Designing Incentive Compensation
By David Hehman
Here’s a way to get you excited about paying out bonuses…tie them to exciting goals.
Hiring great people is the beginning of a successful business. Your next goal in leading your team is to create a structure of compensation that motivates success. Here are some of Spartina’s principles, which will help you get excited about paying bonuses:
- Tie the bonus to near term (monthly) goals that you’d be thrilled with hitting.
- Pick the metrics that matter: revenue, profit, new sales
- Tier the payouts. That is, tie the bonus to a stretch beyond a goal, but make sure that it is reachable
- Insure that the goals/bonuses are ratcheted upward each month
Here’s an example of aligning a bonus structure with immediate goals, for a sample month:
|Overall Potential bonus||$2000|
For whatever bonus levels are achieved, replace them with new ones at the start of each month.
Overall, a carrot is always better than a stick, and in the case of setting great goals, everyone gets the reward.