Recently, we have seen a new management practice taking centre stage: peer-to-peer bonuses. This type of scheme is a new motivation tool in which peers, rather than managers, proactively recognise the good performance of their colleagues by rewarding them with money or points.
At first sight, peer-to-peer bonuses are useful, simple and harmless. However, before employers embrace this new compensation approach, they should take a closer look.
Promoters argue that it encourages collaboration and it enhances empowerment in the workplace. These are laudable aims, with which it is difficult to disagree, but arguments based on these reasons might be misleading. It is worth understanding why, to help inform compensation choices.
For organisations, collaboration is paramount. However, the use of bonuses of any type is unlikely to enhance collaboration. The objective of bonuses is to enhance motivation, assuming that money and competition drive it. In the long run, however, a peer-to-peer bonus is unlikely to enhance collaboration because, by definition, it assumes that competition is needed for it to work. At best, in the short-term, it will create pseudo or self-interested collaboration.
Arguing that the use of peer-to-peer bonuses increases empowerment is commendable, but also deceptive. While typical bonuses are controlled by a manager and could be considered autocratic, empowerment is a process by which people feel control over their own working lives, rather than the working lives of others. When people exercise influence or control over their peers, they enter a different type of governance, the results of which are still unknown.
In conclusion, employers should exercise caution regarding this new bonus initiative. As with any management practice, it is likely to work under some conditions and for some time, and backfire under other circumstances.
Rather than seeing peer-to-peer bonuses as a one-size-fits-all remedy for motivation, organisations should see them as a prescription medication that requires careful use, has side effects, and requires continuous observation.
Dr Monica Franco-Santos is a reader in organisational governance at Cranfield School of Management