Is My Bonus Plan Needlessly Complicated?

I had lunch with a colleague this week and our conversation turned to staff bonus plans. In prefacing my description of the bonus plan I've put in place for the staff at my association, I described it (with a bit of tongue in the cheek) as "needlessly complicated." This, frankly, is based on some feedback I've received from my team. After explaining it to her, however, she said she didn't think it was complicated at all. Maybe you can be the judge.

The total possible bonus I offer is 5% of a person's salary. That 5% is comprised of three parts:

1. Association Goals. As I've described multiple times on this blog, each year our Board sets a Strategy Agenda for our association, and from that Agenda I develop an Operational Plan. A big part of that Operational Plan is a set of measurable goals that are designed to move us forward on the metrics of success that the Board has built into the Strategy Agenda. This year, there are 54 of these goals, each related to a key operational area of our association, and each requiring some level of teamwork across the organization if it is to be achieved. A bonus equal to 2% of each person's salary will be awarded for the percentage of these goals that are achieved. In other words, if 100% of these goals are achieved, everyone will receive a 2% bonus. If 75% of these goals are achieved, everyone will receive a 1.5% bonus. If 50% of these goals are achieved, everyone will received a 1% bonus.

2. Individual Goals for the Individual. In addition to these association goals, we have also identified an individual bonus goal for each staff person. These goals: (a) are directly related to each person's area of responsibility and influence; (b) will require the staff person to stretch themselves out of their comfort zone, and (c) if achieved, will represent the creation of new value for our members or for the organization. This individual goal is worth a 2% bonus to the individual. If they achieve it, they receive a bonus equal to 2% of their salary. If they don't achieve it, they receive no bonus.

3. Individual Goals for the Team. For every individual goal that is achieved, everyone of the team receives a bonus equal to 0.1% of their salary. Because there are ten individual goals for ten individual staff members, that means that if all ten people achieve their ten individual goals, everyone on the team receives a bonus equal to 1% of their salary. If only five of the staff members achieve their individual goals, then everyone receives a 0.5% bonus. If only one person achieves their individual goal, then everyone gets a 0.1% bonus.

Hopefully you can see how that all adds up to a 5% maximum: Up to 2% for the association goals, up to 2% for each individual on their individual goal, and up to 1% for the team for the success rate of the individual goals.

Hopefully you can also see how I've mixed rewards for personal success with rewards for team success. We all need to work together to achieve association goals, so those rewards are shared. We each have to contribute individually if we are to achieve our individual goal, so those rewards are not shared. But everyone should have a stake in making sure their team members achieve their individual goals, otherwise we risk decaying into jealous arguments over who has "easy" and who has "hard" individual goals.

Now, you tell me. Is that needlessly complicated?

+ + +

This post first appeared on Eric Lanke's blog, an association executive and author. You can follow him on Twitter @ericlanke or contact him at eric.lanke@gmail.com.

Image Source
https://www.123rf.com/photo_45705087_genius-aged-teacher-explains-a-complicated-lesson.html