How to Start a Bonus Program at work

By on 08/22/2012

I just went through the task of implementing a bonus program at work.  There are many different ways this can be achieved.  Ill outline a couple I really liked in this post, then tell you which I implemented. 

Bonus Programs

Bonus Programs

Bonus Plan 1

The first thought is more of a profit sharing program with points as a driving force.  I really liked this approach, it gives employees with longer tenure more of a bonus.  It is also more objective, but much more complex to manage.  

Lets say your basic deciders are tenure at the company, predefined goals achieved, meetings set and close rate.  Lets vreak it down like this as an example.

Tenaure: each year is worth a point, Jon has been there 10 years, he has 10 points.

Predefined Goals: Jon was supposed to learn HTML 5, attend 1 CEU class during the year and read a programming book.  Jon didn’t have time to read the book, but he did complete the other 2 goals, so he earned 2 points.

Meetings Set: Jon was supposed to set 1 meeting every week, all year long. He only set 30 meetings, so he received 30 points.

Close Rate: A good salesman in this business should have a close rate at 70%.  Jon got 1 point for every percent over 70%, but he got 1 taken away for every point under 70%.  Jon had a 65% close rate so he lost 5 points.

So Jon ended up with 37 points for the year.  The company did 100,000 in profit, and their were 1,000 points in the pool, so each point was worth $1.  So Jon ended up with a $3,700 bonus.

So the benefits to this program are that employees work harder to get more points and more profit, which all correlates to a bigger bonus.  But its very complex to manager.

Bonus Plan 2

Bonus plan 2 is based on what the keys to success in your business are.  For example, the keys to success in our business are customer service, sales, completing projects, quality assurance and contributing to content on our website.  These are the things that seperate us from companies like us, so these are the things that are important to focus on.  

So lets say you give each employee 5 points at the beginning of the month.  Then if they have an error that makes it to the client, a point is taken away.  If they dont contribute to the blog in the form of a post, a point is taken away.  If we dont hit our sales numbers, a point is taken away.

With this plan, you saying these are the things I want to focus on, and if you (the employee) can help me make it happen, Ill reward you for it.

Which Bonus Plan Did We Use?

We went with plan 2.  The keys to success are something I want to engrain in our company, these are the reasons clients use us instead of competitors.  So if we can get those right, our clients will be happy and refer other business to us.

Have you implemented a bonus structure?  Let me know what type of bonus structure you have in your business and if it has helped or backfired.

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One response to “How to Start a Bonus Program at work”

  1. patsygillispie says:

    Thank you for this article. I’m the manager of a web development team and sometimes it’s just hard to figure a bonus structure for them. I went with things like “continues to educate themselves in their trade -honing their skills, delivers projects early, finds better ways to make delivery more efficient”. Still working out some other details but this was good. Thank you.

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