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- [00:03]
A
So, Emma, let's kind of dive in because there's these different strategies I think that people have. And I really want to figure out what's really the best way to enhance morale boosting for your employees and build employee retention. And does the bonus really have a lot to do with that?
- [00:17]
B
Right. So let's talk about the two types of bonuses. One, you have a holiday bonus.
- [00:21]
A
Sure.
- [00:22]
B
Holiday bonus or end of year bonus, depending on, you know, your company, Depending on where your staff lives and where you're located or where your staff is located, it may not even be a holiday for them. So let's just call it end of year bonus.
- [00:34]
A
Right.
- [00:34]
B
Versus a performance bonus. And it isn't just because we made it to the end of the year together. You get some money. Performance bonus is because you hit a certain KPI, or maybe because you hit a certain milestone, or maybe it was a certain tier level of profit or revenue for our business, depending on which you choose. Or maybe you choose both. You can take those two things and make it so that it builds morale and loyalty and motivation for your team.
- [01:00]
A
Okay. I think it might be helpful maybe if we make a case for each of them. Let's start with making a case for holiday bonus. It's obviously it's a gesture of goodwill.
- [01:06]
B
Right.
- [01:07]
A
And it's a way of expressing appreciation for your employees. You know, they've been with you another year. It's a celebration, a milestone. So beyond that, what else does it really do?
- [01:15]
B
I think that it creates a sense of belonging. I think it creates a sense of loyalty. All year long. We ask our staff to be loyal.
- [01:24]
A
Yep.
- [01:25]
B
And so it shows that we're loyal to them. I think that it also can create a lot of issues because once you give a holiday bonus, once you give an end of year bonus, it then becomes expected. Particularly in the United States, end of year holiday bonuses are very expected. And so what happens when it needs to be reduced or it needs to be skipped?
- [01:47]
A
Sure. If the company's not doing as well as it's done in the past, or.
- [01:50]
B
Or maybe they're growing and they need the money to grow so that they can give their employees performance bonuses later. Right?
- [01:56]
A
Sure.
- [01:56]
B
There's a plethora of reasons. It doesn't always mean that the business is doing bad. It just not may not be the right thing for the business at the time. Is that going to create employee resentment?
- [02:05]
A
Right. Because here's what you've been doing and you built this habit and now you're changing or tweaking it from what it's always been.
- [02:10]
B
Right.
- [02:11]
A
And especially if it's been very formulaic. I've seen companies where they have a very set formula percentage.
- [02:16]
B
So if it's not in your compensation package, in your contract, which a lot of people do, put that in. I know several of our clients do that because they want to make sure that the person stays for the year.
- [02:28]
A
Right.
- [02:28]
B
So at the end of the year they get, and usually delivered on January 1st. Right. But at the end of the year, they get 5%, 10%, 3% of their salary as an end of year bonus, which is taxed higher as part of their compensation. Right. So in other companies, they just, you know, hand out cash, whatever they have that makes sense for them, both from a profitability aspect and a tax perspective. I mean, that's the real reason why it all started was let me get rid of some money and I can give it to my staff instead of Uncle Sam. So I think that holiday bonuses are a good thing. I think that performance bonuses are better. My personal opinion. But I also think that an end of year gift to your staff, and I prefer to call it that an end of year holiday gift to your staff comes from the business to them and creates a bond with them. Like, we actually care about you. So here's your gift.
- [03:25]
A
I can see that. I definitely see that. Well, let's talk about the alternative. Right. Let's kind of dive into rewarding high performance bonuses. Make a case for that as well.
- [03:33]
B
Sure.
- [03:33]
A
I remember when we started Shockwave, that was one of the things that we talked about.
- [03:36]
B
Productivity, Productivity, Productivity, Productivity, productivity.
- [03:40]
A
Because we care about results. Right?
- [03:41]
B
Care about a lot about results.
- [03:42]
A
Yeah. Let's talk about some of the aspects of the drivers that really go towards that productivity and, you know, achieving goals. Like how do you set that in a performance bonus? How have we done it? How should companies do this?
- [03:53]
B
So every company is going to be different.
- [03:54]
A
Yeah.
- [03:54]
B
The biggest reason I like performance bonuses is that I like that I can allow my staff to have an unlimited check that they get to write. And so we set up our bonuses. That way our profit, a percentage of our profit, gets divvied up between our staff and the people who create the results that the profit came from are the people who get the highest percentage because it's not an equal divvy up between everybody. That being said, you can have a bonus for a salesperson that's an increase of sales over what our norm is. So for a norm is, you know, 10 new clients a month and you bring on 12. I'm going to give you 50% of what the those two extras brought in for us. I don't know if that makes sense. I think so for someone in customer service, if you bring the refunds down, if our refunds are generally 9% and every percent costs us, say, $22,000, off the top of my head, that was one of the clients that we had. Every percent was $22,000 a month. That's what it represented. Every time you take me down 1%, I'm saving $22,000. So every time you take me down 1%, that customer service manager, that customer service lead is a going to get a bonus $1,000 themselves. And two, they're going to get a $1,000 bonus to Divvy up amongst their team, which will be given in the percentage of retention that came in by each person.
- [05:21]
A
Okay.
- [05:21]
B
And so it allows us to say, okay, this is what we need you to accomplish. And if you accomplish this and save the company money or earn the company profits, we're going to reward you for that in a performance bonus. And it's given it different intervals throughout the year rather than a set time. So they're always striving. You know, it's kind of like you have two kids, right? I have four kids. I know December, all of them tried to be real good and real helpful around the house, but come January, like, they didn't give a shit anymore. Right. Like, you know, so I really want to be motivating them to be able to earn more if they're earning me more throughout the year.
- [06:05]
A
Right.
- [06:06]
B
So if you can't tell by the way, I just talked about holiday end of year to performance, I'm a big fan. I'm also a big fan of motivating, motivating productivity. Productivity. And if I need to do that with a holiday end of year bonus, because I see that it motivates my team, I'm going to do that. If I need to do it because I'm setting up milestones and giving them money, then I need to do that.
- [06:28]
A
Are there downsides, you think, on doing a performance bonus like that?
- [06:31]
B
Okay, yes. So let's say I'm going to make this up, but I'm going to talk about. This is a completely made up story. This is not real. But I'm going to use Tiago and I'm going to use Richard.
- [06:39]
A
Okay.
- [06:40]
B
Richard and Thiago are in our company. Shockwave are our operations company. They both are account, I wouldn't say account managers because they're not account Managers, but they both have an account that they're responsible for and they're primary on that account. And so let's say we have a performance bonus and Richard worked 15 hours a day to create the same thing that Tiago was able to create in five hours a day. And that's actually kind of true for them. But the next part is totally fake. The next part is totally fake. So Richard gets, and I'm going to give, just for math purposes, really simply, Richard gets $100 bonus. Tiago gets $100 bonus. Richard now feels total animosity towards Thiago. Does he get the same bonus? And in his mind, he worked twice.
- [07:28]
A
As hard or three times hard? Yeah.
- [07:29]
B
Or.
- [07:30]
A
Right.
- [07:30]
B
Three times as hard. Technically. Right. Where is the line? And if you say, well, I just won't tell other people what the other person's getting, I assure you they'll tell you. I assure you they'll talk. If that's what you're relying on, I promise you they'll talk and they'll find out. I think that there's just a very well defined performance bonus. And it's well defined in quantitative measures that don't consist of effort or time. And you make that very clear. You make that very clear. If it took him one hour to create the same results, it took you two weeks, you still created the same results. It's worth the same amount to me.
- [08:05]
A
Yeah, yeah.
- [08:06]
B
It's important that as a team you talk about that and everybody understands it because it could blow up in your face pretty badly. I'll go back for a moment to the holiday bonus because you didn't ask me the same question. The thing with the holiday bonus is it can create a lot of people quitting. They could wait until the end of the year and come January, they're quitting. And the other thing is, if you have to decrease for some reason or skip it for some reason, you may, worse than quitting, have people who silently quit, they stay on and then they just to get the bonus.
- [08:35]
A
Do you have like an example that we walk through about switching? Like, have you seen or have you worked with companies who have switched through.
- [08:40]
B
That back and forth? Yeah, ours, yeah. We've done it with clients as well, but our own company has done that. We've gone from doing performance bonuses to end of year bonuses, back to performance bonuses and back to end of year bonuses. And a lot of that had to do with are we investing heavily in the other businesses? And then the performance bonuses, they're just so massive. We won't be able to provide a future for the people that are working for us in the way that we want to provide it for them. So we're going to have to switch back and forth, but we do that with a lot of conversation. A lot of conversation. You didn't do anything wrong. Wrong. We're switching it. Still going to work out the same way for you. But we're switching things around because of xyz and we're very transparent in our business. But I would say if you can stay consistent in your bonus structure and your compensation packages, particularly if you put them in writing. If you put them in writing, you have to. I never put them in writing and I'm always very open. When we have it, we give it, and when we don't, we figure something else out.
- [09:43]
A
So what if you don't have to actually choose one or the other? Is there a way to explore doing both or a hybrid?
- [09:48]
B
I highly recommend it. Yeah, I highly recommend it. Because for us, we have employees all over the world and so we also have employees of many faiths. Actually, I think I didn't even know how many. I think I thought there were like three, but there's a lot more. Yeah, we've got, you know, someone who's Buddhist. Someone who's. What is Indian?
- [10:09]
A
Hindu.
- [10:09]
B
Hindu. Oh, right. Manisha's Hindu. We've got Saka, who's Muslim. I'm Jewish.
- [10:14]
A
Christian.
- [10:14]
B
You're super Christian. And then a couple of the people are normal Christian. And I'm pretty sure Richard is atheist. Pretty sure. But I'm not 100%.
- [10:23]
A
A lot of diversity.
- [10:24]
B
There's a lot of diversity. A lot of diversity. And Saka doesn't celebrate any holiday at all. And for the Jewish faith, it's not even New Year's. New Year's was months earlier. So I like to call it the end of our year. At the end of our year, I like to give them a gift. I don't like to give bonuses. I like to give them a gift for. Early on in Shockwave, it was stuff because I was an idiot and you were cheap. You're still cheap, but frugal. It was cheap, I'm frugal, you're cheap. But it was, you know, a Shockwave cup and a book, and they were all very appreciative. Sure, we've always had really great staff, but that's what it looked like. Year one, Year two was like, man, it's kind of stupid. It cost us so much money to ship it around the world. I remember when I Bought all that alcohol and I thought I could ship it and FedEx sent it all back to my house. Do you remember that? A gift of cash, A gift of money.
- [11:20]
A
I think it probably depends too. Like if you have remote teams or everybody here locally, I think give cash.
- [11:26]
B
Give cash. People get presents from their friends. They don't need a present from them. Give them cash. Give them money. Give them money to show your appreciation, but don't make it part of the compensation. Make it just. This is a gift from the company to you. This year we did well. This year, we were able to do it. This year you were a part of that. And so we'd like to reward you. While we don't do this every year. And that's how I always put it. We do do it every year, by the way, but I always say we don't do it while we don't do it every year. We really wanted to do it this year because we've really done well as a team this year. And then on top of that, we have performance bonuses to keep them driven and motivated and productive all through the year.
- [12:03]
A
Yeah. And I think that clear communication really helps avoid misunderstandings or frustrations too. Right. Because that's part of managing the team morale as well.
- [12:11]
B
And there's a lot of people like to say a lot of words to not get to the freaking point. So annoying. Don't do that. Get to the point. Say what you mean. Mean what you say. Be very clear in it. And don't say a whole bunch of words selling them on nonsense because what. That creates confusion. Hey, we're giving holiday or end of year, whatever you want to call it. End of our year bonuses. We did really well this year. While we can't do this every year and we don't do this every year, I really wanted to show my appreciation to the team members. You guys are all going to notice that there's a bump in your checks this week or if they work in your office, here's an envelope. I really like envelopes. Cash. But. But every CP hearing, this is cringing right now.
- [12:53]
A
Look, if you need some help designing a bonus structure, go ahead and head to our free members area specialists podcast.com and download our bonus strategy toolkit. It includes templates and guides to help you get started here. I'd like to shift over, actually, and talk a little bit about some of the pitfalls to avoid as you're developing these strategies. Because there's bonus strategy mistakes that people are making all the time. Ineffective incentives, you know, different workplace Challenges. And so, you know, how do we navigate through not over promising on a bonus. Right.
- [13:21]
B
Or. Well, the first thing is, is a lot of people, I'm speaking to you, Perry Belcher. A lot of people like to go, oh, they're doing such a great job. They're not looking at the budget, they're not forecasting what's coming up. And they make promises that is really difficult for us to keep and we have to keep them, but it makes it really, really difficult to keep. I called out Perry. We've never not paid a bonus that he's promised. But it's hurt sometimes.
- [13:42]
A
Right.
- [13:42]
B
And so we do know of other clients who I will not name drop, who we had to get on calls with staff, long time staff members, and tell them, hey, that bonus that you promised for the past six months, it's just not going to be able to be done right. And we'll have to make it up to you sometime in the future. And you pretty much just destroyed a great employee.
- [14:00]
A
Right. Because not getting paid something you feel like you deserve is demoralizing.
- [14:05]
B
Not getting paid something you were promised.
- [14:06]
A
Yeah.
- [14:07]
B
Even worse, a lot of people believe that they deserve to get paid more. And honestly, a lot of people probably do deserve to get paid more. That being said, when you're promised to be paid money and then not paid it, you can create yourself all kinds of issues, including some employment law problems.
- [14:25]
A
Right.
- [14:25]
B
Which not a lawyer, definitely not an HR person, but you certainly could create all kinds of problems for yourself. So it's really important to be forecasting what you can actually afford. So like I was saying earlier, if you bring on two clients and you give them 50% of that revenue, what if it costs you 70% of what came in?
- [14:42]
A
Right.
- [14:43]
B
You have to understand your numbers.
- [14:44]
A
Right.
- [14:45]
B
And you have to have conversations with your controller, bookkeeper, cpa, whatever you have on what you can actually afford. And then, and then once you understand what you can actually afford.
- [14:54]
A
Yeah. So not over promising and really focusing on what your budget, your company could actually afford in this budget. Yeah.
- [14:59]
B
And then the next thing is make sure. And I was just saying this earlier, there is full transparency and people completely understand what the things are that they're trying to hit for the. Particularly the performance bonuses. Is there anything that's going to keep them from getting the end of the year bonus if they miss too many days? I love that one, by the way.
- [15:19]
A
I miss too many days.
- [15:20]
B
Oh yeah, I love that one. It is. If you are out more than five days, I'm making this part Up. It depends on the company and the staff and everything else. But if you are out more than five days over your pto, your vacation, your holidays, then you're not eligible for a performance bonus.
- [15:38]
A
Right.
- [15:38]
B
And that should be exclusive of someone who has a doctor's note for a serious illness or you know, whatever. Excessive tardiness, excessive write ups.
- [15:49]
A
Right.
- [15:49]
B
If you've been written up more than twice or, I don't know, whatever. It just depends. I don't write people up unless it's serious. So it'd be one time for my company. I know a lot of people, I know a lot of people that write up like they think they have to document everything. So they write up people 50 times. But you, you need to look at that and make sure it's well defined and well, and just is there anything that's going to keep them from getting the bonus? Make sure they know it and make sure they sign off on it. What are the parameters around the performance bonus and what are the contingencies and nuances to it? And make sure they sign off on it. Have conversations about it, make them repeat it to you, put it in writing and make sure everybody signs it so.
- [16:23]
A
There'S no questions about what you're requesting. Yeah.
- [16:26]
B
And then the last thing is if you have to skip them and you may and you know, things, things happen, somebody makes a big mistake and it costs the company hundreds of thousands of dollars and we've seen these things or you know, in June your high ticket program is selling at 13% conversion and now it's selling at 1% conversion but you still have all the bills of the 13%. Right. And so now I have no money to put these bonuses so I got to skip them. And so avoid that at all costs at the moment that you need to deviate, you know.
- [16:57]
A
Yeah.
- [16:57]
B
So if July happens and all of a sudden things start taking and August happens and they're tanking, September happens and it's tanking. Don't wait to December to tell your people. Sit down with them. Hey guys, let them help you problem solve and let them know what's at stake.
- [17:12]
A
Love it.
- [17:13]
B
Hey guys, we're screwed right now. Employers don't want to do that. They're afraid. People warn people. If you have a good company culture and you have created battle buddies, not co workers. If you have created a business where people feel trust, people feel heard, people feel comfortable with conflict and debate and people want to drive, they'll step in and they'll help you with ideas.
- [17:36]
A
Yeah. Sometimes things that you wouldn't even come up with, right?
- [17:39]
B
Because you're in the thick of it. You're in trouble and you're drowning and now you feel like there's a noose around your neck. What happens when you have a noose around your neck? You start wailing. And what happens when you do that? The noose gets tighter, right? So let the team come. Cut the frickin rope.
- [17:54]
A
So bonuses are more than just extra cash. They're a reflection of how you value and motivate your team members. So choose wisely. If you've enjoyed this content, feel free to please, like and subscribe.
- [18:04]
B
Don't feel free like and subscribe, bro. Like. Like and subscribe and give us comments on what you think too.
- [18:09]
A
Yeah, we definitely appreciate that. And don't forget to take a look at our Visionary Vault. It's got some tremendous resources.
- [18:14]
B
What's the Visionary Vault? Travis?
- [18:16]
A
It's Visionary Vault is a free free members members area that you can get to@specialopspodcast.com really, it's got some tremendous resources. We're diving in there for some ideas on things that we're doing for my girls and some launching businesses content for all different kinds of things. So make sure to so just to.
- [18:33]
B
Give context, Travis is having his two 17 year old daughters go into a Visionary Vault to find resources and to learn how to create a business. That's what that meant. But go ahead and sign up for it because it's really awesome. We put a lot of hard work into it and it's free. It really is free. It's not bullshit free. It's like really free. And when you go in, it's not going to try and sell you other things either.
- [18:53]
A
So thank you so much for joining us and we will catch you next time.