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Turbocharge Your Bonus Plan

2012-10-15 12:23:57

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.

Copyright 1999 Open-Book Management Inc.