Bonuses should be wonderful things to give and receive, but the classic year-end bonus -- the one you get for making your budget numbers -- often fails to motivate.
That's why Art Spinner, a founding general partner of Hambro International Venture Fund, is gravitating toward more objective bonus systems. At Tylan General, a $35-million instrumentation company in San Diego, he and other members of the executive committee have set up a new plan: the top four officers of the company must achieve 75% of their budgeted plan to get a bonus. Beyond that, the executives will receive a straight percentage of pretax net income.
Tylan CEO David Ferran's bonus, for example, is 6% of his pretax net income. Previously, he could get no more than 25% of his base pay in a year-end bonus, if the board decided he'd done a good job. "Now the sky's the limit," he says. This new approach motivates managers to increase sales and cut costs. Says Ferran: "If we find a way to save $1 million, that's 60 grand in my pocket. You'd better believe I'm looking for ways to save money." -- Ellyn E. Spragins