ALLOWING MANAGERS TO use their discretion when allocating bonuses helps
motivate staff, say Rebecca Hewett and Hannes Leroy of the Rotterdam
School of Management at Erasmus University in the Netherlands.
Hewett and Leroy studied actual bonuses given to office workers by an
organization funded by the U.K. government. They asked 155 of the 733
employees to report their motivation levels shortly after receiving their
bonuses. The researchers found that employees who received high bonuses
perceived to be based on their manager’s discretionary judgment thought
the bonus was fairer. This, in turn, increased their intrinsic motivation.
Leroy points out that several companies in the Fortune 500 have
shifted toward allowing managers to use their discretion when allocating
bonuses because they want to create work environments that “encourage
passion, purpose and engagement.” These factors engender intrinsic
motivation, she adds, in which “you’re doing a job because it aligns with
who you are and your core interests and values” rather than doing it for
The research also suggests that manager discretion is only perceived to
be fairer and more motivating when employees benefit from it. Those who
receive less money view this discretion as less fair.
“Bonus systems are, by nature, not put in place to treat everyone
equally—someone always loses out,” says Hewett. “If your goal is absolute
equality, then bonuses are perhaps not the best tool, but if your goal is to
motivate the better performers, then allowing managers space to use their
discretion is a good thing.”
“Well, it’s only fair: How perceptions of manager discretion in bonus allocation
affect intrinsic motivation” was published online March 28, 2019,
in the Journal of Management Studies.