Bonus Better Than Raise




Profess Hsee of BoothMy CEO executive coaching clients frequently wonder how best to motivate and retain key employees. The question often takes the form of, “Should I give her an unscheduled bonus or a raise?” The business owner often tends toward a raise because it defers the cash outlay. My study of psychology recommends the bonus.

I have written about Professor Christopher Hsee of the Booth School of Business before. Recently he spoke explicitly about the bonus vs. raise question. “If you ask a typical employee, he or she will tell you they want the salary. But that’s because they don’t understand psychology,” Hsee said. “You should give them the bonus instead. Salary is stable and people adapt to the new salary level quickly. Bonuses are not as easy to adapt to.”

Hsee also supports my advice about giving a gift, particularly something the employee wants but might not indulge in. “Give somebody something they like but won’t (more…)

Hsee’s Happiness Heuristics



HappinessCompiling research from psychologists and economists (including colleague Richard Thaler), Professor Hsee provides tips on how to make the people around you—employees, significant others, friends, relatives—happy.

  1. Separate gains.
    Combine losses.
  2. Announce good news early.
    Announce bad news late.
  3. Unpredictable gains are better than stable gains.
    Stable losses are better than unpredictable losses.
  4. Choice is bad for good options,
    good for bad options.
  5. Wanted is better than needed.
    Memorable is better than usable.

Details in The University of Chicago Magazine.

Prof. Christopher K. Hsee
Chicago Booth