When revenues dropped at his company, Wesley Bacon faced tough questions: How do you kill bonuses that people had come to accept as “standard” — without killing morale? And is there another incentive you can use that satisfies employees and keeps the company out of the red? Here’s how he found good answers to both.
His story:
When we hit a little rough patch in business and revenues declined, we found we had a pay dilemma, too. People had been used to getting bonuses based on productivity, but during a business slump, that proved costly for the company.
I mean, people might still produce a lot, but that didn’t necessarily mean we were selling a lot. So how could we cut bonuses without having a mutiny on our hands? The answer came in how we decided to figure bonuses, rather than cutting them.
No more productivity bonuses
The new plan: Instead of setting bonuses on straight productivity, we also tied them to company profits.
In effect, we moved from a bonus plan to an expanded profitsharing plan.
We explained the new plan to our employees in small groups and gave the reasoning for it: If the company makes more money, you’ll make more.
And we threw in a kicker: With the old bonus plan, there were limits on how big anyone’s bonus could be. We scrapped that and announced that there were no limits to the profit-sharing – if the company keeps making more money, you will, too.
People bought into it, since they realized that the new system was designed so that if the company was successful, we’d all share in that success. And when revenues started to inch up, our employees realized they were being rewarded in a better, more fair system. I doubt we’ll ever go back to the old way.
(Wesley Bacon, Latco Corp., Houston)
During your free trial, you can cancel at any time with a single click on your “Account” page. It’s that easy.
