Performance Based Rewards: The Way To Win The Salary War!
Are you losing staff due to higher alternative salary rates on offer in the market? Then offering performance based rewards will assist you to retain staff and improve your bottom line!
Research indicates Generation Y has high earnings expectations and wants rewards based on performance. To implement an effective performance based rewards program, your staff needs to have input and agree to what is expected of them (“deliverables”).
Establish the deliverables for both individuals and team positions. These can include a range of quantitative (objective) and qualitative (subjective) assessment criteria. Once the deliverables are agreed, you will apply a weighting to each criteria. This will depend on the strategic and operational objectives of your business (grow sales, new customers, better productivity etc). A staff member’s result determines the amount of their performance bonus. The more they deliver the higher their rewards. It’s a win for both owners and their staff.
David needs to grow sales and improve profitability. David’s concern is his staff costs are increasing and profits are declining. He has now implemented the Staff Value Program and agreed to pay Tom, a key staff member, a maximum bonus of $20,000. The payment of the bonus is conditional upon Tom meeting specific performance targets. Below is his bonus score card.
The qualitative assessment process allows business owners to assess the achievements of their staff and the criteria are measurable by observation. It provides a proactive approach for addressing subjective performance matters that are otherwise usually left unresolved.
Once the Staff Value Program is implemented by your business, you then need to ensure you have the systems and procedures in place to measure your staff’s performance on a timely basis. As performance bonuses are paid as a result of exceeding budgeted profits, business owners are beginning to realise they can compete with apparently higher alternative salary rates on offer in the market and retain their staff by paying a sufficient bonus based on performance.
The business advisory team at MGI have specialists who have helped businesses like yours develop a performance based reward program. A business coach from MGI can help you to implement a similar scheme and help improve your staff retention. We always have a clear focus on managing costs and improving profitability. We offer expert business growth support and can also assist with business benchmarking and analysis to ensure your business remains competitive.