Monday, March 15, 2010

Bonuses Twice a Year!

An exciting new trend is out there, according to the Wall Street Journal: companies paying bonuses semi-annually (that's twice a year). The Journal reports today that this practice is "gaining traction". That means it's become more and more popular. In an era of shrinking bonuses, surely this is something we should all encourage management to consider.

Here are two extracts from the Wall Street Journal article by Joann Lublin with the news that some industries are fattening their employees wallets twice a year, business expressions to be reviewed are in blue:

More bosses are getting two bites at their bonus apples. A growing number of U.S. companies, mainly in the retail and high-tech industries, are replacing their annual incentive structure with bonuses earned twice a year. In addition to boosting morale at a time of salary freezes and pay cuts, semiannual bonuses help companies retain key players by dangling the carrot of two targets a year, while giving boards a chance to raise those goals quickly if economic conditions improve."
[While many large companies, including Home Depot and Xerox have started paying bonuses two times a year, the practice has its opponents. The Wall Street Journal article includes this quote from the U.S. "pay czar" Kenneth Feinberg]:

Rewarding managers for brief bursts of performance strikes certain compensation critics as a bad idea. "Earning a bonus every six months is an awful short-term vindication of worth," says Kenneth Feinberg, the U.S. pay czar. People will "cut corners to get the quick fix," he warns.

So, while some people will be getting rich off bonuses two times a year, we'll be enriching our business vocabulary! Let's review the key business vocabulary:

incentive structure - how people are paid for their work (including salary, bonuses, benefits). Given the right incentive structure, people will be more productive.

(to) boost morale - morale is the general mood in an office. Boost means to lift. So when you boost morale, you improve the mood in the office (you make workers happy!). Things that boost morale are called morale boosters. Bonuses are certainly one morale booster. A company trip to a fun location could be another.

salary freeze - when companies stop giving raises. Your pay gets stuck at a  certain level. This helps companies cut costs (but doesn't do much for morale -- see above!)

key players - the most important people in an organization. The kind of person YOU want to be. The opposite of the poor slob who gets canned (fired) at the first sign of trouble.

(to) dangle the carrot - to offer as an incentive, or something that motivates. "Dangle" means to hold something in front of someone, while "carrot" is a promise of a reward. This comes from the complete phrase "carrot and the stick." The stick, of course, is something that punishes (the opposite of the carrot).

U.S. pay czar - this person works for the U.S. government and advises on salaries. When U.S. companies received government funds as part of their rescue packages, the U.S. pay czar had the authority to determine pay levels of senior executives at these companies. The U.S. government has other czars too - including an energy czar, a drug czar, and a war czar. I wonder what Nicholas and Alexander would think of all of capitalism's Czar talk!

(to) cut corners - to save effort by finding easier ways to do things (or to save costs by finding cheaper ways to do things). Generally this is not a good thing to be accused of!

(to) get the quick fix - to get a reward quickly (to do activities and take measures that will earn one the reward, but those measures may not deliver results into the future). This expression can also mean a solution that's put together quickly and only solves the problem temporarily.