To Bonus or Not to Bonus

Bonuses are used as a tool to help motivate employees—from the front of the house to the back of the house—to reach quantitative and qualitative performance goals. Bonuses can also help attract and retain and talent. However, it's important for employers to consider if giving bonuses is draining cash by rewarding employees for meeting expectations. Executives questioning whether to bonus or not should carefully considering the following pros and cons:

To Bonus…

Accountability and motivation – Awarding bonuses can be a great way to incentivize employees to accomplish more and be accountable to certain measurable goals.

Rewarding a job well done – If sales are up and guest satisfaction is high, those driving the results should be rewarded. 

Retain and attract talent – Many restaurant companies, particularly the larger chains, pay bonuses to store managers, district managers, and other senior level employees. Therefore, it may be prudent to maintain a bonus plan in order to remain a competitive employer.

Encourage a culture of collective success – A bonus plan allows for employees, particularly general managers, to feel like they have a stake in the company and are empowered in making financial decisions to improve the bottom line. When the restaurant performs well, the wealth is shared with employees.

….Or Not to Bonus.

Give your best to the guest – Many operators believe that awarding bonuses will encourage employees to focus on maintaining costs at the expense of quality guest service.

Above and beyond every day – Some operators believe employees should strive to perform above and beyond every day as a minimum requirement. The worry is that rewarding employees for doing their core job duties can lead to complacency.

Structure of Bonus Plan

Bonus plans should be designed strategically to mirror the broader goals of the restaurant, driving employee behavior to exceed expected responsibilities and help reach the business' overall objectives.  However, if the goals set are not achievable and are continuously missed, then the reverse will occur. Company morale may decrease, performance may suffer, and employees may even choose to leave.
What are three important considerations to keep in mind when designing bonus plans?
  1. The goals associated with a bonus plan should be well-defined and measurable, and the plan should be periodically reviewed to ensure that these goals remain relevant and reasonable.  This helps ensure that bonuses are set up in a way that makes them valuable in measuring the success of employees based on how frequently they are able to achieve their goals.
  2. Ensure that bonuses are tied to the same benchmarks across the board, and be transparent with employees about the pre-determined criteria for receiving bonuses. 
  3. Align your bonus plan with your financials to minimize any impacts to your bottom line. 
Whatever decision you ultimately make on whether to bonus or not, remember that company culture is a key factor in retaining and attracting the best staff, as well as providing exemplary service to customers.

Have questions about bonuses for restaurants? Contact Giselle El Biri at gelbiri@bdo.com, and be sure to keep up with the Practice's latest thoughts by following us on Twitter at @BDORestaurant.
 

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