Bonuses and certain reward systems have little impact on long-term organizational performance.
So says a study, conducted by the HPO Center, a global research organization with U.S. headquarters in Concord, Mass., aimed to identify the factors that determine an organization's sustainable success. The study finds the use of bonuses and some reward systems are a "hygiene factor" for many organizations that have no substantial effect on long-term organizational performance.
"The practical implication ... is that organizations should not spend a lot of time on designing and implementing elaborate and sophisticated reward systems to improve performance," says Andre de Waal, academic director at the HPO Center, a consultant with Arthur Andersen Business Consulting and co-author of the study.
The link between bonuses and performance has long been debated, but most experts agree an appropriate reward system is a necessity.
"In every case, the reward system addresses both financial and non-financial factors, celebrates success and appropriately differentiates compensation," says Marc Stockwell, a principal and national practice leader with Findley Davies' compensation and rewards management consulting practice in Toledo, Ohio.