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Finance First: Should we give year-end bonuses?

spukkato/iStock/GettyImagesPlus Hand holding Bonus card with green background.
Tie bonuses to farm profitability and individual performance to help generate an owner’s mindset in your employees.

 We have traditionally given all our employees an end-of-year bonus. What’s your take on employee bonuses and rewards, especially this year? — D.W., Nebraska

Many in ag find a main factor limiting growth is retaining good employees. Kudos to you for acknowledging your employees’ part in the success of your operation.

But how can farm leaders properly share an operation’s success with their employees?

Consider this: Do employees have any control over the size of their bonus? Do they understand when they would receive a bonus versus not?

Say, you gave each employee a $5,000 bonus at year-end for the last two years. You tell them it was a good year and you appreciate them, but they still don’t know what they did to contribute to the farm’s success. They’re appreciative, but it doesn’t impact how they focus their time. Generally, if a bonus has happened two years in a row, the employee will begin to expect it, regardless of performance.

If you want to bring your employees further into the successes and challenges of the operation, you need to explain how a bonus will be calculated. It might be based on the farm’s profitability or a proxy of that. This can help generate more of an owner’s mindset.

You could continue with year-end bonuses — but you run the risk of having an unprofitable year and still paying out.

Overall, employee retention is much more than an end-of-year bonus check. One of the best things you can do to help retain employees is to maintain a positive workplace environment where people are respected, encouraged to bring their creativity to work, and feel they are part of something bigger than themselves.

Frye is president and CEO of Water Street Solutions.


TAGS: Management
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