Why Do So Many Owners Resist Revenue Bonuses for Employees?

Setting aside the obvious inconsistency of paying higher-than-market salaries while believing that money doesn't motivate, we find that there is considerable confusion among owner-advisors about the motivational properties of compensation. Ironically, what our merger partner found in his research is exactly right: typically, money doesn't motivate employees. More money might attract them to take a job, but it rarely causes employees to perform better once they are in their jobs. 

Our experience—and research—tells us that's because the prospect of additional raises is too far into the future, and too uncertain, to motivate most employees. In fact, when we're confronted by advisory employees demanding "more money," we automatically look for other causes for their unhappiness; we almost always find one.

What our merger partner (and many other owner-advisors) fails to understand is the logic behind revenue-based bonuses. They aren't about the money. Instead, they are a tangible way to tie firm employees to the success of their firm. If the firm does better, they get rewarded.

Essentially, revenue-based bonuses are a relatively inexpensive and non-equity sharing strategy for getting a firm's employees to think—and act—like owners. Without exception, the owner-advisors that we've seen implement revenue-based bonuses are amazed at the changes in employees' attitudes and work ethic. 

I often wonder why more owner-advisors just don't see the many advantages in creating a more employee-centered culture. After all, their success largely depends on their employees. I suppose it's because they just don't see the problem that Charles Budowski described, so they don't see the wisdom in creating a firm that offers a good answer.