8 Secrets To A Perfect Bonus Program

This article by Kevin Kruse, posted on Forbes, covers an area I often see problems with.  Entrepreneurs sometimes build programs that sound good on paper, but that generate an “every man for himself” approach.  One star quickly pulls away, everyone else gives up, and apathy sets in… and then we wonder why it didn’t motivate our staff! – Reeve

 

I’m fascinated by the topics of motivation and employee engagement and one tool I’ve focused on in the past is variable pay. I even wrote an article suggesting
that the unemployment crisis could be solved if we paid people the way
we paid pro athletes—low base, super high incentive pay.

I recently met long-time entrepreneur and business leader, Gary
Brose, who is passionate about creating “perfect bonus programs” for
everybody. Brose suggests there are 8 key elements of an effective
program. They are:

  1. Gradiated—create multiple levels so employees always have higher levels to strive for.
  2. Equitable—Eliminate rivalry between departments or job types by making the bonus programs fair across your company.
  3. Timely—vary the frequency according to job level. Lower level
    employees should get bonuses in every paycheck, mid-level managers
    should be bonused quarterly and senior executives should be bonused
    annually.
  4. Simple—make sure it’s easy to explain and easy to understand.
  5. Meaningful—the employee must be able to affect results, and the amount must be large enough to make a difference to the worker.
  6. Objective—make the bonus based on measurable results, not subjective opinions.
  7. Reinforced—share progress against goals as frequently as possible.
  8. Easy—structure the bonus so the lowest levels are easy to achieve,
    so almost everybody get something, and are motivated to achieve higher
    levels of reward.

Where I may differ with Brose somewhat is who and how the bonus
amount is impacted. While the employee’s own results should be the biggest
contributor, if you don’t also factor in department and even company
results you may end up with individuals working to maximize their
personal gain, but to the detriment of others. I like to create cultures
that focus on both results, but also how one got the results.
If you’re interested in Gary’s lessons on bonus programs check out his book, Bonus Your Way to Profits.