Bonuses: more bang for your buck

Guy Kawasaki's world-class How to Change the World blog picked up on an interesting study showing that bonuses are much more effective than merit raises in encouraging better employee performance. The study, conducted by the Cornell School of Hotel Administration, concluded that a one percent merit raise increases employee performance by about two percent. But a bonus of the same dollar amount improves performance by almost 20 percent.

Same buck, more bang.

Michael Sturman, a professor at the school, wrote the report, which you can download here. Guy's post is here. The study was reported on in Science Daily here.

Comments

[Steve Wilson]

This is an intersting phenomenon to me. Given that the dollar amount is the same (or even slightly less), the merit increase is always a better option. Why? Because the salary increase is like an annuity -- you get it every year, plus dividends. Why settle for a one-time bonus, unless you are planning a hasty retreat from the company. I guess "bonus" just sounds better than 1% or 2% increase.

[Mary-Louise]

I work for Guy Kawasaki. Thanks for your comment about Guy and the link to his recent Science Daily blog posting!

Mary-Louise
http://blog.guykawasaki.com/