Bonus Targets

The company I worked for met a sales target recently and that triggered a bonus that is paid on a company basis to each employee. That was a nice gesture, and it’s a common goal that helps everyone to push towards earning it, and it’s an equitable distribution.

I then got a note that the group bonus, which is different for different departments, is being altered to a “stretch” but not “impossible” target.

Bonuses are always an interesting motivational tool. You want to motivate people to do their best, and help grow the company. A bonus allows people to share in the success that results from their efforts.

But how do you set targets? How much of profitability should be shared? After all, I’d argue that some profits should be retained for growth and reinvested in the company. Shareholders also deserve some benefits.

Setting targets is hard. In the next few posts, I’ll discuss a few plans I’ve seen, and some good and bad results.