This might surprise you, but the last stage in developing a bonus plan is designing it. Think about it like decorating a room; it’s all about the preparation.
So, how can you prepare effectively and implement efficiently?
First steps in planning a bonus plan
The first thing to do is consider the roles carefully. Consider:
- What do you really want people to do?
- What does success look like?
Almost no one can achieve results on their own, so consider carefully if it should be an individual or team plan.
Putting measures in place
Measures may need to be qualitative, as well as quantitative. As Michael Rose states in his book, Reward Management (2018): “Counting the number of words in a poem or weighing a statue will not help you appreciate their value”.
Consider bonus ‘relationships’, context and impact
Consider horizontal and vertical relationships. What do the bonuses of others above employees or with whom they work do?
Consider also: what is the context within which the bonus is meant to help?
Bonuses do not manage for you. What is the time span over which the individuals or teams make an impact? Align the bonus payout to that time scale?
Any bonus will also sit within the context of overall compensation received. You must be able to answer the question, ‘what is basic pay for and what is a bonus for?’
Consider if a non-cash programme would work well. They can make a particularly big impact for a short term incentive.
Look up Expectancy theory (Vroom, 1964), which is the main motivation theory seen to support bonuses.
Knowing what you want to target with a bonus plan
Finally, remember that your people will do what the bonus targets. So, be really sure that whatever bonus is based upon, is what you want.
A good bonus plan requires thorough preparation. It’s important to have the right support to develop your bonus so that it aligns with the reward strategy and current compensation structures and has the desired impact in the organisation.
Enquire today and get support to develop your bonus plan.