Most of the businesses I work with pay an annual bonus, and some pay sales commission too. On the face of it, that seems entirely sensible. Work hard. Perform well. Receive a financial reward. Everyone wins.
Or do they?
Whenever I work with leadership teams, one question keeps surfacing, “We want collaboration, but why doesn’t it happen?”
The answer is often hiding in plain sight.
Many organisations say they value teamwork, knowledge-sharing and collective accountability. Yet the way they reward people tells a very different story. Individual performance is celebrated. Individual targets are measured. Individual bonuses are paid.
It shouldn’t surprise us if people then behave like individuals.
Every reward system creates a culture
Leaders sometimes think of bonuses as simply a way of paying people.
They’re not: they are one of the strongest cultural signals in the organisation.
They tell people what success looks like. They shape priorities. They influence who shares information, who protects it, who asks for help, and who quietly keeps opportunities to themselves.
If your bonus depends primarily on your own billings, clients or sales, why would you willingly hand work to someone else? Why introduce another department to your client? Why spend time coaching a colleague when you could be generating your own income?
None of this proves that people are selfish. It just proves they are rational – the system is encouraging exactly the behaviour it was designed to produce.
Unfortunately, it may not be the behaviour the business now needs.
Success creates new problems
This is particularly noticeable in growing professional services firms – when the business is smaller, individual performance drives growth. Entrepreneurial people build relationships, win work and develop loyal clients. A bonus linked to personal achievement can make perfect sense.
But then the business grows.
Clients need expertise from different disciplines. Opportunities become more complex. Leadership becomes shared rather than founder-led. Knowledge needs to move around the business rather than sitting inside individual teams.
The organisation has entered a new stage of maturity, yet the reward system often remains exactly the same.
And what happens?
Departments become silos. Cross-referrals dry up. People protect “their” clients rather than acting in the best interests of the whole business. Senior people become reluctant to delegate because they don’t want performance – or their own income – to suffer.
Without meaning to, the organisation starts competing with itself.
Money isn’t the whole story
Of course, people need to earn a good living. We all have mortgages, families and financial responsibilities. Fair pay matters enormously.
But decades of research suggest something interesting.
Once people feel fairly rewarded, increasing financial incentives doesn’t necessarily produce greater motivation – particularly in professional, knowledge-based work where people already find satisfaction in solving problems, helping clients and developing expertise.
In some circumstances, an excessive focus on financial reward can actually reduce intrinsic motivation.
That’s worth thinking about: if every conversation becomes about this year’s bonus, what happens to professional pride?
What happens to curiosity?
What happens to the satisfaction of helping a colleague succeed or developing the next generation of leaders?
These things don’t usually disappear overnight, but over time, they simply become less important – because the organisation has taught people to focus elsewhere.
What people really want
In my experience, people stay engaged because they feel they are building something worthwhile together. They want to understand where the organisation is heading and how their contribution matters.
They want opportunities to learn, stretch themselves and be recognised for doing good work. They want honest conversations with leaders they trust. And increasingly, they want clarity.
- Clarity about what success looks like.
- Clarity about their role.
- Clarity about how decisions are made.
- Clarity about how different teams work together.
These are the foundations of accountability – and notice that none of them relies on an annual bonus.
Reward the organisation you want to become
I’m not suggesting you abolish bonuses: for some businesses they remain an important part of total reward.
The better question is this:
What behaviour is your reward scheme actually rewarding?
- If you want collaboration, does the bonus recognise collaboration?
- If you want knowledge-sharing, is that visible in how success is measured?
- If you want leaders who develop other people rather than rescuing them, are they rewarded for building capability instead of simply hitting their own numbers?
- If you want collective accountability, does your reward system encourage people to think beyond their own desk?
Because every system in an organisation is perfectly designed to produce the results it gets. Your bonus scheme is no exception.
Several leadership teams I’ve worked with recently have begun redesigning their approach. Rather than rewarding only individual performance, they’re introducing measures linked to team success, cross-functional working, client outcomes and the long-term health of the business.
Interestingly, the conversations change almost immediately. People stop asking, “What’s best for me?” They start asking, “What’s best for the client?” and “What’s best for the business?”
That’s a very different culture, and in the long run, it’s usually a far more profitable one.
Because sustainable growth rarely comes from brilliant individuals working harder; it comes from building an organisation where people consistently succeed together.