Bonus kickers are a great way to motivate employees and boost performance.
Take, for example, the basic bonus pool at Jim's Formal Wear - 5% of all profits over 5% of sales. But team members can add an additional 4% if they hit specified labor cost and quality targets. Result: most of the company's seven centers hit the targets, and the average payout for 1998 exceeded 15% of base wages.
Similarly, Putman Publishing pays a bonus of 1% of salary for each $25,000 increase in net profit, but increases the sum by half when the company hits targets relating to customer retention, return on sales, and new-product activity. Putman now has "significant new-product activity," says president John Cappelletti, along with 50% five-year sales growth, healthy profitability, and a bonus pool standing at about 11% of salary.