(edit title) Determining bonuses / increases What would you consider fair? Options

[dave.smith]

So, I'd like input on something.

For ages I have been struggling with finding a fair way of determining salary increases or bonuses. I try to do it performance-based, but that is so difficult to measure. Currently it is all ticket-based, but this causes problems and has lead to "system gaming". What I mean is this:

We have an internal website (part of our intranet), that amoung other things like documentation, has a ticket system. This system is used for any piece of work in the organization. If anything has a delieverable it is (and has to be) in the ticket system. From the PA organizing something, to a developer adding a new piece of functionality to one of our systems or a client's setup, to bug fixing or sales/post sales tracking.

The system measures the following: time taken on a ticket, ticket urgency level, number of updates to the ticket, number of replies to client contributions (to the specific ticket), and a host of other things. For each user, these metrics are calculated by the system and a potentiality percentage is awarded. This percentage is used as a basis to calculate bonuses and increases.

Unfortunately, everyone tries to game the system by assigning tickets around, entering way more replies than necessary (for updates on progress for example, where one reply every 2 hours may be enough, they would update the ticket 10 times in that 2 hour timeframe), as well as ticket-grabbing - everyone wants to have their name associated with as many tickets as possible and will assign the ticket to themselves, even the PA for example, who will assign a ticket to herself, type a reply to the client like "we are looking into it" or along those lines, and then assign it to one of the developers after 25 minutes or so (depending on how much she needs to tweak her ticket stats!).

Obviously this is ridiculous and is not working, but what is a fair way to determine increases / bonuses without bringing personality into the equation? At the moment I don't even do interviews, I just have the system draw up percentages and then I calculate based on that.

My question is: as an employee, how would you prefer to be measured? What criteria would you prefer?

Thanks in advance!

[skogsbo]

The more modern way is bonus is split between personal and overall company performance..
Good at job but totally selfish only 50% of bonus, which is based on 10% of salary.
Good at job and great team player helping others and the business, 100%.
You will of course need to interview and explain to each person their strengths and weaknesses.

[John.Smith]

The whole point of a bonus is system is performance reward. performance can be subjective as if you are just counting ticket %'s then you miss out on the good guy who spends time on the difficult tickets instead of the player who just tries to do as many tickets as possible.

You could continue using the ticket system as a basis for say 25%-50% of the bonus and the balance based on their level of involvement and participation in making the company money!

My bonus is a max of 20% of my annual salary, of that we usually see inbetween 12-15%. This is based 50% on the company performance and 30% on me meeting my targets and 20% on other Department/project/organisation goals. Nobody gets above 15% in reality however as the company would need to have an exceptional year with explosive growth and ALL people in your department/project would have to meet all their targets too...

it works well as nobody wants to be the pleb that gets everyone a reduced bonus and all targets assigned for the year are measurable.

You cannot avoid the need to sit face-to-face with your employees and assign the necessary targets. Otherwise they will just play the game and the end result is a lack of productivity.

[dave.smith]

The only reason I don't like that method, skogs, is that it can become too subjective too quickly. Who decides who is a good team player? If it's solely at my discretion, that would result in high "suck up" rates, which I definitely don't want. If it's up to others, how would it be possible to avoid "clique-ism"? Once personality comes into it objectivity goes out the window, and I can't support such a system on principle.

[Puffin]

How many employees?

[dave.smith]

John, it sounds good, but with the nature of our business the only people who measurably make money for the company are the sales guys - and because most of our business (about 70%) is in other EU countries, we don't have a HQ based sales force, we use outside contractors (who get comission). The only person at HQ that actually is involved in the sales side is me.

Of course, without the software, support and assets, we wouldn't make money, but how do you measure those in terms of making money for the company?

[Puffin]

I worked in a PRP-system that created very negative results. Pay bonuses were highly individual but staff were expected to act as a team. Some staff even went to the extent of hiding documents that other people needed to do their jobs so that their performance and outputs would look better. Nobody wanted the complex tasks either. It was total chaos and if anything the bonus system reduced performance overall

So something to avoid

[dave.smith]

At the moment, 9

[Jamtjim]

You know what dave, if I were you, and you really want to encourage your staff to work hard and give it all for the company, I would offer your staff the bonus of a ride in your Maserati...

Party, party Maserati!

[Puffin]

At the moment, 9

With such a small number would it not be possible for you and perhaps senior manager/s (if you have them) to sit down and discuss who has contributed most/least to organisational performance.

[johnjohn]

You know what dave, if I were you, and you really want to encourage your staff to work hard and give it all for the company, I would offer your staff the bonus of a ride in yo ... (show full quote)

You know what dave, if I were you, and you really want to encourage your staff to work hard and give it all for the company, I would offer your staff the bonus of a ride in your Maserati...

Party, party Maserati! ... (hide full quote)

Beat me to it.

[Yorkshireman]

Your current system whilst simple, is open to abuse as You have found, and doesn't take into account the possibility that You may actually make a loss in any financial year! Let alone true performance of an individual, since as mentioned earlier, some things take longer than others to solve/do ... That would be like paying Your sales people per sale, rather than commission on each sale. eg. I sale = 1 MSEK compared to 10 sales = 100 TSEK, 1 ticket could take days to resolve, 10 tickets 10 minutes. Totally useless.

Another question is whether even the commision paid takes into account profitability or not? ie. Can they sell at a loss, and still make commission?

Now to the employees. Sorry Dave, get Your management hands dirty, or at least employee someone that can!

Divide the bonus into personal and company related. (eg. 50%/50%)
EBIT link the TOTAL bonus payable. (this way you only pay out when your company is profitable)
Employees also need to recognise that the company must retain some of the profits for sustainability, growth and future capital investments. Actually You need to know that too
You set the companies EBIT targets, different for different kinds of business .
eg.
0% = no bonus
0-5% = 50% of bonus pool available
->10% = 100% of pool available
>10% = 125% of pool available (ie. you drop more of the profit into the pool)

Use current salary as the percentage portion of the total bonus pool available to each employee.

The personl part, has to go by feel. If You can not do that, You certainly need someone that can! It's called Managing and Developing employees

So, in a good year, they can make more than 100% of the total bonus available ... in a bad year it can be nothing or zero ... but as a company you do not overpay in an immediate bad followed by good year, since you also need to possibly rebuild cash reserves. Hence only maximum of 125% in a year, building reserves back over following years if good.

Add other incentives. eg. Issue B shares, give them rights to buy or distribute as part of the bonus, B shares ... so they can get dividends, but not vote

With any cash bonus, remember the company can also offer indirectly tax incentives in Sweden. Even if You only pay the bonus in say December ... If the employees join a private pension scheme, put it into the companies name, the company can pay into that scheme an amount of the bonus, and there are tax beneftis for doing so. Check it out.

Additionally, for hardware etc... If the employee wants to buy new computer etc... for home, something the company would normally use at work ... have them put it into the Companies name on the invoice/receipt, they sign an agreement that if they leave they will buy-out the device, value reduces over 3 years ... technically the company owns the device, but the employee from their bonus pays only price - vat.

Just a few ways of offering a bonus, but increasing it's value without actually increasing the payments from the company.

Whatever You do, be ready, judging from what You have said before ... if You do not increase their total pay, then they are likely to threaten to leave anyway!

[skogsbo]

The only reason I don't like that method, skogs, is that it can become too subjective too quickly. Who decides who is a good team player? If it's solely at my discreti ... (show full quote)

The only reason I don't like that method, skogs, is that it can become too subjective too quickly. Who decides who is a good team player? If it's solely at my discretion, that would result in high "suck up" rates, which I definitely don't want. If it's up to others, how would it be possible to avoid "clique-ism"? Once personality comes into it objectivity goes out the window, and I can't support such a system on principle. ... (hide full quote)

Yes, it is subejctive, who decides? YOU do, YOU ARE the Boss, It is YOUR company, YOU ARE paying their wages. It is YOUR decision and it's final. You have the big car, the flash house and wife/sambo, but you have to be the man at work, or rather the boss, you owe it to your employees, especially the good ones who don't give you hassle or make your job hardly. I bet because of the way you work and holiday, you have some real stars there, who think for you, who cover for you, who practical run things whilst you are not there, but you probably don't even see it happening all around you?

Team players, if you can't look at a room of people(ie your employees) working and know within an hour, a day, a week exactly who is a team player, a selfish git, a worker, a communicator, a natural helper, or a sherker, then you better employ someone who can. As your company grows, your need for this will grow with it.

With such a small company of people, you should know them inside out, I've had many more people working for me previously and you just have got to get to know them, watch them work, listen to them talk with others and clients, see who gives you detailed updates why projects aren't working - or are late - need changing etc. This is what managing people is all about, giving the right job to the right person, or the group of people who work best together, etc. This knowing your staff, is how YOU earn respect, your programming skills are not so relevant anymore, it's people skills, with this comes the acceptance that bonuses are fair and equal to peoples' ability and performance. If people believe you know the job, know the staff, then your word on bonuses will be final and accepted by all as being fair.

ps. You really need an office manager or deputy. Good luck

[dave.smith]

Thanks for the messages guys. Some good advice.

Yorkshire - luckily we have never been in a position where bonuses or increases would pose a problem. I would rather cut my own salary and bonus than cut theirs though!

Skogs - tried already. She was GM for about 3 weeks and it didn't work out

[mångk]

Skogs - tried already. She was GM for about 3 weeks and it didn't work out

Dave, who is to blame for that???

Have you looked at training for this person yet?

Management training or additional training so that you can utilise this person in the company?

Perhaps provide an alternative for this person, Company paid training or resignation/redundancy. From what you have stated their position is not at all needed and most of the duties could be absorbed or delegated by a real office manager.

When you are thinking about the bonuses, I urge you to consider utilising this occasion to take back control of your company.

What I suggest you do is practice saying the following each night in front of the mirror, head tilted slightly down and forward, looking directly into the reflection of your eyes and say the following bluntly and firmly until you believe it:

'I ain't gonna listen to no more pissing around'

When you are done with the mirror practice with your wife, be sure to explain what you are doing.

Next step, here is an important one, and I will tell you exactly how much bonus to give.

Re-read this thread: http://www.thelocal.se/discuss/index.php?s...t=0&start=0

And this thread: http://www.thelocal.se/discuss/index.php?s...t=0&start=0

Give the persons involved exactly 0 kr in bonus! (Yes a little presumptuous, but I am going to assume that they are still working for you and you have taken no real action.)

If they do not like it, and start to complain repeat the sentence above to them. If they continue complaining or threaten to resign, say:

'Good. You can either tow the line or I expect your resignation by the end of the month. As I said 'I ain't gonna listen to no more pissing around'. This is my company, I make the rules, you follow them.'

Then what you need to do is set up a measurable system and use company performance, personal performance and personal conduct as a carrot to reward and not just as an expected part of their salary.

Set core values in each three. If the company does not reach a reasonable or projected profit - no bonus. If an employee does not reach the core levels of performance - no bonus. If an employee does not reach the core levels of personal conduct - no bonus.

If an employee fails to reach the core levels by a significant amount - formal warning plus monthly follow up.

The best thing that you could do is set monthly performance measurements and appraisals.

EDITED TO ADD:

Yorkshire - luckily we have never been in a position where bonuses or increases would pose a problem. I would rather cut my own salary and bonus than cut theirs though!

Are you serious Dave?

You don't want sucky sucky employees, you prefer to give it to them?

Sorry Dave, but to be perfectly honest you are creating all of your companies problems!

Give yourself exactly 0 kr in bonus as well! No dividends either, put any profits made directly back into the company and either grow a pair, use to money towards hiring someone who has a pair or don't be surprised when you continuously have problems.