How and why I am paying 2021 bonus
In a nutshell
I failed with B corp approaches to pay bonus and make donations. I found a new way to allocate profit. The how and why is explained below.
We are a small startup in construction / craftmanship sector with approx 20 employees and are actively practicing models of holocracy.
All employees just received a bonus of 1/2 month salary in cash. Equally distributed, to all who are with the company > 12 months.
Dont forget: Owning and working in a profitable company is a privilege.
WHY
I believe:
- in teams & models of holocracy
- every employee is equally important and necessary to produce and deliver our products & services.
- sharing profit makes employees more engaged and caring about daily expenditures and efficiency
- providing capital is just a and not the resource of a company
- MbO's and rankings are for school kids & olympic games
HOW
All employees get the same bonus in relation to their nominal monthly salary. Excluded are all employees <12month with the company. This measurement is extremely simple and kind of old school - but it's serving many issues:
a) Full transparency. No greed. No manipulation.
b) Team spirit, every team member is equally important
c) Seniority level (= higher salary)
d) Part time work
e) Easy communication: (Excellent year = 1 pay, average year 1/2 pay, bad year= 0)
f) Cash is king
Pm: Sales staff have variable pay. For the bonus (as well as hourly paid workers) their average salary has been used as baseline.
Important to know: We have a completely transparent company, everybody sees everythig. Read more about how we work
Learning Curve
After studiying dozen of benefit schemes, especially those of B certified companies I initially found the models from Bronner (soap) and Patagonia (sports article) interesting and started to explore on that. What they do is basically split their profits into 3/4:
- Shareholders
- Reserves
- Employees
- Charity / Environment (ie 1% for the planet)
At Dade Design I have initially tried to do something similar with disappointing results. First of all (because of the direct profit sharing) employees started to act on others in an unhealty way (you waisted material, you are not efficient, ...). All of the sudden we had greed in the company. It was disturbing.
Secondly the donations have been questioned by employees, banks (even though we have no bank loans) and clients. I had to realize that this (B corp) are my personal values & believes and not the ones of the company und customers.
Thirdly our profits (as a startup) were not stable enough, especially the allocation to the reserves too low. With the first Covid-19 wave we got hit badly and needed government loans to finance our balance sheet.
There were many lessons to be learned... and no bonuses paid for years. Thats another negative impact of that original approach: Employees started to lament: ...if we woudn't have made donations last year, we would have gotten a bonus this year. Solidarity has its limitations.
No donations anymore?
Absolutely not. But we are not communicating them anymore.
For example we have our CO2 neutral commitment established since 2016 and are expanding it. But we are no longer communicating it (unsubsribers on CO2 newsletter were higher than click rates). We still grant scholarships to Aiducation and we are still providing jobs for handicaped people or help employees when they end up in financials or other troubles.