The following article is inspired by a brilliant blog written by Song, Jiguang. https://blogs.ubc.ca/jiguang/2014/10/27/bonusesanatomy/

In last class, we learned about how Zappos uses incentive compensation to boost employees’ morale and  to create a creative working environment.  Offering bonuses such as free snacks in vending machine, parties on every weekends, and high salaries for call services persons, Zappos have a high expense on workers’ wellfare. However, seeing all these bonuses, people cannot help but ask: can these wellfare effectively motivate employees to excel in their workplace? or, the costly bonuses are unnecessary.

According to Jiguang, the value of the bonuses depends on the type of one company. In his opinion, companies that rely on innovations need such bonuses to provide a creative working environment. I partly agree with his opinion but also think the labor market matters, too.

As discussed in class, a company needs to provide high bonuses for employees that considered as “scarce” in labor market. Why? first, the cost of free snacks is nothing compared to the opportunity costs to find a new scarce employee and the cost of training him. Also, the risks of losing a excellent personnel is always high when one company’s competitor can offer more for him.

I agree with Jiguang’s idea that the type of company determine the importance of bonus but think that the type is not merely on the value proposition of the company. Anatomy values more than bonuses in a self-owned company. “A meaningful job” is defined in the tipping point written by Malcom Gladwell as anatomy, high returns and intellectual rewarding. The sense of working and getting reward for oneself is the best incentive in self-owned company. Punishment works for the best when the job is relatively easy and has abundant supplies in labor market. Punishment keeps every worker works hard even in the easy job and also provide “fresh blood” to that company.

In summary, in addition to Jiguang’s idea that a company should motivate its employees according to its value and spirit, I think a company should also consider different perspective such as the labor market, the general type of the company, and the scale of its employee.