Keep Them Hungry: Innovative Bonus Plans for your Best Employees

By Kendra Lee, President, KLA Group

Even amid talk of an "economic slowdown," the job market appears quite healthy heading into 2007. And the competition for seasoned sales and management experts remains high. Translation: Retaining your best employees could become increasingly difficult in the year ahead. What's a VAR to do? Many will surely consider bonus plans for their best performers.

Bonus plans remain a popular way for companies to accomplish a number of goals, including meeting sales quotas, recruiting and retaining valuable people, motivating employees and ensuring the overall financial viability of a company. A number of compensation strategies exist that will help solution providers maintain a strong and motivated workforce and enhance their bottom-line.

Retention Bonuses
Retention bonuses are one way to maintain the workforce a solution provider wants. Since these types of bonuses are non-salary based, a solution provider can establish a bonus plan based on a person's overall value to the organization. These types of bonuses are often implemented as a way to keep the competition from recruiting and hiring a company's best employees, and maintain a strong management team across the nation. Retention bonuses are especially effective during time of change, mergers and acquisitions, corporate restructuring and relocations.

While retention bonuses are effective for executives and management, they are not as common for salespeople. Sales bonuses are based on commissions. If a sales plan is well written, key sales people will earn large commissions, effectively causing the same desired result as a retention bonus. Typically you don't want to retain sales people who don't perform, and a good commission plan will help weed out the weak.

Project Completion Bonuses
This is an increasingly popular bonus plan, paid to team participants who are assigned to specific projects. This type of bonus may be comprised of 5 to 20 percent of a person's total compensation related to a specific project, and are generally short term (over the course of three to six months). By defining quantitative goals from a project's start, with fixed bonus amounts set based on the importance of an individual's role in the project, bonuses can be paid based on the success of the project and the customer's satisfaction. Since goals are well defined, there is no room for debate once the project is completed.

MBO Bonuses
Management by objective (MBO) bonuses provide solution providers with a way to complete internal projects that risk becoming neglected or overlooked as employees focus on client work. Effective MBO bonuses are time bound and offered quarterly or semi-annually.

In an MBO scenario, employees receive a list of specific tasks, deliverables, due dates, and a dollar value for completing each assignment based on quarterly company priorities. This makes the structure of an MBO bonus very objective and clear that employees will only receive a bonus if their assigned task is completed. MBOs are built into employees' overall compensation plan with dollar value buckets from which quarterly project assignments are made.

When implementing an MBO bonus, it's important that the assigned tasks can be completed by the employee on his own or with minimal peer reliance. Otherwise, it will be difficult to define how much of the task was completed by the employee assigned. If the employee only partially completes a task, management has to determine what percentage of the MBO to pay. In this situation, the bonus payout becomes subjective, exposing the company to a potential lawsuit if the employee does not agree.

Profit Sharing Bonuses
To help drive the retention of key people, these bonuses require that a person stay on the job for a set amount of time before they receive payment. A percentage of the bonus is paid each year on a pre-designated date, for example, October 1 each year over a 3- to 5-year period.

To determine if a bonus plan should be implemented, a solution provider should first review employees' total compensation packages and also decide if a bonus plan will drive the desired actions and results.

Older and experienced employees are usually conditioned towards receiving bonuses, whereas younger employees tend to value time off and a good 401K savings plan.

After reviewing the compensation package, and understanding the expectations of employees, a solution provider can make the best decision for their team and their company.

Kendra Lee is author of "Selling Against the Goal" and president of KLA Group. Specializing in the IT industry, KLA Group helps companies rapidly penetrate new markets, break into new accounts and shorten time to revenue with new products in the Small & Medium Business (SMB) segment. Ms. Lee is a frequent speaker at national sales meetings and association events. For more information, contact the company at +1 303.741.6636 or info@klagroup.com or visit www.klagroup.com.

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