Motivating Without Bonuses

Keeping your team happy without a check

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The
recession has brought many new or previously little-used terms into our
common language – from "subprime mortgages," "toxic assets," and
"quantitative easing" to "cash for clunkers" and, of course, "zero
bonuses."

It's a clever phrase, because
technically, a zero bonus isn't a bonus at all. But the words give the
impression that companies aren't breaking past promises to pay bonuses
(albeit bonuses dependent on company performance), while at the same
time give hope to workers that their bonuses will actually have some
value again in the future.

The practice of paying bonuses is not dead. In the financial sector, many banks have continued to pay bonuses – they
use the somewhat circular argument that they need bonuses to retain
good people because their competitors are paying bonuses. But in some
industries, bonuses have disappeared for now.

So, if you're a manager in one of these areas, what are your options
for motivating people without cash bonuses?

In this article, we'll look at some creative strategies for motivating and rewarding members of your team in a down economy.

Non-Cash Financial Incentives

One
of the most common non-bonus ways to reward and retain star employees
is with stock or stock options. What's the difference between them?

• Shares/Stocks
  - Many companies offer workers a set number of shares as a reward for
  good performance, or as a sign-on bonus. Workers can do whatever they
  want with these stocks: sell them, or hold onto them and hope that the
  value will increase.
  
  
  
  


• Stock Options
  - Stock or share options give workers the right to buy stock in the
  future at a predetermined price. For instance, a company may promise
  its team members a share price of $45 one year from now. If they work
  hard and the share price is $75 after a year, then those workers can
  buy the stocks at the lower price - and then immediately sell them for
  a big profit.

Now, there are advantages and disadvantages to offering shares and/or options.

One
of the biggest advantages has to do with worker motivation. The
Employee Ownership Foundation recently conducted its 18th annual
Economic Performance Survey. They found that 88.2% of the companies
surveyed stated that their employee ownership programs helped the
company. And, in a study they conducted with Rutgers University, they
found that employee ownership programs increased sales, on average, by
2.3%. These programs also helped to increase staff retention compared
with companies that did not have such programs. When workers feel they
have a stake in the company's future, they're usually willing to work
harder and stay in their jobs. This can be a big benefit for
organizations.

Also, stocks and stock options
are a great way to save money, especially during an economic downturn.
Offering shares to workers allows companies to reward their teams
without the financial cost of bonuses.

This
type of reward also helps align personal goals with company goals.
After all, the staff gets a bigger reward if the company does better,
so it only makes sense that they work harder.

One
big disadvantage is that stocks and stock options aren't as attractive
in a down economy, simply because people are so unsure of what the
market is going to do. After all, what do the workers do if the company
offering a $45 stock option does poorly later in the year, so when the
team is able buy the shares, they're worth only $25? In that case, no
one wins.

Another disadvantage is that existing
shareholders – the owners of the company – often profoundly dislike
stock grants and stock options. After all, if managers create new
shareholders, they're diluting existing shareholdings – i.e. reducing
the share of profit that the existing shareholders will get.

Existing
shareholders will only be happy for managers to award stock options if
they, the existing shareholders, are likely to receive more as a result
than they'd lose were it not done. There are only certain types of
business and certain business situations in which this will be likely
to occur.

Non-Financial Bonuses

If you're in a company that used to pay bonuses but doesn't do so now, there are many other motivational rewards you can offer.

Start
by finding out what your team members really value as individuals,
because this might not be what you think. By taking the time to
determine what's really important to your people, you can offer rewards
that really mean something.

Here are a few non-financial bonuses that companies can offer their people in this down economy:

• Flexible scheduling
  - Many people, especially those with families, would really appreciate
  a shorter or more flexible workweek. So, consider offering people
  within your team the option of working four 10-hour days, or of cutting
  back on their hours entirely. This might be a welcome reward. Letting
  them leave early on certain days is another possibility.
  
  
  
  


• Additional vacation time
  - Many companies offer their people increased vacation time, as well as
  extended time off (sabbaticals), instead of bonus checks. People can
  use this time to spend with family, take a long trip, or even go back
  to school.
  
  
  
  


• Telecommuting options
  - If your company doesn't need everyone in the office every day, why
  not allow some trusted team members to work at home? Working from home
  is often more comfortable, and it can save workers money on gas and
  lunches out.
  
  
  
  


• Additional training
  - Some people might really value improving their education or work
  skills. Offering them classes or extra training might be appreciated.
  
  
  
  


• A relaxed environment
  - Some companies are starting to let their team members go without
  shoes. (No, we're not kidding!) Letting workers walk around in their
  stocking feet (keeping their shoes at their desks in case clients come
  in) is not only relaxing, but it also helps them feel more "at home"
  with one another. You might think about relaxing the dress code as well.
  
  
  
  


• Volunteer time
  - Many companies offer their team members one paid day off per month to
  volunteer at an organization that really means something to them. This
  is a great way to raise morale, and help your local community at the
  same time.

For more ideas on how to creatively motivate your team, read our articles Rewarding Your Team and Managing During a Downturn.

It's
important to make your team aware of the financial value of these
benefits. For instance, if you offer your team an additional week of
vacation, how much is this worth to each of them? Let them know the
numbers so they can appreciate how much these benefits are "worth."

When Your Team Wants Cash, But Can't Have It

Inevitably,
some team members will be really upset that they can't have a
"traditional" financial bonus, particularly if they're depending on
them financially. And while you must acknowledge their feelings, it's
important to be honest with them.

Make sure
workers understand the company's financial situation. The more your
team knows about what's going on, the more likely they'll be to make
allowances. So, communicate openly.

Work with
your staff. If you really want to retain someone, then examine how you
can give that person more money without a bonus. For example, could you
provide a company phone or car, saving the person money?

If
you have to, be totally – and brutally – honest. If people know that
their bonuses will cost themselves (or one of their colleagues) their
jobs, they might realize that the bonus is not that important after all.

Key Points

When
the economy is struggling, it's even more important to retain your best
workers. Make sure they're happy – and there are plenty of ways to keep
them motivated without a bonus check.

Stocks or
stock options are always a great idea if your company can offer them,
but this alternative might be less appealing when the market is down.
Other rewards – like flexible scheduling or additional vacation time –
might motivate your team more, and they won't cost your company much.

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