Fundamentals of Human Resource Management 6th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart,Patrick Wright

Exercise 1

Giving Arbitrary Bonuses to Employees
Josh Patrick is now a successful adviser to business owners, and many of his lessons are ones he learned from personal experience. He started his business career by building a food service and vending company. In that role, he wanted to reward his employees for doing their jobs well, so he set up a program for paying bonuses. At the beginning of this program, the company had about 40 employees, and Patrick tried to evaluate whether each employee had performed well enough to earn a bonus. However, the decisions were not always tied to an objective measurement or to the company's profitability. In some cases, employees were rewarded for individual successes that did not contribute to the company's overall success.
So Patrick decided to discard the individual bonus plan and start over. Initially, employees were upset about the change, but Patrick addressed their resistance through communication. He explained that the company would pay bonuses for group success, and he began to teach them about the company's finances. When employees understood how their actions contributed to profits, they began working together to build a stronger company.
Patrick's move toward group bonuses was a response to some problems that can arise with poorly constructed individual bonuses. Employees may not understand what they need to do to earn a bonus and why those goals matter. Further, employees who do not understand the bonus requirements may resent any occasion when their bonus is smaller than it has been previously.
What problems do you see in the way Patrick set up his original bonus program