Bonus Programs for Supervisors

We are wanting to implement a program where our department supervisors can earn a bonus, based on certain criteria they have to meet.  Just wondered if anybody has something like that in place that is working well for you and would share.

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  • Target goals used in objective-based plans can be anything important to the
    business. Standards for the goals usually are formulated based on the business
    planning process. A manufacturing group might choose goals and standards
    related to costs, safety, production, and environment. A service enterprise
    might choose productivity, accuracy, customer service, or cash flow.



    As part of the crafting of a unit-based plan, a schedule of payouts
    predetermines how much additional cash for each incremental improvement in
    performance will accrue to the incentive fund. Management plans typically begin
    to fund at a minimum level of performance, depending on what is needed to
    maintain competitive pay levels relative to similar positions in the market.
    What constitutes the minimum level of performance, or threshold, is a
    management decision influenced by competitive strategy and management
    philosophy.



    Performance on each of the criteria relative to the business plan generally
    produces a rating by assigning "points" or some other mechanism in a
    management employee unit-based plan. The rating is used to "size" the
    fund pool. For example, "on target" performance produces 100 points,
    and would generate 100 percent of the budgeted incentive pool. A rating of 80
    points would generate 80 percent of the budgeted incentive fund.



    Once the fund pool size is determined through the rating of the business,
    the fund is distributed to individuals, based on their performance against
    pre-planned objectives. Planned achievements are specific, quantifiable end
    results that evolve from the position's accountabilities. Usually, they center
    on the five most important expectations that a manager has for the year.
    Examples of these individually planned objectives might include:



    • Develop a plan to reduce inventory 10
      percent from current levels.
    • Implement a cost-savings program to
      achieve a reduction in overhead expense of 5 percent.
    • Increase the market share of XYZ
      product to 8 percent.
    • Revise the underwriting procedures to
      increase the proportion of homeowner policies from 35 percent to 42
      percent of the personal lines market.
    • Achieve an investment yield on an
      assigned portfolio that beats the Standard & Poor's 500 by 5 percent.


    The idea is that if all the planned achievements were put together, they
    would reflect the business unit's overall goals.



    Senior management can rate management employees against their planned
    objectives on a scale of 50-150 or 0-200 to achieve a wider performance
    distribution. If target performance equals 100 points, the sum of the points
    assigned to all individuals combined should equal 100 times the number of
    individuals, in order to fully spend the fund.



    Top-down management incentive plans are easier to implement in profit
    centers, or revenue-producing areas. Staff-support areas are more difficult to
    rate because of the unquantifiable nature of results. The rating process
    generally looks to the business strategy as the measure of performance.
    However, as total quality management (TQM) becomes prevalent in U.S. business,
    more and more plans are involving the customer in the rating process.



    And companies are looking to "beef up" their management incentive
    plans by competitively benchmarking their performance, bottom-line, against
    their business competitors. Ultimately, this is the best way to ensure that
    management awards truly reflect performance.



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