11 Tips for Creating Performance-Based Bonuses

performance-based bonuses

Figuring out how to compensate sales staff is easy — how much in sales did they do last quarter! But what about for your other employees? The rest of your team works just as hard, but their metrics-driven results can be more difficult to gauge. So we posed the question:

“What one tip do you have for creating performance-based bonuses for non-sales staff ?”

Here’s what YEC community members had to say:

1. Outline Goals

“If you’re going to offer performancebased bonuses, it’s important to outline clear goals ahead of time. It’s helpful to use the S.M.A.R.T. Goals system: Make sure each goal is Specific, Measurable, Achievable, Results-Focused and Time-Bound. If you outline these elements, it will be simple (and transparent) to assess whether or not each goal has been achieved.” ~ Brittany HodakZinePak

2. Base It on the Individual

“Non-sales staff are not always motivated by money. Creating incentives that give them the flexibility they are looking for is more ideal than a financial bonus. Sometimes it’s autonomy; other times it’s ownership over certain projects. Incentives should be customized to the individual and their career goals.” ~ Joe ApfelbaumAjax Union

3. Call It Like You See It

“Chances are, you know movers and shakers in your company when you see them. By keeping a record of outstanding things that each employee has done, you will know what they’ve done to deserve a bonus. Plus, your staff members will get acclimated to you rewarding good performance, so they will be incentivized to work harder and smarter.” ~ Firas Kittaneh, Amerisleep

4. Ask Yourself if a Bonus Will Drive the Right Outcomes

“In his book “Drive,” Daniel Pink outlines the unique behavior that emerges when bonuses are awarded for routine work versus creative work. Routine work — like what you would see on an assembly line — has a positive correlation with larger bonuses. But for creative work — the type that many office workers perform — bonuses can have the opposite effect of narrowing focus and producing worse outcomes.” ~Avery FisherRemedify

5. Focus More on Collective Objectives Than Personal Ones

“With time I learned that the best profiles I worked with were the ones who weren’t thinking solely about their own department and tasks. If you really value team players, you’ll want your staff to be working as a team.” ~ Nacho GonzalezMailtrack.io – The double-check for Gmail

6. Align Bonuses to Profit Revenue

“If variable-based compensation is going to be used, it should always encourage behaviors that lead to profitable revenue. For example, account managers should be incentivized by being offered 1-2 percent of the account value for maintaining the client. This incentives them to provide excellent service.” ~ Kyle SamaniPristine

7. Make Results-Based Goals

“We create quarterly goals and milestones that are directly linked to the company goals. The goals have to be results-based. They can’t just be to write 50 articles or post five tweets. Better results-based goals would be to generate a certain number of leads or new fans. It’s also a good idea to agree on the incentive. I like to create a pool and give team members who achieve goals a percentage of the pool.” ~Nicole Munoz, Start Ranking Now

8. Focus on Profit Sharing Based on Company Performance

“All employees need to be aligned around the most important outcome for any business — generating profit. Therefore, the entire company should be eligible for profit sharing. The profit pool should represent a small percentage of overall profit and should be based on the company hitting specific profit or loss milestones.” ~ Kristopher JonesLSEO.com

9. Measure All Outcomes

“To create performancebased bonuses for non-sales staff, find a way to measure end results of every assignment and project in a quantifiable manner. If an employee wrote a series of articles to be published for your consumers to read, collect the numbers of how many readers there were, what the influx of consumers was after the article was published, etc. Measure everything with numbers.” ~ Miles JenningsRecruiter.com

10. Reward What You Want to See

“If you like people to take risks, reward an employee who tries an outlandish approach regardless of the outcome. This type of positive enforcement of process helps you develop a culture in the office that will move your company in the direction you want it to go.” ~ Kumar AroraAroridex, Ltd.

11. Use Multiple Metrics

“Employees will optimize their compensation based on how it is structured. If you only provide one metric, then all efforts will go towards optimizing for that metric. Most of the time, a company needs to make progress on multiple metrics in order to move forward, so make sure employee incentives are aligned accordingly.” ~ Sathvik TantryFormSwift

Tug of War Photo via Shutterstock

The Young Entrepreneur Council The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.