Bonus Programs for Supervisors
afpgraves
7 Posts
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.
Comments
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:
percent from current levels.
achieve a reduction in overhead expense of 5 percent.
product to 8 percent.
increase the proportion of homeowner policies from 35 percent to 42
percent of the personal lines market.
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.