Fine-Tuning Your Bonus Plan
How does the bonus committee at Commercial Casework revise the company's annual bonus plan so quickly and efficiently? They simply tweak the answers to the top 18 or 20 most frequently asked bonus questions they've received over the years and drop them into a neat template.
Some sample questions include: What are our key financial and operational goals and stretch goals for 1999? What do I have to do to become eligible for the bonus pool? What will be contributed to the bonus pool? How do I calculate my share?
For years, the bonus plan has been based on increases in sales volume and gross margin. For example, if employees achieve the planned (goal) gross margin, $100,000 flows into the bonus pool. In addition, the dollar equivalents of 1% of sales over $10 million and half of the gross margin over 22.5% flow in too. But if they hit the gross margin stretch goal (24.5%), an additional $130,000 flows in, raising the pool to $230,000. Fully 88% of the pool is shared equally; 12% is based on job or position. Supervisors and managers receive 140 shares, team leaders receive 120, players receive 100, and rookies, 80.
This year, the committee made a few key enhancements to the bonus plan, based on employee feedback:
- Offer additional shares. "Employees were asking how they could get more shares, so we decided to set up more classes. For each class completed, they can get 10 extra shares," says CEO Bill Palmer.
- Require players to pick up their checks. An employee was on an extended leave of absence last year, and peers questioned whether it was fair for him to receive a bonus check in the mail. "Actually, we weren't sure he was ever coming back," jokes Palmer. "Now we have people pick up their own checks just to be on the safe side."
- Say it in Spanish. The four-page handout that describes the company's bonus plan for 1999 is written in English and Spanish. And at the annual kick-off meeting, a team leader (lí der del equipo) introduced the plan in Spanish.
Copyright 1999 Open-Book Management