February 29, 2024

You’re the Boss: Should I Give My Employees a Bonus

Staying Alive

Thanks again to all who took time to comment on my three problems. Last week, I further addressed the issue of whether I should toss my aging servers and move my data to the cloud and the issue of whether I should buy a building or continue renting. And now, finally, the employee bonus versus investing in the company question.

What I asked: Should I spend $20,000 investing in new machinery or rewarding my workers with an unexpected bonus?

Consensus advice: Buy the machine — but if I want to reward the workers, do it with a gift of some sort instead of with cash.

My thoughts: I agree that the sensible thing to do is to buy the machine: It’s a great deal and will lead to enhanced productivity and future profits. I can’t explain why I felt I should give out a bonus.

The desire to shower riches on my people is an impulse that I have consistently felt in all of my years as a boss. Is this some defect peculiar to me, or is it behavior left over from prehistory, when tribal chiefs were expected to spread the wealth around? Whichever, I know it is a dangerous proclivity. So I’m glad I asked the question, because my readers were unanimous (has that ever happened before?). I received a wide variety of suggestions for modest thank-you gifts that would communicate my gratitude at a much lower cost than $20,000. Good advice!

There seemed to be some disagreement as to whether a surprise bonus should be cash or some kind of gift. I know which I’d want: cash. Personally, I hate shopping for gifts, so maybe that’s why I prefer to get and give money. Quite a few people suggested tickets to sporting events. But is giving my money to the local sports millionaires a better idea then letting my workers choose how they would like to use their bonus?

As business improves, and our cash position becomes more comfortable, I have been mulling whether to give raises. My employees are still making about 10 percent less than they were in 2008 (the ones still with me, anyway). I know that a few of them feel bad about that. But were the 2008 wages appropriate then, and are they appropriate now?

I was losing money then, and I’m making it now. I believe that the adjustment in my costs was very important in keeping the company alive. Nevertheless, if you have never looked employees in the eye and cut their pay, challenging them to take it or quit, you might find my desire to be generous hard to understand. There are aspects of the boss-employee relationship that reveal a naked power imbalance. Some people might revel in the power, but I find it distasteful. (Firing people is another power that is quite distressing to exercise.) Maybe I wanted to give that bonus as a kind of apology for the pain I put them through. Not that I had any choice and not that I would do it differently if we hit hard times again.

I don’t want to give out pay raises as a matter of course. I think I’m paying people more than they could get in any other local shops. No one has left for another job; no one has asked for a raise. But I would like to hold out the possibility of more pay. I’d want a raise to be explicitly tied to increased productivity, and in particular to the efforts of the workers to improve operations. For example, when I bought a specialized veneer-splicing machine, our productivity went up about 10 percent. I don’t feel that I should reward the workers for that.

The sander is another investment of this type. But if one of my people comes to me and tells me of a better way to glue panels, one that would increase output by 5 percent, that person should be rewarded. I’ve been asking for new ideas at every Monday meeting but have received few suggestions. Maybe a system that explicitly rewarded real increases in output would shake more innovation loose. Or possibly just get people moving faster.

What I did: I bought the sander. Took a quick trip to Utah to take a look at it, and it was everything I was hoping for. It will be here next week. I’m also going to spend more time trying to design a bonus system that creates incentives for the innovation I’m looking for.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside of Philadelphia.

Article source: http://feeds.nytimes.com/click.phdo?i=55a1e25b1e562ed05ed1325caaca9882

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