A Bonus With a Spec Sheet

In my previous post I talked about the fact that a bonus plan can be bad news if insufficient thought has gone into the planning and implementation. The last part of that sentence is really the answer to creating a better bonus plan … thinking through the planning and implementation.

I know for a fact that if you are considering, or have, a bonus plan that you expect something in return for it. And you should. But, be honest, are you and your employees getting what you wanted and expected when it’s time for the bonus to be paid?

It may help to think about your employees with the same mindset that you use on your suppliers when they create a product specifically for you rather than pulling an item off the shelf. How do they know what you want? You’ve told them. You probably put together a spec sheet that has every possible measurement and a detailed description of the materials you want used. You also expect to receive exactly what the spec sheet stated … or you’ll request a replacement or withhold payment. That’s why your suppliers are also very careful about what the spec sheet says and they make sure they absolutely understand what you want.

So why does it go so wrong when you try to motivate your employees in exchange for a bonus? Most of the time I find you’re missing that spec sheet. Oh, you may think you have one but I bet if I asked your employees they’d tell me they didn’t really understand what you expected or what they were supposed to do to earn the maximum bonus amount.

Did you even tell them what the bonus had to do with your company goals? Often companies base a bonus program on the overall success or profit of the company for that year. However, your employees don’t know what role they played in that scenario because it wasn’t defined.

Good bonus plans have goals attached. Otherwise, you aren’t involving the employees in the plan … you’re just tossing them some cash that doesn’t reward them for anything other than showing up.

So, try this. (Note: Items listed may take more thought than they seem!)

1. Determine a time frame for your bonus plan. This could be quarterly, 6 months, or a year. The key to deciding on the period is to choose a time frame that is controllable while still giving you sufficient time to achieve goals. For instance, if your business is young or changing, a year is probably too long because your focus may be different in a year and the goals no longer viable or valuable. In this case, 6 months is more practical.
   
2. Determine what company goals you want to achieve in that time frame. If you know how to set goals, you already know they need to be very specific (see the spec sheet above), measurable so everyone is using the same yardstick to determine success, achievable within the time frame, relevant to what you are doing as a company, and timely (with a deadline). Write them out and review them to make sure they move the company in the desired direction.
   
3. Take those company goals and break them down into what each department needs to accomplish for their role in each company goal. Work on the department goals in the same manner as you did the company goals. Write them down. If you don’t have departments, skip to the next step.
   
4. Every employee also needs specific goals that help the company achieve the big goals. So go through this process on an individual basis. Depending upon your company, several employees may have the same basic goal list … but you still want to have something that sets them apart unless you have designated them as a team that wins or loses as a team.
   
5. Determine how your bonus amounts will be earned. I’ve seen a company use 50% toward achievement of the company goals, 25% toward department goals, and 25% for personal goals. This takes into account that a department may not hit all their goals but the missed ones didn’t delay the company goals. Whatever you decide to do with the money, just make sure it’s very, very clear to everyone how any and all bonus amounts are earned or lost.
   
6. Make a huge deal out of the bonus plan. Put up posters announcing the company and department goals, have monthly update meetings where you cross off (on the posters) any goals achieved and talk about how to ensure overall success. By the time the bonus is paid, every employee should be able to tell YOU what they earned because your plan was so clear and communicated so well that they knew exactly what to do to earn it.

I’ll admit this is an oversimplified view of creating a workable bonus plan. However, I think it’s sufficient for you to recognize what you may and may not be doing correctly. Remember, a bonus plan is supposed to be seen as a benefit so make sure it’s actually viewed that way by your employees!