First, the bad news. For the third year in a row--and the sixth time in the last seven years--companies across North America aren't expecting to pay out bonuses at as high a level as they'd originally hoped.
In a recent survey of 121 companies in the United States and Canada, the HR consulting firm Towers Watson reported Thursday that respondents now plan to pay out bonuses at 87 percent of the level they'd forecast at the beginning of the year.
And now, the even worse news: One-quarter of the people getting those bonuses (albeit slightly lower) don't actually deserve them.
Towers Watson found that 24 percent of respondents said employees who "fail to meet performance expectations"--those who got the lowest ranking possible in their performance reviews--were still going to be paid bonuses. Additionally, nearly 20 percent of the companies surveyed said that employees who performed well and those who performed poorly would see no difference in the payout they'll receive.
Why do companies still pay bonuses to poor performers? At the executive level, that question has long been answered--unconvincingly, it should be said--by the explanation that executives who aren't paid the big bucks will head for the exit. There's enough of a talent shortage at the top, the theory goes, that the C-suite has to be paid mountains of cash and gobs of stock options to keep them around.
But among the rank-and-file--the employee group the Towers Watson survey covered--that argument is less applicable, for obvious reasons in an era of high unemployment. Laura Sejen, the global rewards practice leader for the consultancy, says it's likely the result of poor goal-setting, entrenched cultural beliefs that bonuses are expected, and the difficulty many managers have at delivering the tough message that some haven't performed well enough to get a bonus.
Is it any wonder, then, that bonuses aren't valued all that much by employees? In results that will sound like sacrilege to those who view the "pay for performance" concept as a sacred cow, other recent research from Towers Watson found that employees ranked annual bonuses 15th out of 27 factors that keep employees in their jobs and 22nd among those that would attract them to a new one.
That's because the difference between the bonuses paid out to the really good performers and the bonuses granted to the middling masses is often hardly enough to take your family somewhere for a long weekend. After all, says Sejen, if the bonuses aren't distinctive enough, "it's demotivating for the wrong people."
So if they don't care that much about bonuses, what do employees really want? Simple: a good base salary, job security, opportunities to advance in their careers, and a good manager. Each of these ranked much higher than bonuses in Towers Watson's study. Extra payouts are fine, but they don't mean very much when everybody gets one.
Jena McGregor is a columnist for On Leadership.