Bonuses won’t make your organization an HPO!

One of the biggest debates, among business people and scientist, is the role of bonuses and reward systems in becoming a ‘high performance organization’. Together with colleague Paul Jansen (Professor of Industrial Psychology at the VU University Amsterdam) I just presented at the European Reward Management Conference a research paper (The bonus as hygiene factor: the role of reward systems in the high performance organization) about this hot topic.

The first conclusions in this paper about bonuses as an hygiene factor:

“The literature review described in this paper showed there are twelve characteristics, found in research studies into high performance organizations, that have a bearing on the type of bonuses and reward systems that organizations can apply to achieve high performance. However, eleven of these twelve characteristics seem to have a minor role compared to other characteristics found in the literature review (which have to do, among others, with organizational structure, quality of management, quality of workforce, information technology and communication) and did not make the cut into the empirical study. In the empirical study, the remaining characteristic A ‘fair reward and incentive structure’ did not show a significant relation with organizational performance. The conclusion therefore is that using bonuses or implementing certain types of reward systems does not have a positive nor a negative effect on long-term organizational performance. A possible explanation for this result is that bonuses and reward systems are a hygiene factor for an organization. If the organization does not have an appropriate reward system, with or without bonuses, it will run into trouble with its employees. If it does, which employees expect and consider to be normal, it can start working on improving its performance.”