How do you bonus your employees? This post is going to talk about how to implement a bonus program. We don’t want to just give bonuses, we want to incentivize activities that drive the metrics that make our businesses more profitable. We want to motivate your employees to excel, and reward them for their hard work and achievements.
How is this accomplished? Here are the high-level steps to create a bonus program:
- Determine two (or three) metrics that you want to focus on, some examples are pre-tax profit margin, improve customer service, and average time to product or service delivery. Make sure to establish a baseline that is achievable and keeps the business healthy.
- Define how much of the increased profits you’re willing to give up to employees for hitting these goals.
- Decide how often you want to pay out these bonuses, quarterly is a great option. I find a year is too long and employees forget about the program. Side note: if you have trust issues with your employees, starting with monthly payouts could be a good way to show them this is real and build some trust back.
- Create multiple payout levels (five would be a good starting point). This allows employees to earn along the way, with the best bonus for hitting the hardest, and most beneficial, goal.
- You’ll then need to communicate the program to your employees, and of course track progress and make payouts when they hit their goals.
What is that baseline that you can start with? Likely it’s the metrics that you’ve been hitting for years. It should be something you can comfortable hit, if you make it too hard it makes the game not fun. The business also needs to be profitable and sustainable at the baseline.
This program needs to work for everyone. Periodically you’ll need to evaluate it to ensure it’s making the business, and your employees, more money.
Needs some help designing it? Don’t hesitate to reach out, we’d love to help you get your bonus program up and running!