Accounting for behaviour – the missing ingredient in many bonus plans
April 27, 2023
For those businesses that have been fortunate enough to pay out bonuses for the 2022 financial year, March and April will often be the months in which payments are made.
However, for many of you who manage and oversee bonus plans, there will be at least one payment (if not more) that you think is ill-advised or inappropriate. Not because of the quantum, but because of the behaviour during the year of the individual who is receiving the bonus award.
Payments of bonuses to people who have achieved agreed results but in a way that has caused upset (or worse) within the business can often be brushed off by other senior executives as “a necessary evil” or “just how that person is, nothing we can do”.
However, allowing such behaviour to continue and (through the payment of the bonus) even be celebrated sows the seeds for others to behave in the same way. Unfortunately, these seeds are like Knotweed and, if allowed to take hold, the toxic culture it can create is difficult to eradicate.
Fortunately, there is a suitable “herbicide” for such a problem – which is to introduce a “behaviour adjuster clause” into your bonus system. These can take multiple forms, including positive/negative adjusters, scorecard adjusters and values adjusters.
Selecting exactly which type of adjuster is right for your business and its culture will be the key and should you want someone to help you explore your thinking on this issue, please contact Stuart James in the first instance.