Employee performance-related bonuses with a twist

I've heard some pretty bad stories about how companies award performance-related bonuses to their employees. This ranges from 'number plucked out of the air' by a manager, to putting all members of a department in some kind of one-dimensional ranking and awarding bonuses on a downwards sliding scale according to where you you have been placed.

We wanted to do something a bit different at our company and we have come up with the idea of setting a list of performance criteria (e.g. completing objectives that were set for you; project performance; soliciting and acting on personal development feedback etc) but instead of the manager making the judgment call, the employee rates their own performance for each area as a percentage, and then they are awarded that percentage of the maximum available bonus.

The manager has power to increase the percentage if they feel the employee has been too harsh on themself, but not to decrease it, thus leaving it to the integrity of the person.

To make a system like this work you have to have a very transparent culture. We have open-booking accounting so salaries and bonuses are public knowledge. This makes the system self-policing. Who would want to be seen by their co-workers as taking a bigger bonus than they deserve?

[Credit to Phil Herborn for developing this idea]

Comments

[Alex Farran]

Interesting. A step on the way to employees setting their own salaries perhaps? If pay was decided by similar clear and open criteria then it could be seen to be fair. Percieved unfairness in pay relative to colleagues is a stong demotivator, no matter what the absolute level is.

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