I’m fascinated by the topics of motivation and employee engagement and one tool I’ve focused on in the past is variable pay. I even wrote an article suggesting that the unemployment crisis could be solved if we paid people the way we paid pro athletes—low base, super high incentive pay.
I recently met long-time entrepreneur and business leader, Gary Brose, who is passionate about creating “perfect bonus programs” for everybody.
Brose suggests there are 8 key elements of an effective program. They are:
- Gradiated—create multiple levels so employees always have higher levels to strive for.
- Equitable—Eliminate rivalry between departments or job types by making the bonus programs fair across your company.
- Timely—vary the frequency according to job level. Lower level employees should get bonuses in every paycheck, mid-level managers should be bonused quarterly and senior executives should be bonused annually
- Simple—make sure it’s easy to explain and easy to understand.
- Meaningful—the employee must be able to affect results, and the amount must be large enough to make a difference to the worker.
- Objective—make the bonus based on measurable results, not subjective opinions.
- Reinforced—share progress against goals as frequently as possible.
- Easy—structure the bonus so the lowest levels are easy to achieve, so almost everybody gets something, and are motivated to achieve higher levels of reward.
Where I may differ with Brose somewhat is who and how the bonus amount is impacted.
While the employee’s own results should be the biggest contributor, if you don’t also factor in the department and even company results you may end up with individuals working to maximize their personal gain, but to the detriment of others.
I like to create cultures that focus on both results, but also how one got the results.
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