A bonus scheme is not an easy task to accomplish successfully. A successful bonus scheme depends on Performance Management and mainly on efficient goal setting process. In many companies the Incentive Scheme and Bonus Scheme are taken as the same items in compensation and benefits area, but they are not the same.
Bonus Scheme is usually linked to the company goals with long term deadlines. But the Incentive Scheme is very individualized and the employee can fully control the income from the scheme. Even in the case the company is loosing money, the excellent salesman can earn a lot of money.
A successful Bonus Scheme needs realistic and achievable goals to be set. When the goals set are not realistic, the employees will not believe in the bonus scheme and they will become de-motivated rapidly.
The efficient bonus scheme needs the following criteria to be met:
- Transparency;
- Simplicity;
- Trust.
The bonus scheme must be transparent to employees. Each employee must have a chance to sit down with a calculator and based on goals or KPI fulfillment, he/she must be able to make a proper calculation of his/her bonus. Many companies do make a mistake – the bonus scheme is not transparent to the employees and they do not know exactly, what behavior and performance is expected from them.
Also – the bonus scheme must be simple. When the bonus scheme is simple, the employees can see, what is expected from them at the first look at the paper. When they do not have a chance to make a proper interpretation of the scheme, the company cannot expect the employees to deliver the results.
And trust – the employees must be sure, the money invested into the scheme will be really released. When the company tries to make a note about a final decision about the money released, the motivation and trust is lost.
The rules for developing the bonus scheme look simple, but they are really hard to achieve in the daily practice. Good luck to accomplish them.
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