Finding ways to incentivise employees to deliver performance and results for the organisation is a major challenge to all businesses. A common approach is to introduce some form of Incentive bonus scheme which rewards the positives and is affordable.
I led a project to develop a new bonus scheme for an organisation following a company merger. The remit was to build on the best of the previous schemes but the new scheme should be differentiated from pre-merger schemes. The scheme would cover the whole of the organisation from Sales and Marketing professionals, engineers and support staff, managers and Senior Managers. It would need to be individually focused for sales staff but group/department focus for support staff.
To ensure that the new scheme had wide support I was able to put together a cross business project team with feedback and inputs from the team members at each meeting. The team met every month for six months culminating in a report to the executive team.
Bonus Scheme design
Through discussion the project team developed a multi parameter scheme that focused on the main business drivers for each group of staff. The “on target” achievement was split 40/60 between corporate goals and individual/team/group goals to enable a high level of individual, team and group impact on results.
In order to maintain a high level of affordability the achievement of the Company sales budget was set as the corporate parameter worth 40% of the on target achievement. The Business Groups focus was on sales achievement for their sector products thus the next 30% was directed towards individual, team or group sales budget achievement depending on the customer allocation.
The business sales were based on solution selling, placing electronic components in other companies’ products to meet the final customer’s product requirements. This developed “pipeline” business for the future. To support this, and building on the best of the previous schemes, we developed a parameter around the value of achievement of “design-ins” (where a customer picks the product for final consideration) and “Business-wins” (when the customer signs the contract for supply of the component).
The Corporate and Support functions such as Engineering, Finance and Accounting etc. would also have the main Corporate Goals but the remaining 60% of achievement would focus on performance on the ISO9000 quality goals or metrics and budget achievement as these issues were focused on corporate goals which supported the Business Group sales achievement.
The scheme applied to all staff but the senior team had an additional parameter based on achievement of personal objectives. The overall scheme was based on performance of the half of each financial year,
The results were presented on time to the Executive team and accepted with immediate implementation. The scheme has performed well over the past 2 years with low sales achievement matched by low bonus payments but still rewarding individual, team and group performance on their sales and Design-in/Business-win performance. The only changes to the scheme have been to refocus the Support functions to reduce their actual spend against budgets with average group performance in the first half it was introduced around 4% below budget.