The development of a company bonus system is an important stage in the management process. The right approach allows you to achieve a good result, while not wasting the budget of the company for nothing. As can be seen from the numerous studies devoted to this issue, a successful approach to setting up bonuses makes it possible to achieve almost a third increase in the productivity of the working day of staff. This forces to pay particular attention to aspects of monetary motivation.
We start from the very beginning: who should be?
Who should the bonus payment system apply to? Opinions diverge significantly on this score, but the fairest approach involves the inclusion of all enterprise personnel. If we analyze the current practice of many enterprises, we can see that often managers prefer to apply bonuses exclusively to top managers. A slightly broader option is the inclusion of the entire staff involved in the key business process, that is, implementing sales, responsible for the production, provision of services to the client. There are enterprises in which only middle and senior managers can count on incentives. The most extensive approach is to assign bonuses to all or almost all employees of the company.
Examples of bonus systems exclusively for top managers can be seen in a wide variety in Western companies, since this is where this method is more widely distributed than in any other state. Some experts believe that the approach does not make sense, it is empty, since it involves giving incentives to those who do not really need them, therefore, incentive as such is not observed. Normally, a top manager is motivated by responsibility, commitment. The best bonuses with which to attract such an employee are career growth, raising social status. But the staff in such a position, striving for heights only with a financial premium, is assessed as low-quality, requires replacement.
What does it mean?
The system of remuneration and bonuses, which involves the application of special incentives only to top managers, as many specialists in personnel development and financial improvement of the enterprise assure, does not justify itself, and the very role of stimulating employees in such positions is exaggerated. True, this does not mean that the financial factor does not play any role at all. Of course, monetary incentives are important, but they are only secondary, therefore, the introduction of a bonus system should not be limited to such posts. A company aimed at good development prospects should implement a more reasonable, extensive, effective approach, otherwise the money is likely to be wasted.
What to try?
If at the moment there are no bonus practices at the enterprise at all, many recommend starting the introduction of a bonus system for employees with a program that affects all participants in the main business process. It is they who have the strongest influence on the financial results of the company. In fact, revenue and margin are created by the forces responsible for sales, while quality and cost depend on those involved in production and services. The introduction of a successful, effective motivational system allows you to increase benchmarks, and the results are observed quite quickly.
If the activity is medium-sized or really large, you can apply a bonus system at the enterprise, affecting the heads of departments, branches, departments, as they are responsible for the work of subordinates and can stimulate it, being interested in a good result.
Enough for everyone!
The bonus system in organizations, which involves the inclusion of almost all of the company’s personnel, not so long ago seemed to many to be unpromising, implemented exclusively in a small company, because too many restrictions are associated with its implementation in practice, and this costs too much, the result does not justify itself. As practice has shown, at present, when management gains access to the latest technologies, many restrictions are a thing of the past. This also applies to payroll automation. Using specialized products, you can easily count bonuses to thousands of employed people, spending a minimum of effort on this.
If we analyze the recent practice of introducing bonus systems for enterprise employees, it becomes noticeable that more and more often management decides in favor of the option of including all personnel in such a program. Analytics proves that it is in this case that the productivity of the work process gives the highest growth rates.
Everything has its time
In order for the employee bonus system to show good results, it should be included in the company's work gradually. A fairly widespread approach is to apply incentives first only to top managers and department heads, after which middle managers responsible for auxiliary functions are included in the program. Gradual cyclical expansion sooner or later allows you to cover the entire staff of the enterprise. From the accumulated statistics, it is known that companies that once introduced premiums for the entire state did not cope with the task because of the scale of the project. The risks are especially great if the company employs more than five thousand people.
And if in more detail?
One of the most important aspects requiring special attention is the bonus scorecard. A single method for choosing such parameters has not yet been developed; there are no scientific or generally accepted managerial approaches, which imposes certain limitations. Incidentally, what is practiced in modern enterprises often contradicts one another. However, the analysis of such contradictions can give a lot to the manager who is interested in introducing the most effective option in his company.
Among the main discrepancies, first of all, it is worth noting the assessment of the financial factor. As is commonly believed, a monetary result is the main indicator of the success of any modern enterprise. At the same time, simply a bonus system for personnel will not allow assessing what the contribution of an individual employee to improving the situation of the enterprise is, that is, motivation with the financial aspect loses its importance and relevance. Along with this, features related to the point of view are complex. For the company as a whole, only the totals that characterize the company as a single entity are really important, while a single employee can improve only his personal results, which affect the overall indirectly, often very weakly. In order for the performance indicators used for bonuses to give good results, they must be measurable and objective, while at the same time, subjective, qualitative ones can better reflect the contribution of an individual. The objective ones, having understood the essence of their work, can be deceived - this, as practice shows, takes a little time.
Many or few?
Introducing a bonus system for personnel, it is important to formulate common approaches to determining monetary values to be paid.At most enterprises, a certain percentage is selected that is calculated on the salary of the employee. An alternative approach is the share of the employee’s total salary. As professionals say, planned, actual payments should be highlighted. The first is what is taken into account when building the budget if each of the employees fulfills all the tasks assigned to him by 100%. Actual - that will be actually paid to the state, taking into account worked out. The actual premium is extremely rare in size equal to the planned one, but it is impossible to predict its value for each individual time period, even having at its disposal a summary of statistics for several periods.
When deciding on what method to calculate the planned size for the labor bonus system, you need to think about the difference for an individual employee that will already be decent enough to be a real incentive to better cope with his tasks. As can be seen from the numerous studies devoted to this issue, with a bonus of less than 15%, the increase is so insignificant that it causes the staff more negative perception than positive. Good results are observed with bonuses ranging from 20% relative to salary and upward.
There are always two sides to a coin
Forming the labor bonus system, it is worthwhile to understand that any employee of the company wants to have a minimum salary, for which he will have no doubt: this money will be received in any situation, no matter what the circumstances. If you set too low a salary and a high bonus, this will lead to violations of discipline in the workplace. Many will try to trick the evaluation system in order to achieve personal benefits with minimal labor and time.
Specialists considering the formation of a bonus system for workers agree that it is not necessary to assign a bonus of more than 100% relative to salary, that is, allocate more than half of the total wage for it. If we evaluate the experience of companies currently operating in the market, their performance will confirm these findings. In fact, the premium should be at least 15%, but not more than 100% of the amount of wages agreed upon by the employment contract.
Posts and incentives
An effective employee bonus system always takes into account the specific features of the specific posts for which bonuses are intended. Determining what to choose for a particular employee, you need to pay attention to the features of his work, evaluate what parameters make it possible to give an impression of the quality of work. If for a specific case the exact picture is made up of objective indicators, then the premium can be set slightly higher than the average for the enterprise. If the assessment is based on subjective indicators, general parameters of the company, then a premium should be assigned in a slightly smaller amount. If it is not possible to evaluate the results of a particular person’s work, the appointment of an impressive prize does not make sense and will not cause an improvement in the results of the enterprise as a whole.
If we analyze the bonus systems introduced at domestic enterprises, it becomes noticeable that all positions are divided into two large groups: trading, non-trading. It is the first ones who deal directly with transactions, so the motivational component is important. Many firms award such personnel bonus of 40% of salary. This applies to qualified professionals, supervisors. For non-trading posts, the premium is the higher, the better the position of a person in the internal hierarchy of the enterprise, since top-level posts have a greater influence on the results of the company. The encouragement of such employees is usually based on growth rates of company results.
Methods and approaches: different options
You may notice that bonus systems in the metropolitan area are somewhat different from the periphery. Salaries are higher in Moscow, and planned bonuses are slightly lower than in the state as a whole, while firms forced to work in other places apply the most stringent staff stimulation schemes to achieve maximum results. One of the tools is a low salary, supplemented by a large bonus. When planning to apply the experience of other organizations within the framework of your own company, you should compare many factors - and especially the workflow, hierarchy, location and area of activity, as well as the scope of the company. Simply copying a competitor’s successful approach can lead to losses without the slightest increase.
Yesterday Today Tomorrow
When developing a bonus system, it is worth considering how often to issue promised rewards to staff. In some enterprises, they are paid monthly, in other companies every three months, once every six months, or even once a year. Of course, it is possible to pay bonuses every four months or two - in a word, how the manager will count it necessary, correct, promising. The generally accepted approaches in our country and abroad diverge quite significantly on this issue. Russian enterprises are mainly built according to the scheme of monthly accrual of incentives, a somewhat rarer option is once a quarter. Using this option, you can immediately see the positive results of bonuses. The method is quite convenient, since it allows you to include workers involved in low-paying tasks.
Foreign firms, including those with branches in Russia, more often use a bonus system that involves the accrual of bonuses only once a year. The plan applies to employees of higher, middle level. An exceptional approach is bonuses accrued to trading posts once a month or quarter, but this is more of a concession to the practice that has developed in the country.
Which is better?
This is not to say that it is possible to organize the improvement of the bonus system through a rarer calculation of bonuses: both of the described approaches have their own specific strengths and weaknesses. The long break between the accrual of bonuses shows persistent indicators of the ability to work of staff. You can evaluate what each employee is capable of, the factor of random fluctuations is minimized. Often, the financial performance of an enterprise cannot be calculated on the basis of the values accumulated over one month.
By the way, it is according to this logic that accountants calculate profit for a quarter, and do not do calculations every month - such indicators simply would not make sense, would give a false picture, would become the basis for making wrong management decisions.
Parameters and periods
When deciding in favor of a specific option, it is necessary to analyze what types of indicators are currently used. If these are subjective assessments, bonuses are paid once a quarter, once a month. If the main part of the indicators is objective, you can focus on the bonus annual or quarterly accrual. An equally significant aspect is the duration of the business cycle, that is, the period for which the results of human activity are manifested. For employees involved in production and sales tasks, performance indicators can be seen in a couple of weeks, but for the management team this is a month, and sometimes more. Accordingly, it is reasonable to introduce bonuses paid not more often than it is possible to evaluate the results of the employee. Top managers are a special story, as the result of their business activity is sometimes difficult to evaluate even when analyzing the quarterly period, which makes it optimal to use the bonus system annually.
It is worth paying attention to the total wage, how great is the ratio of salary to bonus, how much to pay in general. Often, such a restriction seems artificial, but is widespread. If the total earnings are low enough and the premium is one third or half of this amount, the only reasonable approach is to pay bonuses every month. For executives, mid-level personnel, and linear workers, the system of calculating the premium on a quarterly, monthly basis is considered the most successful, but for staff in senior positions it is reasonable to calculate bonuses every year or a little more often.
Prizes and points
The bonus system, based on the accrual of points, involves the assignment of certain conventional internal units based on the results of a specific task. At the same time, the responsible staff analyzes several criteria to form an adequate conclusion. In order for the result to be objective, you can develop a special scale, include all possible criteria in it, describe what achievements are needed to get a new level.
If a specific employed does not cope with his tasks, he gets a zero mark, but the maximum is available to someone who has completely completed everything that was assigned to him. Intermediate points allow you to determine to whom and what bonus to accrue if the staff coped with the tasks partially. All points are recorded, documented, they are open to employees and are used to calculate the final wage.
What else to try?
The system of applying points is considered rather convenient, but in practice it is rarely used, since it requires significant labor costs, especially in an enterprise where bonuses must be awarded to a large number of employees. In such a situation, simplified approaches are used when the final result depends on the efficiency of the company as a whole for a given time period. At the same time, take into account how much free funds are available in the enterprise budget for paying bonuses. With this approach, often rewards are paid fixed, for each position - its own value.
Staff: how much to pay?
The procedure and rules for accruing bonuses to managers is a difficult question. The most objective approach is considered in which they analyze the growth of production volumes, compliance with time constraints in a given time period, including the period for submitting reports. If the company timely releases the goods, saves on expendable resources, raw materials, all this affects the management premium, increasing it.
For employees and specialists, the bonus is calculated taking into account how much the plan was completed or worked out beyond the established limit, whether additional responsibilities were fulfilled. It is important to assess the percentage of rejects, the operating time of the customer base for the specified time period, as well as other similar indicators that reflect the high quality of work.
I want everything officially!
Sometimes the average person has doubts: why is the premium paid at the enterprise, but this fact is not recorded in the work book? A person works so well, tries - and there is no official confirmation of this! In fact, everything is simple: a work book is a document intended strictly for mentioning a position, workplace, documents on employment, dismissal and similar procedures. The fact of payment of the premium cannot be indicated in it, and making unauthorized entries is unacceptable, otherwise the document becomes invalid. If an employee wants to have proof of his high-quality work, it is worth requesting a description. It is in it that one can reflect all the characteristics of a person, as well as the rewards paid to him during his work. The impossibility of entering data on regular bonuses in the workbook is published in a government decree published in 2003. The document was published at number 225 and considers various features of registration, maintenance of work books.