Get our Free Newsletter

Managing People: Incentive Compensation Ideas

Do you have a profit sharing plan to share your successes with your employees? Do you make partial distributions quarterly and then worry about later quarters under-performing, thus creating an overpayment by year-end? As you would expect, taking back the overage after it's been paid will quickly torpedo most of the motivational appeal of your plan. By contrast, absorbing the extra charge against earnings should serve to dampen your enthusiasm as well. 

Try this: Instead of disbursing quarterly payments, distribute a profit-sharing status report to each employee showing how much they have coming for the quarter and year-to-date. They will see the money to their credit, and better understand how each quarter's results affect their bonus share. They'll also receive a larger amount at year-end than any individual quarterly payout would have been. Your employees may even develop a stronger connection to your goal of consistent profitability (a goal you should espouse before embarking on such a program in the first place). Finally, you won't have to recover, or forgive, overpayments. 

Back to Publications Index

To subscribe newsletter, please click here.