What are good approaches for setting up a performance based bonuses for employees?

In my business, positive bottom line equals bonus for everybody. Percentage of salary to employees - same for all, up to three months salary. That is simple and works well, and is aligned with overall goals. And it is easy to report where we are. We don't have sales targets, which we maybe should have.

Depending on your business type that may not be feasible for you-startups don't make money initially. But building on your idea, hitting targets is important. Both growth and quality. People will behave as they are measured and challenging targets will help you create a sense of urgency instead of entitlement. (However, increase risk of suboptimization).

I think hitting sales targets, finishing projects on time and budget combined with NPS for both sales and project process should be enough. You don't need many targets, but use them all the time, talk about them with your team, incl. what you are trying to achieve. KPI's are no substitute for leadership; your team needs to know what your intent is.

One way of showing your commitment to quality could be to collect NPS yourself through customer interviews. That would also inspire new ideas, and give you better market knowledge. Given the size of your team that should be feasible.

Good luck. Should you want to talk more to someone with a business of similar size, feel free to give me a call.

Best regards
Kenneth Wolstrup

I would spend sometime working alongside the team members you want to target to find out what would be their hot buttons for a bonus.

Attaching a bonus to a difficult task or a part of the business that they don't typically enjoy can suddenly make that part of the business great.

At management level if we do not see or feel what they feel, our opinion on what will excite them as a bonus is sometimes off target.

Just an idea.

Keep up the great work and good luck!

Mark

We've tried so many different models of this over the years it actually hurts to think about.

What we currently do for "core/critical" staff is we base bonuses on gross margin. We also tie a % of commission to sales people to gross margin so that there is an alignment on incentives between production staff and sales staff.

Is it perfect? Hell no. It does work the majority of the time though.