These tips were published by the Selling Power website.
Parameters employees can affect
The indicators used to calculate bonuses must be sufficiently open to the influence of the given employee. If, for instance, someone is rewarded solely on the basis of the company's business results as a whole but they work in a department with zero direct influence on these results, this might be understandable from the employer's perspective but it is far from motivating for the employee.
Transparency
A reward system must be transparent. Employees need to know in advance what is expected of them to reach certain rewards, and they must be able to assess for themselves how much they will receive in bonuses. Calculations used to reach the final amount should be made public and every employee must be sufficiently acquainted with them.
Motivating rewards
Bonuses must be genuinely motivating. If, for instance, an employee can only receive once in six months a bonus amounting to ten percent of their monthly pay, the whole system is useless as it will not be motivating in the slightest. You need to determine the maximum bonus of individual employees so that it really pays off for them to spend time and energy on activities that will enable them to reach that target.
Something extra
Managers should have the possibility of awarding extra bonuses even beyond all the abovementioned systems. These bonuses form a genuine addition to wages and other bonuses. Such sums should be paid only in exceptional circumstances and deserving cases.
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