Rewarding Your Employees: How to Do It Right

We are approaching that time of year when many companies issue holiday gifts to employees, intended to show employees they are appreciated. It may be money, a gift card, company apparel, etc.

In this sense, gifts are unrelated to bonuses, which are rewards based upon agreements tied to employee performance or company growth. Let's discuss this important distinction and why the appropriate application of your rewards program can make or break team morale.

Employee Gifts

Gifts will vary depending on company size and revenue, as will employees who receive said gifts. At some companies, gifts given to the general employee population may vary in value from those given to management. This is common, but it can generate resentment in the group receiving gifts of lower value.

For that reason, it is best to keep the discrepancy in the gifts a secret. The problem, however, lies in keeping the secret. A few employees will either complain or brag, and the secret will spread.

Giving to Some, But Not Others?

Something worse than giving appreciation gifts of different value is only giving gifts to select employees. This is a morale killer and a harder secret to keep.

For example, a friend of mine works at a manufacturing plant that has seen hard times in recent years. Sales have been down and wages were frozen. When things began to improve, it became evident that a wage increase was still out of the question, but the company was able to provide holiday gifts to employees.

Management, however, elected to only give gifts to select departments within the company. This meant roughly one-third of employees would not receive anything.

This was a poor decision, to say the least. With wages frozen, everyone was in the same boat: "We are all in this together." But when bonuses were distributed selectively, it became: "Hey wait, I am working just as hard as the next guy" and "Why are you getting something I am not?" Resentment was strong.

Remember, these were gifts, not bonuses based on agreements related to employee performance or company growth.

Since the rewards were distributed based solely on departments employees worked in, some employees with 20-plus years of service did not get the bonus while some new employees did receive the bonus. Imagine how the employees who have given 20-plus years of their lives must have felt.

This was a perfect way to alienate the most experienced and often the most productive employees.

The gift was $500. If the company had lowered the amount to $300, every employee could have received the bonus and morale issues would have been averted.

A similar situation occurred last year in my friend's practice. The practice was down for various reasons; however, near the end of the year, he decided it would be possible to give employees an appreciation gift at holiday time.

Just before the holidays, he purchased coffee mugs decorated with the practice's logo. He filled a mug with candy for each of his four employees. In two of the four mugs, he buried $100 gift cards. By lunch, the two employees who did not receive gift cards knew the other two employees had been given gift cards.

My friend neglected to tell the two employees who received gift cards to keep the cards a secret. As stated previously, this would be a hard secret to keep, but he could have tried.

My friend alienated two employees over $200, but he felt justified. He described one of the excluded employees as "marginal" and the other as a good, longtime employee who had missed more days of work that year than he thought she should. The long-term employee quickly found another job.

Back in 1988, I was a client of a practice management group. During one of the seminars, the speaker stated that replacing the employee primarily responsible for billing and collections cost an average of $28,000 over eight months. His information came from tracking his clients' practices.

The money was lost in billing and collection mistakes, and things falling through the cracks in general. Eight months represented the amount of time it took the new employee to be settled into the job and functioning well.

The long-term employee who left my friend's practice after the $100 gift-card "fiasco" was the person primarily responsible for billing and collections. I am not a math whiz, but I think $100 is far less than $28,000 or whatever the amount would be today to replace her.

If the two employees were marginal and had excessive absences, the problems should have been addressed in a different manner; namely performance reviews or disciplinary actions.

Establishing Rules for Gifts & Bonuses

Rules should be established for the value of holiday appreciation gifts and for performance-related bonuses. The rules must be discussed with everyone or on an individual basis as necessary. Everyone should know where they stand.

Rewards related to job performance definitely must be arranged in advance. They are not gifts. They should be distributed based on predetermined circumstances, usually practice volume.

For example, they could be based on the number of new patients, patient visits, collections, etc., accumulated during a specific period of time.

Volume-based bonuses are the most common bonus structure; however, bonuses can be based on anything from attendance to obtaining additional education / certifications, company profit, etc.

In addition to being agreed upon in advance, rewards for job performance must be in writing, list specific numbers and describe specific rewards.

Putting the performance goals in writing gives them more meaning and makes the rules for obtaining the bonus concrete. Using specific numbers provides specific targets.

It isn't enough to say, "If we do better next month, I'll give you a bonus." There isn't anything specific to work toward in a statement of that nature. The same applies to the reward: What defines a "bonus"? The reward has to be something that will excite the employee(s).

Goals may differ by position, number of hours worked and the individual employee's degree of influence over specific goals.

Holiday and Other Gifts of Appreciation

• Gifts are gifts, not performance awards.
• Gifts are not described in writing.
• Gifts are given at the practice owner's discretion.
• Gifts are based on the practice's financial status, morale and degree of employee appreciation.

Guidelines for Bonuses Related to Job Performance

• Bonus systems must be in writing.
• The level of performance required for achieving the bonuses must be specified. This requires documenting; improvements in specific practice statistics, obtaining specific education levels, etc.
• A method for measuring performance must be in place.
• All timelines / deadlines set must be specific.
• Rewards must be described in detail.
• There should be a specific time frame for issuing the bonuses after it is determined the performance goals have been met.

Sample Variables Used to Set Performance Goals

• New patients
• Patient visits
• Collections
• Overall company growth / profit
• Number of reactivated patients
• Perfect attendance
• Completing educational courses
• Certifications

Gifts vs. Bonuses: Best Course of Action

Some may agree with my friend's tactic of limiting the gift cards to specific employees he felt deserved them. Some employees work harder and are more loyal than other employees. These employees do deserve more recognition and reward. The argument has a degree of validity.

But instead of the holiday gift having a positive influence, it created discord among my friend's staff because some received it, while others did not. In the long run, separating holiday and other appreciation gifts from performance-related bonuses is the most logical and safest plan of action.