I am the biggest possible fan of merit-based pay raises and performance based compensation.  In these days of poor cash-flow, it’s tough to give out raises.  And ironically, it is now when people are more likely to want a raise.  This is because your employees haven’t been given a pay boost in a while and now are hankering.  But our plight hasn’t improved much.  At least, it hasn’t improved enough to give back to the employees to the extent that you can make up for lost time.

Enter the bonus system.  Suppose that giving a bonus meant that you got more in return?  Then the extra outlay of pay would be a genuine investment; give out $5 and get back $10.  Then I suppose that you’d be silly not to give out a “raise”.  But today, I think that we should analyze the bonus systems and perhaps extract a few flaws.  Whenever there is a bonus earned, you – the business owner – must be the ultimate winner.  That can’t be hard to understand.  There is simple no point to rewarding someone with $10 for saving you $9.  Completely pointless.  I admit that you didn’t need me to tell you that, but I think that it’s happening sometimes and you are possibly unaware.  Read on…