Today's news about Twitter's sale and the tidying up of its executive suite highlights a little-discussed and poorly understood compensation practice: the retention bonus. A key feature in the mergers and acquisition context, these financial inducements are aimed at keeping employees in their seats in the face of corporate insecurity that naturally results when employees learn that management is about to be reshuffled (or shuffled out). The purpose of a retention bonus is to reward employees facing employment insecurity who stick with a business in acquisition play. The hope of course is that these employees will keep the target in shape until the acquisition is completed. There is nothing legally or morally wrong with retention bonuses which, like many compensation methods, if crafted properly will incentivize employees to continue to do good work until the new owners decide if and where employees fit with future plans. But retention bonuses can serve other purposes, such as inducing an employee to remain in their seat until other dust settles - the completion of an important project, the implementation of a succession plan, the anticipated but secret departure of a key executive, or other future unrealized corporate strategies. With all of that said, when are retention bonuses ill advised? That is where the bad boss concept becomes relevant. A retention bonus should not be used to compensate an employee victimized by bad management, by a bully boss, or by corporate ambivalence. Money shouldn't be used to cash-bandage a management problem. If buy-in to the corporate purpose or mission is what keeps employees in their seats, a focus on that mission should be the foundation for the corporate compensation philosophy. And businesses should be intolerant of bad bosses who fail to adhere to the corporate mission. Employers should keep this in mind when compensating employees in this transformative, fully distributed and occasionally fickle workforce.
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