The power of “choice” in bonus structures

As we move towards the last quarter of 2025, many commercial organisations will be reviewing their bonus plan provisions and starting to consider the likelihood of targets being met that were set at the beginning of the year.

However, there will be some organisations for whom this process will occur at a later date.

One group will be those who have put in place a purely discretionary bonus plan which will not need to be reviewed until the close of the financial year.

A further group will be those businesses that do not pay any bonuses at all (because they consider that paying an above average salary is a more effective remuneration tool than having some sort of performance incentive).

Whatever the reason, we would suggest that not having a performance based bonus structure, where targets and goals are set up front, could be detrimental to achieving annual key performance indicators (KPIs) or objectives and key results (OKRs).

From a behaviour perspective, whilst it might sound a simple truth, people will usually only engage with delivering a “growth plan” if they choose to do so because they believe its goals are achievable.  Many of us will have worked in organisations where people just consider that they should just “do their job” and therefore do not contribute to change and growth.

Accordingly, having no bonus or a bonus which is only awarded after the year is done, provides no additional opportunity for agency or choice to engage with the business and create change (which may simply be to obtain more sales than last year).

In contrast, by having a performance-based bonus structure, individuals have the opportunity to actively engage with a decision to create change – and engaged workers are more likely to achieve the goals and targets set.

If the above matters resonate and you would like to discuss how MM&K could assist you with developing your approach to incentive structures – please contact Stuart James (stuart.james@mm-k.com) in the first instance.

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