Should a Hot Division Get a Bigger Bonus?

Money & Ethics

Should a Hot Division Get a Bigger Bonus?

Q: I’m 25. At the medium-size company where I work, compensation, especially the annual raise and bonus, is tied to the performance of the company, rather than a department’s success or an individual’s performance. My division is profitable and growing. I feel I’m penalized with small raises and bonuses for the lackluster performance of other departments, which are dragging down the company’s overall success.

The company apparently has a long tradition of “We’re all in this together,” with generous rewards for all when the company prospers and universal belt-tightening when it doesn’t. Longtime employees seem to like this, but my peers and I think it would be fairer to have individualized incentives. What do you think?

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This is less about ethics than about different corporate cultures. The view you express is very common among young workers, who seem to find the communal culture you’re describing old-fashioned and unfair. In their minds, the lackluster performance of other divisions—and perhaps the company as a whole—isn’t their problem, and it shouldn’t affect their compensation. But veteran employees—who probably include senior managers—have long memories and know that a star division one year might be a laggard the next, so the communal approach smoothes things out.

Some companies thrive by fostering rivalry among departments and making sure the winners get rewarded more than others. Other firms believe that esprit de corps is hurt (and resentment festers) if word gets out that some departments got fat raises and bonuses and others didn’t; ambitious employees might seek transfers to those departments to improve their pay.

Compensation policy should seem rational and consistent to employees. And top performers in every division should be recognized both publicly and monetarily. But in the end, the goal isn’t to please everyone but to attract and retain talented staff. Different approaches can accomplish that.