Do Bonuses Improve Employee Performance?

While a bonus can help to motivate through positive reciprocity, workers may come to expect a bonus in future interactions. Failing to pay an anticipated bonus may have counter-productive effects through negative reciprocity or reduced work morale. On the other hand, if managers are committed to employing discretionary bonuses transparently and in good faith, the twin forces of trust and reward may together create a powerful tool to help solve a fundamental managerial challenge.