Recruitment: Designing bonuses that are smarter, not higher

Sheep Central, November 27, 2023

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recruitment northern cattle - Copy


AGRIBUSINESS owners and managers need to ensure that their employees are productive and eager to do the best job possible at all times – especially during challenging economic times.

Yet every industry and every organisation has people who simply do not produce work in the quality that they are capable of providing, which can create costly problems for management and the business itself.

Companies often miss the mark when trying to ramp-up employee productivity. And it is about time that some of the widely publicised studies that promote the idea that financial incentives don’t work are debunked.

According to a study conducted by business advisors PWC, simple bonus plans with fewer metrics and limited managerial discretion do actually result in greater employee motivation, at lower cost.

PwC’s study reinforced the idea that financial incentives can deliver significant motivational value – but only when designed in a particular way.

Today, some businesses have added more complexity to their reward structures in an attempt to meet the needs of employees, employers and shareholders – without the benefit of innovation and forgetting the company’s bottom-line.

The more complexity that is added to reward structures, the more it is likely to dilute value in the eyes of the employee.

Design bonuses which are smarter – not higher

PWC’s report found that pay is still the critical lever above most non-financial incentives, with employees willing to sacrifice no more than 10 percent of their pay packet to leave for a better role, better boss or more flexible hours.

The presence of a financial reward doesn’t automatically destroy intrinsic motivation as some prior research would have us believe. The message is that rather than tinkering with last year’s bonus plan or throwing more money at employees, getting the design right will deliver greater return on investment.

Five keys to more effective reward spend

There are five important keys to designing financial incentives that cost less, but which still provide effective levels of reward, according to the report:

  • Wherever possible, clearly define performance expectations to minimise ambiguity, especially in areas like Key Performance Indictor targets. When considering more than a few metrics, be sure the gains from specificity will offset any costs caused by the added complexity.
  • Measure performance at the individual or small team level where possible, and allow staff members to form teams to increase motivational value. Team bonus structures can counteract the effects of ‘free-riding’, but free-riding should still be addressed quickly to avoid longer term negative team response.
  • Bonus caps should be used sparingly and only where there is a real threat of overpayment.
  • To some extent, employees should be able to trade-off financial rewards for more intrinsically motivating roles, better leaders and more flexible working arrangements.
  • Tailoring incentive plans should be based on evidence rather than intuition, as the perceived value of tailoring is often overplayed.

Always ensure that financial incentives are appropriately designed for equal, if not bigger, impact.

When an employer recruits and motivates the right people, the right work gets done in the right way; and the machine functions smoothly.

All agribusinesses becomes defined by their employees’ continual productivity improvements, widespread innovation and ability to adapt to the changing agribusiness environment.


Source: Meat Processors Pty Ltd – Managed Workforce



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