Just to clarify:
Team Bonuses: Pay Now or Pay Later?
• Cash is ALWAYS best. • A dedicated bonus check is second best but less effective. • Tying it in with normal payroll is bad. • And the winner for the worst possible outcome of all is (drumroll please …) paying bonuses using direct deposit. Just so there’s no room for confusion, you NEVER want to pay bonuses by direct deposit. Why? Direct deposit is “digital money.” It’s too ethereal. This is made crystal clear when you look at spending habits by payment method. Studies show people spend 18% more money when they buy something with a credit card or 8% when they use a debit card than when they use cash. Digital money is “pretend money.” It’s only slightly better than Monopoly money. You don't want the access to the bonus to be fettered or limited by needing to cash the check or going to the bank. You want to present the money in a way that conveys the highest perceived value ... Why? So they go and do it again. Cash carries a higher perceived value, which makes it harder to spend. That’s why it motivates. Cash (paid immediately upon hitting/ exceeding bonus) is motivation in its purest form. In order for the bonus to have the desired ongoing impact on behavior, your team needs to see, feel, and smell the money. In other words, the minor inconvenience of additional record-keeping pales in comparison to the immediate and lasting impact of receiving the reward exclusively as the reward. Incidentally, if you’re looking for guidance on creating your own team bonus system, please reach out to your Personal Gems Concierge and schedule a one-on-one call with Elizabeth, Dr. Orent’s wife, “The Engineer,” Davidson. She will go over your practice numbers, then design and write your Team Bonus System for you. Elizabeth will walk you step by step through the process of deploying this powerful strategy to spur accountability, inspire your team members to help your patients achieve their very best health, and, as a result, drive increased practice and revenue growth.
By Tom Rich, MBA, GG12 Senior Practice Analyst
It comes down to a question of effectiveness versus convenience.
No matter who you are, there's just something magical about getting a wad of “ready to spend” money. Don’t misunderstand; it absolutely needs to be reflected in their payroll, taxes, and your accounting. You should have people sign that they've received the cash bonus (including the date and amount).
Recently we’ve received several questions about team bonuses. Not so much how big they should be or what yardstick should be used to determine whether someone qualifies. The recent questions revolved around when and how bonuses should be paid. The answer, much to your accountant’s chagrin, isn’t rooted in accounting. Instead, it comes from psychology. Psychologists will tell you that in order for a reward to be effective and have a long-term impact on behavior, the reward needs to be given in very close proximity (timewise) to the action/behavior that generated it. In short, in an ideal world, your team bonus should be paid out on a weekly basis, as it is earned. By the way, Mondays are great days to pay bonuses.
The fact is that cash = excitement.
Why? Because cash = opportunity/freedom/ choice/security.
DON’T TAKE THE “TEETH” OUT OF YOUR TEAM BONUS SYSTEM! Although it may be more convenient to include the team’s bonus in their normal paychecks, it's entirely counterproductive. You don't want the bonus money buried in their normal checks. You also don't want them to start confusing what they made in bonuses with what they normally make. If you absolutely refuse to give a cash bonus, the next best alternative is a standalone check . It’s not nearly as effective as cold, hard cash at encouraging your team to continue to push for better results, but it’s better than burying it in their paycheck. "In order for a reward to be effective and have a long-term impact on behavior, the reward needs to be given in very close proximity (timewise) to the action/behavior that generated it."
Here’s the part that makes a HUGE difference: You should pay the bonus in cash.
Reading those words will make many accountants’ heads explode and cause more than a few Dentists to think that it’s “less efficient to process it outside of payroll.”
True … but that’s ignoring the entire purpose behind your team bonus.
The reason for a bonus is not to make it efficient for you to pay or easy to track for your accountant … your team bonus is there to incentivize your team to reach — and exceed — performance goals. You’re asking them to step outside their comfort zone and do more than they’ve done before, the achievement of which requires immediate and meaningful reward.
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