Since it's the time of year for reviews and bonuses, there's been a few articles to come out recently. The following link is to a posting of Bob Sutton's that contains links to information about performance reviews. Sam Culbert in the Wall Street Journal: Get Rid of the Performance Review!
What’s the Value of a Big Bonus?
What would you expect the results to be? When we posed this question to a group of business students, they said they expected performance to improve with the amount of the reward. But this was not what we found. The people offered medium bonuses performed no better, or worse, than those offered low bonuses. But what was most interesting was that the group offered the biggest bonus did worse than the other two groups across all the tasks.
None of the above is new. Annual performance reviews are, at best, a time to rank people. It's easier to justify who to layoff or fire.
When given yearly, bonuses are expected. When it becomes an expectation, it's not really a bonus anymore. It's a part of the yearly compensation. If there's a year when one isn't given, you'll find out that someone was expecting that money to buy their kids something for Christmas or pay some type of expense. Worst yet, you may be sending a signal to employees that things aren't working out so well at the company. Ideally, the company is open honest with it's employees such that company performance is known and isn't a surprise. The employees should have been treated well enough that you wouldn't expect them to leave when bad news is announced. This is called loyalty and it's something today's worker can't afford to give lightly.
Companies that want loyalty should know that it isn't earned easily. It's earned with trust which is built on honesty. Employees need to trust their supervisors and management. Trust comes from being able to believe what management says.
If I were an autoworker, there's no way that I would have any loyalty to automakers. It was obvious from the testimony before congress that don't know what they're doing. They danced around questions and couldn't give good direct answers. They can't be trusted.
It's the same thing with politics. I'm an independent because I can't trust what either party says. I won't sign up for the dogma that is espoused by either side, because I don't believe that they're honest.