FAQ - How to fairly distribute a corporate
bonus?
Q. Â We have recently centralized
the administration of our compensation programs. Â In the past one section of our organization has always received a
fairly generous bonus, while the rest of the organization has not. Â Since the centralization of the compensation
programs, we have been at a loss as to how to properly deal with this
situation. Â Should we continue to give
out the bonus based on past practice, but provide it to everyone in the company
at a lesser amount? We feel that this will cause problems with the people who
are used to receiving a larger sum. Â Or
should we cancel the bonus program all together?
A. Â It is important that you (and others!) are
aware that there is no real solution to this. Â
Either you treat the company as one unit and then those who got a bonus
in the past "lose out" or you carry on with the status quo, and the
sense of being one company with a centralized compensation scheme is
discredited.
Every side
will come up with reasonable arguments as to why it is "fair" that
they get the money.
So rather
than focusing on "the right answer", I''d worry about the right
process for getting management and staff on the same side. Â You should definitely present the case to
senior management, explain the options, explain there''s no way everyone will be
happy, and facilitate them to a position they are happy with.
In a high
involvement organization (the best kind), you would also get feedback from
staff. Â You will have to be sure that
this revolves around an intelligent discussion of "what is best for the
organization".
Once
management has worked itself into consensus and acceptance, then the next step
will be to communicate the decision to the organization. Â I suggest in the communication to give the
decision and the reason, and note the reasonable objections without being
apologetic.
As HR your
main role will be to facilitate agreement but you need to have a position as to
what is your first choice. Â I prefer
simply eliminating the bonus but I could easily argue in favor of the other
alternatives. Â Whatever you choose I
think it important that you help people keep their sense of perspective. Â As long as the decision has a reasonable
rationale, and as long as it is communicated honestly and carefully, then
nothing much will happen. Â Fears of
people leaving en masse are usually overstated.
I''d also
point out to management that there are real problems with centralizing and that
the bonus issue may be just a lightning rod. Â
Rather than getting too worked up about the bonus they need to ask how
they will help the people adapt to the new structure.