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Design A Bonus Program for Your Team

Create an Effective Bonus Program for Your Business

One of the best ways to improve performance in your business is to implement a bonus program for your employees. A well-designed bonus program will motivate employees to achieve your goals, and you as the business owner get the lion’s share of the increase in sales and profits.  On the other hand, a poorly designed bonus system will only increase frustration and reduce morale.  Here are some things to consider.

Use Open Book Management

As a beginning place for a sound bonus system, I’m a fan of Open Book Management for any arena of business, non-profit or for profit. Since information is power, sharing your information with managers empowers them, and they will understand why they are achieving or missing bonuses prior to getting the good or bad news.

Determine Key Business Drivers

Secondly, decide what your key business drivers are and develop measures for each key driver. In other words, what major factors drive the success of your business, and what goals do you want to achieve? What goals will each retail unit need to achieve in order to attain your corporate goal?

Next, determine how much of a bonus you will share; will you establish a set pool of dollars for a flat bonus, or will the bonus be paid as a percentage of success once a certain goal has been attained? Then, of course, break it down by unit.

Decide how often you will pay the bonus. I prefer a year-end bonus since many businesses are seasonal; a good month or quarter does not always mean a good year.

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Communicate, Communicate, Communicate

Finally, meet with your team on a regular basis to share financial results and other key driver results. Have your managers share what is working and not working for them at these meetings. Brainstorm at every meeting about how you can attain your goals; many times this will mean adding dollars to the top line and reducing expenses. Keep your team focused on “the ball.” Celebrate successes, and encourage managers who fall behind; learn from failures.

A well-designed bonus program works especially well within the framework of a clear, overall vision that is well communicated, deployed and that impacts every area of the organization.


You can see employee and customer satisfaction rise, turnover decrease, and more money in your pocket if you do this well!

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