Show notes
Are your employee bonuses truly making a difference, or do they just feel like another line item on your expense sheet? On this very first episode of The Bonus Podcast, I, Andrew Lamppa, dig into the big question every business owner should ask: Why am I really paying out bonuses—and are they doing the job I want them to do?
In this episode, I challenge you to get honest about the reason behind your bonus payouts. I walk you through the five most common “jobs” people expect bonuses to perform:
- Generosity
- Appreciation
- Retention
- Motivation
- Influencing Performance or Productivity
I share real-world scenarios—like how a one-time act of generosity can backfire—and dig into why bonuses tied to performance are the most effective and measurable tool for moving your business forward.
Key Takeaways- Figure Out Your Why: Before giving another bonus, I urge you to ask yourself—what do I actually want this bonus to accomplish? (00:03)
- Beware the Generosity Trap: Giving a big bonus this year can create expectations (and even resentment) if you can’t repeat it next year.
- Short-Term Appreciation: Bonuses as a “thank you” work in the moment but rarely have a long-term impact (04:32).
- Make Measurement a Priority: Retention and motivation sound like great goals, but if you’re not measuring them, you’ll never know if your bonus is working (05:08).
- Performance is the Real Winner: When you design bonus plans around measurable results, you’ll see improvements in productivity—and as a bonus, you also build motivation, appreciation, and retention (06:11).
- Be Transparent: Your employees need to know precisely what they need to do to earn their bonus (07:10).
If you want bonuses that transform your team—making them think, act, and care like owners—then you’re in the right place.
Subscribe to The Bonus Podcast and let’s build bonus strategies that drive real, measurable results. I’d love to hear your thoughts and help you create a system that works for your business!
Read the full transcript
Andrew Lamppa [00:00:03]:
Why do you pay out a bonus? Why do you give your employees more money than they've already agreed to work for when you really don't have to? If it's because you think you should, then we may have a problem. You see, if you don't know the purpose of your bonus, if you don't know the reason you're paying it out, you're not going to know if it's working or not. Hi, my name is Andrew Lamppa, and And this is the bonus podcast. So I wanna start with an idea. I wanna start with the idea that a bonus is simply a tool in your toolbox. And every tool has a job to do. And if you don't know the job that your bonus is there to do, you don't know if it's doing its job. You don't know if it's gonna work.
Andrew Lamppa [00:00:42]:
Let's look at a couple common jobs people use for bonuses. First is to be generous. And I love this one. One of my core values is generosity. I love being generous, but is it the right job for a bonus? Next is to show appreciation. Then we have, and this is a popular one, retention. I want to use it as a retention tool. Next, we have motivation.
Andrew Lamppa [00:01:05]:
I want my employees to be more motivated, so I'm going to bonus them. And lastly, it's to influence performance or productivity. So before you think about paying out another bonus, I want you to really think, what job is that bonus there to do? And how do I know if it's working or not? So let's look at these 5 jobs a bonus has to do and see which makes sense and which don't. First of all is generosity. Let's start there. Like I said, I love generosity. I love when people are generous, but is it the right job for a bonus? Let me give you a scenario. We're getting close to the end of the year.
Andrew Lamppa [00:01:47]:
It's been an okay year, but we had a couple big projects coming right at the end. And so we're sort of flush with cash. We look in the bank balance and it's fairly large. Maybe it's the largest you've ever seen. And you look back and think, man, my employees, they worked pretty hard this past year. I haven't given them anything extra. I'm going to give them a decent bonus this year. Maybe it's $1,000.
Andrew Lamppa [00:02:11]:
Maybe it's $5,000, maybe it's $500. It doesn't matter the amount, but for the first time you've decided, as a way of showing my generosity, I'm going to give a bonus. And everyone loves it. They're thrilled. They get to maybe go on a little trip for the holidays, maybe buy some more kid toys for the kids. Whatever it is, they are appreciative and they're really excited. Now let's fast forward another year. So this next year, We're actually doing a little better and the team knows it.
Andrew Lamppa [00:02:40]:
We've been hitting our quarterly objectives. Sales are a little higher, but you know what? We missed out on a couple of jobs near the end of the year. So cash flow is a little tighter. The bank balance is nowhere near where it was a year ago because we had some maybe capital expenditures or other things that are keeping the bank balance lower. And you're like, ah, man, money's tight. I can't give a bonus this year, or it's going to be, it's going to be a really small bonus. So if last year you give $1,000 and everyone loved it, now this year you're just going to do a $100 gas gift card. What's the reaction of your employees? If they know we've done better this year and they're thinking about, wow, we got $1,000 last year, they're probably expecting something more.
Andrew Lamppa [00:03:26]:
At least at minimum, they're expecting $1,000, but they're They're probably expecting more, but because they don't have the insider knowledge of exactly what the bank balance looks like and how cash flow and accounts receivable is working, they don't realize that things are a little tighter. And so they get frustrated. Now your act of generosity in year 1 creates resentment and entitlement in year 2, all because you wanted to be generous. Think about that the next time you want to incentivize or bonus your employees. Because of your generosity. So next is appreciation, similar to generosity, but you're thankful for them. Whether it's the end of the year, end of the quarter, after a big project, you give them bonus. That's great.
Andrew Lamppa [00:04:10]:
It's going to do the job it's meant to do. They will appreciate it. Let's say it's a $500 bonus middle of June. Awesome. It has done its job. Now if you're Giving that bonus thinking, man, I hope for the back half of the year they're going to work a little harder. It's not going to happen. The job of that bonus was to show appreciation.
Andrew Lamppa [00:04:32]:
It did its job. Your employees are thankful and we're done. There's no other long-lasting benefits from that bonus that was given out of appreciation. So if we're clear with that, if we're clear about that, then Give it, but know that the job it's performing is simply appreciation and it's, it's short-lived. Next we have retention, and this can be a tool to use for retention. The problem is for a lot of small business owners, they're not measuring retention close enough to know if their bonus is actually impacting it. And when you have a tool and you have a problem and a job it's trying to do, you want to know if it's working because Because if you don't know it's working, then you don't know how to iterate it. You don't know how to adjust it or change it or to stop using it.
Andrew Lamppa [00:05:19]:
So with retention, which I, I do think is valuable, most small business owners aren't measuring enough to know, yes, the bonus I'm doing is improving retention 17%. It's probably not going to be measurable to the extent that you'd have enough information to know if it's valuable or not. Same with motivation. Everyone thinks, oh, I'm going to use a bonus as a motivation tool. Maybe people will Work a little harder, stay a little longer, show up on time or show up early, like all these different ways to know if people are motivated or acting from a motivated state. But once again, how do you measure that? How do you know that this bonus you put in place is increasing motivation? For most small business owners, they're not gonna know. So now we have a job your bonus is trying to do, but no way of knowing if it's achieving its job or not. Lastly, increasing productivity and performance.
Andrew Lamppa [00:06:11]:
And honestly, this I feel is the purpose of a bonus. It's measurable and it's what you want. And honestly, it's what your employees want. Your employees are willing to show up differently. They're willing to work harder. You know what they want? They just want a little piece of the action at the end. If the business does better, if the business is winning, They wanna win too. They don't wanna show up and push a little harder, get a little more strategic, maybe think a little differently if there's no upside to them.
Andrew Lamppa [00:06:43]:
They're gonna show up and do what is expected of them and oftentimes not much more. But if you design the bonus plan to measure and reward when people go above and beyond, then if it's designed properly, people will go above and beyond. That's the way it works. So if your job for your— of your bonus is to increase performance and productivity, awesome. That is the— that's the perfect job for a bonus. Now you need to measure it and make sure that your employees know all the mechanics that go into how they can achieve that bonus. But that is the job a bonus is there to do. So before Before you pay out your next bonus, I want you to answer this one question.
Andrew Lamppa [00:07:28]:
I'm giving this bonus because I want this to happen. How will I know if it's actually happening? If you want to show appreciation and they say thank you, done. Everyone felt appreciated. If you're trying to do it for motivation or retention sake, that's gonna be hard to measure. If you want to do it because you're generous, Great, but it may backfire. If you want to do a bonus to increase performance and productivity, perfect. Start measuring, start communicating exactly what your expectations are, how they achieve the bonus, and then following through. And it's going to work.
Andrew Lamppa [00:08:04]:
It's going to work well. I've seen it happen many times where a properly designed bonus plan increases productivity, increases performance. And you know what? It'll also increase retention. It'll increase Motivation. It will be appreciated amongst your staff, and it is a way of being generous, but a measurable generosity. So before you decide how much to bonus someone, decide what you want that bonus to accomplish. I'm Andrew Lamppa, and this is The Bonus Podcast. If you want employees to think, act, and care like owners, follow the show.
Meet Andrew Lamppa
Andrew Lamppa is a business coach, former 25-employee business owner and founder of Built to Benefit.
Before coaching business owners, Andrew spent 14 years building and operating his own company, which was running at 4x his industry’s profitability and 8x his industry’s growth at the time it was acquired in 2018. Along the way, he became fascinated with a question many small-business owners struggle with:
How do you get employees to care about the success of the business without expecting them to act like owners while giving them none of the upside?
Today, Andrew works with small-business owners to improve employee ownership, performance, profitability and leadership systems.
The Bonus Podcast is where he explores one of his favorite pieces of that puzzle: how businesses pay, measure, reward and incentivize the people helping build them.