Performance Bonuses

As a 26 year old at Lands' End, I enjoyed the period between Thanksgiving and Christmas. All of the hectic work needed to get Holiday catalogs out the door happened in August / September. By Thanksgiving, there was nothing left to do but count the money. And get February / March catalogs out the door. The train must run on schedule.

So there I am, sitting at my desk right before Christmas, when my boss stops by and hands me a check.

"What is this?"

"Half of your annual bonus."

"I get a bonus?"

"Yes. If the company meets profit goals, you share in the profit."

"Say what now?"

"We met our profit goals. Our owner pays half before Christmas because he knows it is important for families to have the money at Christmas. He pays the other half when our fiscal year results are announced in March."

Well I've never been so excited to get half of 10% of $28,000 in my life, less taxes and withholding!

From that moment, I became obsessed with profit. It was a way for everybody to get paid more money!

The incentive only goes up from there ... all of a sudden it's a 20% bonus as a Manager, a 40% bonus as a Director ... it was quite a bit more than that when I was a VP at Nordstrom. Do the math on that one.

An Eddie Bauer bonus became the down payment on a first home. That was meaningful.

My staff at Nordstrom became agitated when our division was folded into the Retail division. The Online division at the time had a bonus structure, the Retail division did not (for analysts / project managers). I was able to get half of the annual bonus added to their annual salaries, guaranteeing them something. Didn't matter. They were livid they weren't being rewarded for a year of hard work.

Bonuses accomplish three things.

1. They allow employees to share in the success of a company.
2. They teach employees to focus on what matters to Management / Ownership. In most cases, that was either sales growth and/or profit.
3. The employee isn't performing soulless work while hoping for a 2% cost of living increase when the Owner sails off in a yacht. There's a reason, a purpose, for doing a good job if salary increases are unlikely and promotions are unlikely.

I realize this message won't get anybody to do anything different. But that's not the purpose. The goal here is to appreciate those of you who are blessed, who might get a check in the next month or early next year ... helping you appreciate your lot in life. Bonuses are good things.