It may be a while before we face the holiday season again … but since sooner is always better than later, now is the time to address what has come to be known as “the Christmas bonus.” Every year someone calls me the Grinch because I’m the guy who points out the ineffectiveness of the holiday bonus but employee benefits advisers, brokers and consultants need to recognize there exists more creative vehicles that can serve as incentive programs to drive and maintain growth as well as recruit and retain key talent.

Here’s the big question – what are your clients getting right now in return for what they are paying out?  I’ll answer that for you – they’re getting the current result, whatever that may be.  But if the results you wish to help them achieve this year are not measurably different than what they had last year, what are you going recommend for next year to drive a different performance level? And how will compensation differ in regards to those changes? 

Growth implies different results and by extension the strategies you’ve employed to achieve current results can’t be the same in the future should a different result be desired or expected.  Since compensation is one of the strategic tools in a business’ arsenal to affect change, benefits advisers, brokers and consultants looking to develop different performance results can’t expect to achieve forward motion if the growth rewards programs don’t match up to their goals.

Let’s break it down a little. If a firm sets its target on growing net income 20% per year over the next three years, you need to ask yourself a few important questions. What part of the compensation and rewards plan communicates that goal to employees?  If the company achieves or better yet exceeds that number how much is the company willing to share? Who will get their fair share and then some if these critical financial targets are met?  To what extent will key employees’ participation fuel this desired growth?  In other words, what comes first – growth or employees that are truly motivated by incentives to create that growth?

For growth to occur sustained performance must be achieved…and since these results are largely a function of your key employees, compensation becomes a focus.  A business needs to determine the right mix of compensation components.  These elements should include a strategic blend of core benefits, executive benefits, qualified retirement plans, supplemental retirement plans, salary, short-term incentives, long-term incentives and long-term equity incentives.

Ultimately, the proverbial “rubber meets the road” when a rewards plan prompts employees to rise to a higher level of performance.  For rewards to be effective they must create increased focus on the part of participating employees – this focus is a direct result not only of financial reward, but also of a positive work environment and the path that you, as company owner, have drawn for their personal and professional development.  Remember, money may be motivating, but so is an atmosphere where a culture of confidence exists.

Moniz is president of Northeast VisionLink, an executive compensation design and management firm.  He can be reached at jmoniz@vladvisors.com.

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