Dear Ken,

I was involved in your online Webinar discussion last week, 'Introducing a Culture of Accountability for Staff.' At the end, I asked a question about bonuses. I'm still not clear on this.

Maybe what I should have asked was this: I don't really want to waste a whole year paying people for work that's not moving our organization forward, until annual evaluation, when I can re-structure our organization. How can I regularly compensate -- or decompensate -- people for results throughout the year?

Also, I was not clear on the specifics on rewarding annually for results achieved against agreed-to goals. They signed on to get paid. If, at the end of the year, they haven't met their goals, I still have to pay them.

So help me understand the rewards system. I thought you were talking about bonuses. I agree that bonuses are not the way to go. So, what is the correct way?   -- J.A.

Dear J.A.,

Thank you for your recent email. I apologize for not providing you the full answer you may have wished while attending the webinar. I will try to do hat this time as best as I can.

First of all, I think we need to establish that in churches, the majority of one's compensation will be based on a fixed portion or salary. With that in mind, you will still need to pay people during the year their fixed salary portion regardless of their performance. [In this situation, and for this part of their pay, if they're not performing, you must take disciplinary action.]

Secondly, one cannot "de-compensate" people. Once money is paid out (unless it is as a "draw on future" earnings), you cannot adjust for it later. This, then, leads me to the issue of bonuses and/or results-based compensation or rewards.

As I see bonuses, they are usually discretionary at the employer's discretion. That is, you had a good year and there's money left over, so everybody gets a bonus at the end of the year -- either paid as equal amounts across the board to everyone or to those eligible, or paid out on an equal percentage basis (that is, percentage of their individual salaries). Sometimes it's just a Christmas turkey. At times, it really has nothing to do with individual performance or specific objectives -- that's not really appropriate for churches, which are nonprofit. 

This is where results-based rewards or compensation comes in. You can take a portion of their total cash compensation which you would like to pay for a job (and there's lots of ways to determine that properly) and tell people that this is "available" to them if they achieve certain jointly-agreed-to goals or objectives (agreed to with their supervisor). These goals could be individual and different for each position, or they can be group goals. The payments can be annual, or if the goals are repetitive or cumulative in nature, the rewards could be paid out monthly or quarterly. But remember: all along, they're getting paid their base or fixed salary as well.

Yes, they signed on to get paid a specific base or fixed salary amount, and they'll be getting that all along. The results-based pay is for achieving "stretch" goals or objectives wherein extra effort is required. The idea is that they get base or fixed salary for doing the base job of what's expected. But if they do over and above that, against certain goals and objectives, the church wins, and they get rewarded. The whole idea is to "motivate" them further with the results-based rewards to do more than they normally would do.

I hope that helps. This is a very complex area, and those who are not familiar with this aspect of Human Resources will likely need some help setting it up. Let me know if you would like more information. I'd be happy to help you or your church as appropriate.

In His Service with you,

Ken Godevenos

NOTE: If you'd like to listen to this on-demand Webinar -- a free service of Church Business Magazine -- it's available online.