The Effectiveness of Bonus Payment as a Financial Incentive for Top Management

Abstract

Employees are important for the company’s success. Top management not only performs functional duties, but also makes strategic and operational decisions. The aim of the study is to determine the impact of bonus payments as a means of material motivation on the top managers’ performance. The authors of this study surveyed 147 top managers of 70 Ukrainian IT product companies using a pre-developed questionnaire. The method of pairwise comparisons was used to establish the priority forms of motivating and demotivating factors. The impact of payment of material incentives in the form of bonuses to top managers on the achievement of such performance indicators as company profit, total revenue, ROI, performance indicators of individual departments and personal performance indicators of top managers was established and confirmed. There is a 96% correlation between the amount of additional bonus payments and the motivation of top managers. The reliability of the regression model of the impact of additional bonuses on the level of motivation of top managers is 92%. The results indicate the ability of company owners to influence the motivation of top managers through the introduction of bonus payments or increasing their size. A high level of efficiency of bonuses as financial incentives to motivate top managers to achieve the established KPIs has also been established and proven. The vast majority of top managers are willing to increase the number or value of already established KPIs to receive additional bonuses. The results of the study confirm the importance and effectiveness of financial incentives for top managers.