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IDear Workforce -IHow Do I Develop a Bonus Program

Four criteria you'll want to consider.
July 2, 2000
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Related Topics: Compensation Design and Communication, Dear Workforce, Compensation
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Q

Dear Workforce:

I am trying to develop a bonus program for our corporate staff including the following departments: HR, IS, Marketing, Accounting and general office. Do you have any ideas on what the criteria could be, other than basing the bonus on goal achievement. Is it common practice to give a certain percentage of profits or no?

—Debbie Drake, director of human resources, D'Amico & Partners, Inc., Minneapolis, MN.

 

 

A Dear Debbie:

This is not an unusual dilemma, so you are in good company in trying to work it through. The most important things to remember in designing an incentive plan are:

1. What are you trying to motivate?

2. Who are you trying to motivate?

3. Set goals that have some chance of being met.

4. Have award amounts that are reasonable and worth the effort.

Typically, for functional offices that are being described below, one would:

  • Have an overall corporate goal that needed to be met that would "fund" the program...this is typically related to earnings but can be different by company.
  • Then "target" along the following types of logic:

Top functional job: Target incentive = 30% of base pay

Next level of jobs: Target incentive = 20% of base pay

Next level of jobs: Target incentive = 15% of base pay

And so on (you go as far down as you mathematically can afford, but you start at the top and work down).

 

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