Most of the time, no.

Many employers provide bonuses to employees that aren’t motivating high performance. Instead, they are a surprise amount of money that isn’t explained.

There are two categories of bonuses:

1) “I received this bonus but have no idea how it was calculated or what it was based on. I wonder what I did to get this amount of money. I wish I knew what to do to make it a larger amount.”

2) “I received this bonus because we exceeded our EBITDA goal by 23%. I know that the company pays 115% of the target when we exceed the goal by that amount. My manager gave me this summary of my bonus calculation. I know what I need to do to impact EBITDA in my job and am proud that I was able to make a difference this year. Next year we’re going to do even better because of the initiatives that are planned. I am so excited to work here.”

Be transparent with your bonus calculations.

Let your employees know how their work responsibilities and results impact the metrics used in the bonus calculation.

Share progress toward your bonus metric goals throughout the year. (If you aren’t likely to pay a bonus, it shouldn’t be a surprise to anyone.)

Make sure each employee understands their potential bonus payout from high to low. They should understand what it takes to maximize the payout.

Is your bonus motivating high performance? Or is it demotivating your employees and just the amount of money you set aside to pay each year that is a surprise number in their paychecks?

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