by Ken Vincent,Featured Contributor
Bonus plans have been around for a long time for general managers, and key department heads. I like bonus plans. Well, truth be told, I don’t like a lot of bonus plans. What I don’t like about them in many cases is this:
- I don’t like them if they are used as a hammer to drive down base salaries to below market levels;
- I don’t like the ones where the participant (s) had no voice in creating the plan;
- I don’t like the ones that are based on achieving a budget. Budgets are a best educated guess, no matter who makes them or approves them. Conditions that management has little or no control over can impact results;
- I don’t like plans that are simply not achievable. Those become a negative.
- I don’t like plans that are not transparent and verifiable.
What kind of plans do I like?
Well for starters I like plans where they serve the needs of both staff and owner.
I like plans that provide an incentive to the participants and reward them for their successes.
I like plans that are based on total results, not on tools like percentages.
This is a plan that I’ve used in hotels with good success. Of course the plan would need to be adjusted to each situation.
Each participant is allotted one point for each $10,000 of salary and 1 point for each year of service. The points are totaled. A percentage of the GOP is set aside for the bonus pool, say 10%. The total points are divided into the bonus amount to get a $ value per point. That amount is then applied to each participant’s points to arrive at that person’s bonus. One half of the bonus can be paid in January and the balance over the next 11 months. Any employee not employed for the full year is not included or forfeits any unpaid bonus.
A couple of the advantages include encouraging team work to achieve maximum GOP., and the system rewards longevity of service.
Do you have a bonus program that has worked well? Or perhaps, one that has not done so?