The BONUS CRISIS (Why employees don’t want them)
Many consulting firms (VARs in the world of ERP & CRM Reseller-ship), have compensation plans for their consultants that include a base salary, plus a bonus that is based on performance, usually billable hours. In the best of circumstances, when there is adequate work to keep the consultant busy, and the consultant has the skills required to perform the available work, the outcome of the compensation plan works to everyone’s benefit.
Also, at first blush, there is “fairness” in the sharing of the risk. If the consultant performs well (i.e. generates a lot of revenue), his compensation reflects that. If, on the other hand, he does not perform well (i.e. generates less revenue) his compensation reflects that as well.
So you ask, where’s the problem?
To simplify (for the sake of a blog entry), there are two kinds of people in employment relationships in consulting firms: (1) employers, and (2) employees. They’re different. Employers are businesspeople, making investments and taking risks for the opportunity to earn more money than if they were employees. Employees are workers, trading their skills and efforts for pay. They are often not focused on “hitting the jackpot”, and so are rightfully averse to taking on the risks of an owner.
For a bonus to be truly motivating, the factors involved in the employee earning it should be within his control. In a consulting firm, arguably the biggest factor in earning the bonus is the ability of the employer to obtain work the employee can perform, and this is outside of the employee’s control. This is the single most troublesome factor in the employee’s consideration of this issue. The more seasoned the employee, the more likely that they have been disappointed by bonuses that didn’t materialize through no fault of their own. This makes them reluctant to accept bonuses as a significant part of their compensation.
On the other side, employers sometimes expect the employee to share their “entrepreneurial nature” and be willing to share the risks of the consulting business. While this is understandable, I submit that employees are employees, and to expect otherwise is like expecting a fish to fly. Sure there are some flying fish out there, but 1. They are few and far between 2. Flying fish tend to… umm… fly, and 3. When you only hire flying fish, you can miss out on some amazing salmon. (Can you tell we’re from the Northwest?)
When all is said and done, employers run their companies according to their values and preferences, and in the final analysis, they’re the best people to know what kind of people will work well in their culture. I only suggest that employers consider with whom they’re dealing (not owners, not entrepreneurs, but employees), and base their expectations on this.