In Science Daily Week: Which is more effective: bonuses or raises? Guy Kawasaki remarks on an interesting study:

According to this “Bonuses Boost Performance 10 Times More Than Merit Raises” in Science Daily which pointed to a Cornell study called “Using Your Pay System to Improve Employees’ Performance: How You Pay Makes a Difference” by Dr. Michael C. Sturman, a bonus yields far better results.

But both the study and Guy miss what is perhaps the most important point.

Do you want to maximize the performance of the individual or the
team. If the team is your goal then offering bonuses to individual
employees maybe counterproductive.

Here are the problems individual bonuses can cause:

• Comptetion within the team
• Perceived Unfairness
• Envy

Is there a better way? Consider Mary Poppendieck’s article: Unjust Desserts (btw its a PDF).