Cameron Herold argues that raises and bigger responsibilities motivate employees more than year-end bonuses. He recommends indexing salaries to inflation and paying fairly from the start, rather than using bonuses as the main reward.
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Alright, so it's that time of year again where we all as entrepreneurs and CEOs have to think about year end bonuses. And I have a fundamental issue with year end bonuses. And I've also built some of the best companies to work for in the world. I was The COO at 1-800-got junk when we ranked number two to work for in Canada. Twice ranked number one to work for in BC. I'm going to give you the tips in this video as to why and how to structure year end bonuses properly. But I've also coached companies that went on to rank number one in Australia. Two different companies that went on to rank number one in Australia. I coached companies that went on to be number two in the United States on Glassdoor, the number 12 company in the United States, on Glassdoor, number one in Florida, etc. So I'm all about building great companies and employee bonuses for year end are not actually how to do it. So here's the thing. Pay employees properly, pay them very, very fairly for the work that they're doing. And if they do a great job, they get to keep their job. They don't get a bonus for doing a great job. That's why you hired them in the first place. That's why you pay them the salary that you pay them as well. At the end of year, every single employee should be getting a bonus or a raise to compensate. And these are for salaried employees, these are not for salespeople, these are not for like people that are making kind of like an eat what they kill role. But anybody who's like a salary or an hourly employee, take a look at trying to at least raise their base compensation to match the consumer price index or to match what inflation is. Because if inflation is going up 5, 6, 7% a year, you at least want to try to make them whole with that. But you also as a company need to be able to justify that raise by being able to raise your price prices as well. So that's one thing you make. Make sure that all employees get to increase their base by that amount now annually. You also then need to take a look if you've been doing this every year, if you've got an employee with you 4, 5, 6 years, etc. Are they still actually earning their compensation? Or if because of inflation every year, are they now pricing themselves out of a role and can you hire somebody to do the job for less money? So that's number one, make sure that you give them a base that is at least indexed to inflation. That's the key. Secondly, if they do an unbelievable job, they're really knocking the COVID off the ball. They're making themselves, you know, irreplaceable. You're probably going to give them a pay raise but you're also going to give them a raise in their title, their roles and responsibilities, the amount of autonomy that they have. So the bonuses for year end should really not be a bonus at all. It should be pay raise to index people to inflation. And then if you're giving them a lot more than that, like a 10 to 15% raise, it's because they're taking on more roles and responsibilities. They don't require as much management, management time from you. They're coming into the role now for their next year with more strategic insights, more PNL responsibility, more autonomy. And that's what you're giving them the raise for. It's not a year end bonus. Hope that makes sense. Hope it helps. Let's go build better companies. Share this one. People need to read it, they need to see it, they need to understand this.
