Questions

What are good approaches for setting up a performance based bonuses for employees?

Team of 5 FTE on salary. Service based creative business. Sales gets excited when deal comes in, but production sometimes says "ah, not another project". They're busy - but the company isn't near capacity. We're working on efficiencies but outside of that I want to make it where they do their job and get a base, but if they work together and meet goals as a collective - they get a bonus once per quarter. Really build a team motivated to help each other. End result: Production being excited to see sales come in. Sales guys being excited to help production move things along. All with an eye on quality. They don't have a clear picture of where we are versus our goals (problem 1) and aren't incentivized to do much beyond their job (problem 2). I've worked hard to build a relaxed, fun culture that doesn't work over 45 hours/wk - but I think it's created a bit of entitlement (problem 3) I'd think these are good metrics to track: Total bookings (we must hit sales goal) Billable ratio (must be efficient with time) Days project is over timeline (due to not PMing some clients well - make projects close faster, don't let client drag it out) Net Promoter Score / Customer happiness (quality must still exist) Afraid of making it too complicated. What do you think?

3answers

In my business, positive bottom line equals bonus for everybody. Percentage of salary to employees - same for all, up to three months salary. That is simple and works well, and is aligned with overall goals. And it is easy to report where we are. We don't have sales targets, which we maybe should have.

Depending on your business type that may not be feasible for you-startups don't make money initially. But building on your idea, hitting targets is important. Both growth and quality. People will behave as they are measured and challenging targets will help you create a sense of urgency instead of entitlement. (However, increase risk of suboptimization).

I think hitting sales targets, finishing projects on time and budget combined with NPS for both sales and project process should be enough. You don't need many targets, but use them all the time, talk about them with your team, incl. what you are trying to achieve. KPI's are no substitute for leadership; your team needs to know what your intent is.

One way of showing your commitment to quality could be to collect NPS yourself through customer interviews. That would also inspire new ideas, and give you better market knowledge. Given the size of your team that should be feasible.

Good luck. Should you want to talk more to someone with a business of similar size, feel free to give me a call.

Best regards
Kenneth Wolstrup


Answered 3 years ago

I would spend sometime working alongside the team members you want to target to find out what would be their hot buttons for a bonus.

Attaching a bonus to a difficult task or a part of the business that they don't typically enjoy can suddenly make that part of the business great.

At management level if we do not see or feel what they feel, our opinion on what will excite them as a bonus is sometimes off target.

Just an idea.

Keep up the great work and good luck!

Mark


Answered 3 years ago

We've tried so many different models of this over the years it actually hurts to think about.

What we currently do for "core/critical" staff is we base bonuses on gross margin. We also tie a % of commission to sales people to gross margin so that there is an alignment on incentives between production staff and sales staff.

Is it perfect? Hell no. It does work the majority of the time though.


Answered 3 years ago

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