With some banks having already announced their bonuses and others just weeks away, grumblings about the size of this year’s payments have begun. While jumping ship isn’t an option for many disgruntled bankers in this market, firms should still beware the consequences of low bonuses – they can potentially create lazy, dissatisfied employees with impaired judgements.
The problem, still, with bonuses is that too many people think they are a mandatory annual payment for doing their jobs, not a recognition for strong performance. “Recipients don't consider it something paid over and above what is due, but the just reward for their efforts,” says Justin Spray, director and business psychologist at London consultancy Mendas.
A poor bonus, made worse if colleagues or counterparts received more, can therefore make people feel under-rewarded and undervalued. “They conclude that ‘I am the problem’. They focus on themselves, not on how the business has performed,” says career coach Jo Goh, managing director of BYS Consulting in Singapore.
This can then lead to feelings of inequity and job dissatisfaction – and here lies a long-term quandary. “If we perceive an inequity between effort and reward, our mental health can suffer. Research has found links between the perception of inequity and poorer health, increased anger, even depression,” says Spray. He points to a meta-analysis report published in the British Medical Journal that found a strong relationship between job satisfaction and mental and physical well-being.
Goh says the dissatisfaction caused by a bad bonus typically makes people reduce the effort they put into their jobs. “Longer-term psychological effects can take the form of not contributing as effectively in terms of output; lack of creativity, motivation and willingness to embrace change; and most obviously, clock-watching,” she says. “Avoiding projects and not doing extra hours can lead to lack of attention to detail and making careless mistakes.”
An unexpectedly low bonus can also make people more disruptive at work, says Spray from Mendas. Worse, in a market-driven sector like financial services, it can affect their judgement. “Anything that leads to negative attitudes or preoccupies an employee may lead to impaired decision making,” he adds.
Generation Y staff – many of whom have high expectations of their employers and a sense of entitlement to good compensation and benefits – are particularly prone to letting bonus blues impact their jobs, says Goh from BYS. “At the opposite end of the spectrum, senior professionals might think they’ve worked hard for several years so deserve much better from a bonus.”
Experts says with proper planning, low bonuses need not be so contentious. “The key for an individual is to minimise the negative interpretation,” says Spray. “Believing ‘the process is a mess and reward is random’ would be less damaging than thinking that the system is against you.”
But the real onus is on employers. “Organisations can make the mistake of setting unrealistic targets,” says occupational psychologist Neville Wharton, head of the Neville Wharton Business Psychology Group in the UK. “Research has shown that people try hardest when they have somewhere between a one-half to two-thirds chance of success and some control over how to go about it. People are even more motivated when they participate in setting the goals.”
Line managers should use data to explain the rationale behind a bonus rather than just announcing the amount and walking away, says Goh. “But before this can happen, senior management should consult with line managers, giving them enough knowledge to clarify bonus decisions.”
A discussion about bonuses should be accompanied by a performance plan for the coming year. “It’s not about picking on someone with a bad bonus; it’s about helping and developing that person to move forward,” she adds.