Bonus Plan

LFernandes

Hi - does anyone out there have a bonus plan which they are willing to share? Our Sr. Management is looking to implement a plan and my director and I are at opposite ends of the scale. He believes it should be totally discretionary and I believe that it should be tied to performance to prevent favoritism.

Any input would be greatly appreciated.

LFernandes

Nina I

I can appreciate management's desire for a discretionary incentive - it sure is easier that way. Measurement takes a lot of time, but I agree with you that it has the best shot at being fair. What kind of company are you? What do you value? Are you trying to use the bonus as an incentive, or as a reward? If reward, what about profit sharing?

E Wart

E Wart
Just be careful. If bonus isn't discretionary, it may affect your overtime pay for non-exempt employees.

SMace

Not exactly true. If your bonus is performance related, but pays a percentage of gross wages (for non-exempts) it will not effect OT. OT is already accounted for when you use the gross wages.

ray a

Our bonus plan is tied to our ranking system which is a part of the evaluation process. Each quarter we rank all of our employees 3 ways, by job title, by department, and by directorate. We use the overall directorate ranking to determine the amount of a bonus. Those ranked in the top third receive the largest amount, middle third receives a little less, and the bottom third receives the smallest amount. Everyone in each third, regardless of position, receives the same amount. Exempt and non-exempt employees are always ranked independently and therefore their bonus ranges will differ.

mbeam

We're in a similiar situation and like the idea of ranking. What is the criteria being used when ranking (am trying to avoid "gut instinct" otherwise known as favortism)? Also, does each manager rank their team and the Director of their area works with them on the overall ranking?

ray a

mbeam,

Your 2nd question first. Yes, each supervisor/manager ranks their own department then the director will coordinate the overall ranking in his area. It does get difficult ranking people with differing skills that may be equal in complexity. For example ranking a test engineer against a manufacturing engineer. Typically, the director will include all his supervisors in the overall ranking process gaining concensus so that no one feels slighted. It's not a perfect process, we have been making headway with it improving as we go.

With your first question, the fear of favoritism is a concern. When we started this process 5 years ago, favoritism was rampant. We have shuffled our leadership trying to weed out those who just "don't get it". I have had training sessions with the leadership on how to use the process accurately and fairly. The bulk of our employees are in manufacturing and we have a mfg. director who is very in tune with the process and tries hard to educate his direct reports so that they will be as fair and objective as possible. I act as the sanity check. If I see an employee's ranking change drastically, I will talk to the supervisor/manager to ascertain why the change. I make them justify their decision just to be sure we are being fair. Being a relatively small company - 175 ee's - I have fairly good knowledge of everyone.

These rankings are used not only for bonuses, but it is the foundation of our raise plan and is used to identify candidates for layoff when we must have an RIF.

LFernandes

Ray A, I would be interested in learning more about your plan. We are a mid-size manufacturing company.

I've developed an performance evaluation process which has had some success in squashing the favoritism. Each employee is given (or should be given) a set of goals (personal goals and departmental goals) which are measured. They are also reviewed and rated on the essential functions of the job (as set forth in the job description) and how well they complete the tasks.

If we base the bonus on attaining goals, would I be right in assuming that it it would still affect overtime pay for non-exempt employees for just that payperiod?

LFernandes