Forecasting – The Single Most Misunderstood Word
August 17, 2016
Are Discretionary Bonus Plans Good or Bad?
August 17, 2016
There are many different ways to customize a bonus program to meet the specific objectives that you hope it will accomplish. However, there are some basic “do’s” and “don’ts” that must be followed for any bonus program to be effective.
DO recognize that a bonus program is just another management tool to provide a reason for, and help motivate, your employees to improve current processes.
DON’T expect that a bonus program will be able to overcome or be the cure-all for many of management’s other human resource problems.
DO base your bonus program on quantifiable measures that are controlled by the employees that are participating. For field employees, base the program on job level gross margin (gross profit).
DON’T base the field employees’ bonus on the company’s net profits as they have little or no influence over office overhead expenses.
DO protect your company’s profitability by creating measurable team goals that do not require a bonus payout if the company does not reach certain field level gross margin goals.
DON’T emphasize job-by-job bonuses that force the company to share the excess profits of good jobs while the company absorbs all the losses of bad jobs.
DO emphasize the team’s contribution towards measurable team goals while recognizing individual contribution too. Allow a very small percentage for some discretionary distribution.
DON’T emphasize the individual’s contribution over the team which will destroy the team work atmosphere that is necessary to make your company successful in the long run.
DO share those company performance numbers that the employees influence and control on a consistent periodic basis throughout the year or bonus duration.
DON’T surprise your employees by only sharing the company’s results at the end of the year or expect that the “grapevine” will provide them with accurate information during the year.
DO define the objectives that you challenge your team of employees to attain and design the method of how the bonuses are distributed to your employees to reinforce those objectives.
DON’T be afraid to modify or change your bonus program from year-to-year to ensure that your objectives are being met, but do not set the objectives so high that they are not reasonably attained.
To design and implement a win-win bonus program that rewards the company and the workers, contact Management Consultants for Contractors using the “contact link” above or call 215.882.2963.
