It used to be that bonuses were practically an automatic part of the compensation package at many companies -- either at Christmas or after a performance review.
In the recent recession when many companies scrambled to stay profitable, a popular alternative to avoid cutting the work force was to reduce or eliminate the standard year-end bonus.
Today, if bonuses are offered at all, they are more likely based on individual performance.
"I'm definitely a believer in performance-driven bonuses," said Ann Rhoades, who has worked as an executive at JetBlue Airways, Southwest Airlines and Doubletree Hotels. "It motivates at a different level."
Ms. Rhoades, who is author of the recently released book "Built on Values: Creating an Enviable Culture that Outperforms the Competition," said the typical holiday bonus given without any relevance to performance does little to inspire innovation in the workplace.
"When employees know they are being rewarded on performance, it's energizing," she said. "If [you] get a bonus automatically, it becomes part of your salary in your mind, and when you don't get it, it's not only a surprise, but probably a de-motivator."
Andrew Sassaman, a division manager at Robert Half Management, a global staffing firm with an office Downtown, said that in the absence of bonuses, employees are looking for other types of perks from employers, such as subsidizing expenses for continuing education, flexible work schedules, opportunities to telecommute and mentoring programs within the organization.
"Companies have less money to pay bonuses, but still want to show employees they care," said Mr. Sassaman. "Offering perks is a way for companies to show appreciation for employees without significant financial output."
A growing trend in many companies is to allow employees to reward each other for going above and beyond their job duties, said Razor Suleman, CEO of I Love Rewards, a Web-based company in Boston that works with midsize to large companies to develop rewards programs that spur employee performance.
"Peer-to-peer rewards and recognition programs are growing faster than anything we've ever seen," said Mr. Suleman, whose clients include 3M, Eli Lilly and Marriot Hotels.
"It's like the silver bullet. It's a way to let employees decide who is driving performance in companies," he said.
"It's hugely empowering for frontline employees because it comes from a peer and is linked to really good work."
As an economist, one of the things Jodi N. Beggs studies is people's behavioral response to incentives. She said that if a bonus is not viewed as performance-based, it is limited in its ability to motivate workers.
Even in cases in which bonuses are based on individual performance, Ms. Beggs said it was not obvious that the bonuses influenced things such as creativity and open-minded thought.
"I actually think it's more complicated than just the lack of bonuses," said Sara Roberts, president and CEO of Roberts Golden Consulting in San Francisco.
"People need to feel a deep need for meaning at work," Ms. Roberts said.
"And with the poor treatment they've been getting -- having to do more work with the same or less rewards and recognition -- and not really being a part of something they can believe in is, moreover, what I believe the core issues to be."
First Published: January 16, 2011, 5:00 a.m.
