Policy of distribution of bonuses

Introduction:

Bonuses have to be given to the employees whether a company is in loss or profit unlike dividends that are paid only according during profit. Hence the policy of distribution of bonuses is of great importance from a manager's point of view. Different managers have different styles of work and when it comes to European managers their legacy lies in distribution of work according to responsibilities, performance and achievements.

However as per the review of filled in questionnaires the Europeans have rejected any influence of nationality in giving bonuses to the employees. It is only the style of work and demography of a person that can sincerely mould the process. The concept of bonus pool is of great importance in managerial economics and provides a new bonus policy that can revolutionise the way the employees work to attain the goals of the organization and self goals.

Key features of European management:

European style of management has shaped the way managers interact with their employees. No doubt that the Europe and America as we see today are a result of the European style of management. Due to their ability to reason out facts and figures and take important decisions, their bureaucracy rules supreme when it comes to management. The main features of the European style of management are as follows: (Top management styles in Europe: implications for business and cross-national teams )

  1. Straight forward approach of using performance and achievements in making judgements.
  2. Decisions are unbiased irrespective of religion, nationality and other demographic factors.
  3. The management is affected by political decision making.

Bonus and "Bonus Pool":

Bonus is the extra payment made to an employee on account of performance in addition to the normal compensation of the work. This implies that every employee is entitled to different bonus amounts according to his job profile and performance. But this form of "post pay' when compared with "bonus pool" is poor in its policies for performance review.

Bonus Pool is a form of 'pre pay" in which every employee gets the advantage to be the champions of the growth of the company. Bonus Pool is a joined entity and cannot work alone. The revenues of the company are saved as a depository of money in the bonus pool and employees are given a share in it. This makes the employees work in the view that the goals of the company are their own and hence multiply the productivity.

Thus the concept of allocating a bonus pool is done over several parameters as mentioned below: (How a 'bonus pool' can motivate your salaried employees| Insurance> Insurance Agencies & Brokerages from AllBusiness.com)

  1. Outdoing with the normal concept of increasing the salary every year. This policy would give additive advantage with the bonus pool giving the employees too uch incentives thereby need to be eliminated.
  2. Concept of bonus should be eliminated to make the bonus pool take its form. Example if an employee is paid commission for the good work he has done, this should be ended.
  3. The size of the business pool needs to be determined and it depends on:
    • The number of employees.
    • The revenues of the company.
    • Goals and Objectives.
  4. The proportion of bonus pool allocated to each employee depends on the following factors:
    • Job profile.
    • The position in the hierarchical organization of the company.
    • Performance of the employee.

      The primary data approach for rating an employee according to the credentials required is of great significance. We can use a five point scale for the purpose. The distribution of monetary fund in the bonus pool is highly significant as any unauthorized share can make the system corrupt rather than moving on the path of growth, like the Wasta Connections etc.

      Outcomes:

      As already mentioned earlier the European style of Management shaped the Western management as we see today. But with regards to the bonus pool strategy the nationality is not important at all. It only depends upon the decisive criteria set by the managers regardless of other factors as mentioned earlier. The main outcomes are given as follows:

      1. The employees are paid on a relative basis and not an absolute basis as in the case of bonus.
      2. The relative process makes the employees work more sincerely to attain the objectives.
      3. The employees have the freedom to use the amount allotted in the business pool as they require in order for achieving the goals.
      4. The producer of services can also participate in the bonus pool and give up the commission taking policy.
      5. The records help by a previous employee are handled over to the new employee for continuing with the work. This should be replaced by analysis, assessment of the book by the new employee.

      The last point is to be emphasized upon. The new employees when making a part of the bonus pool are to be judged on various parameters rather than simply handing over the pool and job to the employee. Producers normally take commission for the services they deliver but if they are acquainted with the benefits of bonus pool they too can join it and hence commission policy ends plus the bonus pool now has another user to it.

      Wasta Connections: Favouritism

      Wasta Connections as called in UAE is a system of biasness. On the bases of some relationships or contacts the employees ten to make the bonus pool corrupt by directing the share of money for themselves in the pool. Thus merit is sacrificed and corruption creeps in the system. Since a manager cannot be biased to every employee hence their tendency has been found very low in comparison to the allotment of shares in the bonus pool. (Arab Archives::Wasta Campaign )

      Wasta connections are not always bad. If some employee is facing injustice and has no other way to deal with it except Wasta Connections he can use it for his betterment. But as whole Wasta connections tend to destroy the integrity of the system and direct the youth towards wrong path of attaining success.

      Wasta connections can destroy bonus pool strategy but can be neglected if Wasta influence is very less. Otherwise if Wasta influence is very large the bonus pool strategy is better to be replaced by the conventional bonus system. Wasta connections tend to exploit the bonus pool and also affect the credible employees since wrong employees are benefitted.

      Business and Wasta Connections: Impact

      This is a common article that witnesses the growth of Wasta in the Middle East. The development of Jordan in 1996 allowed officer to appoint their own family members to the various civil posts in the country. This was allowed since the ruling officials got away with the hectic work of interviewing and selecting people for these jobs. (Wasta: The Hidden Force in Middle Eastern Society)

      As per a research done in the Middle East in the year 2000 the following data was recorded:

      1. 87% of people wished to eliminate wasta.
      2. 90% of people astonishingly wished to use wasta sometime later in their future.
      3. 42% felt that the use wasta would increase in their lives shortly
      4. Only 13% thought that they would minimise the use of wasta.

      Wasta connections thus being known by everyone as a wrong way of work but still everyone (majority) are susceptible of using them in their near future.

      Conclusion:

      The impacts of decisions taken by the managers of the European Nationality are extremely important since it marks a significant shift from the traditional approach of distributing bonuses to the employees. The method of pre allocation of resources using business pool is much better since the employees can use the money to perform duties and other activities for the growth of the company without having to wait till the bonus is given.

      But bonus pool suffers from Wasta and hence the performance of the bonus pool method is adversely affected and is not an instantaneous process but one that will enter in all the processes once it creeps in. The prophecy that Wasta will penetrate deep into the roots of the Arabian countries will make the bonus pool method useless in the country. Thus severe steps are required to control the policy at the earliest.

      The credibility of bonus pool relies upon the fact that if it is administered by internal people of an organization than there may be Wasta connections ruling the process. Hence it should be administered to outside authorities that have no personal contact with the employees and to prevent biasness further these authorities must be changed after every process.

      Thus concluding that the bonus pool can revolutionise the performance of the firm we have a strong measure in terms of bonus pool to allocate resources in the best way to have the objectives and the goals achieved in the long run. The outcomes of bonus pool policy clearly depict that the policy is extremely useful. If by some means wasta can be eliminated out of the process this policy can increase the growth rate of any organization and administer success not only to the organization but also of the employees.

      References:

      1. How a 'bonus pool' can motivate your salaried employees| Insurance> Insurance Agencies & Brokerages from AllBusiness.com Retrieved May, 7, 2010 from http://www.allbusiness.com/management/3588301-1.html
      2. Wasta: The Hidden Force in Middle Eastern Society Retrieved on My 7, 2010 from http://www.danielpipes.org/642/wasta-the-hidden-force-in-middle-eastern-society
      3. Top management styles in Europe: implications for business and cross-national teams Retrieved May 7, 2010 from http://www.highbeam.com/doc/1G1-16840575.html
      4. Arab Archives::Wasta Campaign Retrieved on May, 7, 2010 from http://www.alarcheef.com/campaigns/wasta_campaign.asp

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