Bonuses….

It’s that time of the year for many organizations…time to determine year-end bonus payouts and time to set the criteria for next year.

Here’s the good news.

• If your organization set top-level goals for the year,
• then set functional goals to support those top-level goals,
• and then set individual goals to set those functional goals,
• and then set bonus criteria based on a combination of meeting those goals, as well as stretching above and beyond baseline job expectations,
• then determining year-end payouts is fairly painless and each individual should already have an idea of what they will be earning.

Unfortunately, we don’t see very many expansion-stage or startup organizations that can say that their bonus program is humming along this easily. Why? Often this comes down to a combination of inexperience of the management team, lack of time or lack of focus on compensation planning, avoidance of tackling performance issues, fear of losing specific team members, etc.

How do you know if there is a problem with your bonus program?

1. Individuals can’t explain what the specific criteria and measurements are related to their bonus attainment.
2. Individuals expect to receive their bonus.
3. Individuals have never received less than their full bonus.
4. Your company is missing its financial or strategic goals, yet bonuses are still being paid in full.
5. Managers are worried that they will lose certain employees if they don’t give them their full bonus opportunity, even if the employees’ performance wasn’t exceptional.
6. Your organization’s bonus program is based on goals that are really just expected job or role responsibilities, rather than stretch goals.
    

If any of these scenarios sound familiar, your bonus program has become viewed as an entitlement and it’s highly likely that you should redesign your current bonus program. Now is the time to do it. Some thoughts:

• Set the top-level goals for your organization for the year,
• then set functional goals to support those top-level goals,
• and then set individual goals to set those functional goals,
• and then set bonus criteria based on a combination of meeting those goals, as well as stretching above and beyond baseline job expectations,
• last, you may also want to consider a profit-sharing component (some companies have adopted this as their only bonus program).

Keep in mind that it never gets any easier to correct a bonus program by putting it off for a later date. Tackle it now! You’ll be amazed at the positive impact you’ll see.