Bonus plan design
Does any of below questions resonate with you?
How would an optimal bonus plan look like in our business and culture?
Is our old bonus plan still valid, or should we make changes?
How could we use incentives to support implementation of our strategy?
What is a bonus pan review?
Bonus plans are called with many different names, incentive model, sales bonus, variable pay system, bonus structures, etc. The common feature is, they should be designed to support strategy execution and performance management. Bonus model link individuals’ compensation to the success of the company.
As companies strategies and targets change, or there are changes to roles or organization structures, also bonus models should be reviewed. A thorough bonus structure review considers company strategy, financial situation, company culture, employee motivation and total compensation.
Why do you need a well-designed bonus plan?
No bonus plan alone will ensure employees focus on correct targets in their efforts, but it supports the daily leadership and managerial work. Some of the common questions you need to consider when designing a bonus plan:
Do we want to reward for team or individual performance?
Do we need a bonus for all functions, or something targeted to Sales or Production?
Are we sure employees understand the bonus plan?
Does our plan provide direction and motivation?
Have we simulated the costs; how to ensure we afford to pay the bonuses?
Is the timeframe one year or something much shorter?
Do we have reliable measurements available?
How does the bonus impact to employees total compensation?
What is the end result and how do we get there together?
We start with discussion to understand you organization and your needs. Bonus models will always impact owners and management as well, so thorough discussions are needed before planning actions. We can take the lead in the design work. We setup a project to collect feedback from Board and Management, and work together with you to define options for solution. Once we have a new model approved, we document it, create communication materials and support you with the implementation.
As an end result you get a fully documented bonus plan, with KPIs, eligibility criteria and rules. You also get the needed communication materials, calculation templates and support for implementation.
