In 30 years, I have yet to see a retention bonus retain, let alone motivate, anyone. – Kate D’ Camp, former VP of HR at Cisco
Let’s face it: only a few people voluntarily spend any time thinking about the use of employee retention bonuses (ERBs). I wouldn’t either, except for the fact that a majority of major firms use them instead of much more effective retention approaches. The use of retention bonuses is at an all-time high but I wonder why, because they’re expensive and only occasionally do work. In my over 20 years of work as a thought leader and practitioner in retention, I have been unable to find any credible corporate data that even comes close to demonstrating the effectiveness of retention bonuses.
The major flaws of employee retention bonuses fall into three categories, which include:
- ERBs are evil because they are a form of “paid servitude,” where you buy rather than earn employee loyalty.
- ERBs don’t actually work in a time when turnover rates have gone up 45 percent.
- ERBs have many negative unintended consequences that unintentionally create damage.
Maybe the lack of data proving the effectiveness of retention bonuses is not such a big surprise, because almost nothing in corporate retention is data-driven. There is also no data to prove the effectiveness of most other common “retention resource wasters” like improving benefits for all, engagement efforts to improve retention, or offering a coach/mentor or profit-sharing. Despite their lack of supporting evidence, the use of retention bonuses has doubled since 2010 (according to a recent WorldatWork survey). If you are a corporate manager or a talent management professional who is considering offering retention bonuses, review the following 25 ugly reasons thoroughly before you act. In my book, they rank at the very bottom as the least effective commonly used retention tool.