Effective Bonus Plans Elude Most Companies

Irvine, CA, July 09, 2013 --(PR.com)-- Most organizations struggle with how to develop a bonus plan that “works,” according to Tom Miller, president of The VisionLink Advisory Group, a compensation consulting firm headquartered in Irvine, CA. As a result, many companies end up reinventing their plans over and over again - without seeing any improvement in results. Ultimately, many of the plans end up becoming entrenched entitlements instead of tools for fueling business growth, the firm leader said.

“Businesses that fall into this trap start out with good intentions,” VisionLink’s founder explained. “Unfortunately, they don’t have an effective process that helps them navigate the mine fields of planning this kind of incentive. It takes more than just coming up with some metrics and measures.”

Given the importance of this topic to so many businesses, VisionLink will be broadcasting a free webinar on June 23, 2013 entitled, “What Does an Effective Bonus Plan Look Like?” (More information and registration for this event can be accessed at: http://www.vladvisors.com/business-growth-strategies/event-details.aspx?ID=115

According to Mr. Miller, the development of an effective bonus plan must begin with the right foundational premise. “Business leaders need to start their planning with a philosophy that says any incentive has to be developed on a ‘value-sharing’ basis. This means the company is able to define what value creation is for that business and can identify a ‘productivity profit’ that is attributable to the contribution of employees. This enables the organization to ensure that the plan will always be ‘self-financing’—value is only paid out if value has been created.”

The compensation expert went on to explain that a bonus plan doesn’t have to be overly complicated. In fact, the most effective plans have broad application to a number of tiers within the company. “You don’t need a different plan for different groups,” Mr. Miller emphasized. “You just need to organize things by tiers and then properly ‘weight’ how much emphasis will be given to company versus department versus individual performance for each of them.”

This is one of the many “tricks” companies need to learn if they want to avoid recreating the wheel with their plan every other year, the VisionLink leader said. “Ultimately, the plan must build a sense of partnership with those most critical to the company’s success while protecting shareholders at the same time. It’s not rocket science but it does require enough expertise in the engineering process to avoid disastrous results.”

The pay consultant went on to say that bonus plans should ultimately be developed in the context of a broader compensation philosophy and strategy that seeks to create line of site between a company’s vision, its business plan and strategy, the roles and expectations associated with those elements and the financial rewards attached to meeting established success standards.
The VisionLink Advisory Group
Ken Gibson