Structured Goal-Based Bonuses Provide Powerful Retention Incentive for Employees

If you’re waiting until the end of the season to hand out bonuses to your work crews based on your available cash, you may be contributing to employee turnover in your company. The current labor shortage combined with inflation has workers looking for every opportunity to earn more. A structured goal-based incentive program with internally publicized metrics can increase loyalty. It can also create healthy competition among work crews that leads to increased productivity and revenue.

“Structured” doesn’t have to mean complicated. Search the web for “characteristics of successful bonus plans” and you’ll find hundreds of differing opinions on the right criteria and formulas. Most boil down to these factors:

1.      Keep it simple. Large corporations often use complex formulas to calculate a bonus pool fund, then apply a percentage based on employee salary or tenure, and often a third layer for how the employee has done on performance or personal goals. The more difficulty employees have understanding the structure, the less motivating the bonus will be.

2.      Make it meaningful. Current inflation rates are shrinking discretionary income for employees. As a result, they may be comparing their current compensation and benefits packages against what your competitors are offering. Bonuses should be significant enough to keep employees focused on maximizing their efforts for your company.

3.      Create healthy competition. Setting up bonus programs based on productivity or sales can work well as long as everyone has fair access to the resources they need to succeed. For example, an extra spiff for the top performing person or team will go over better if each team is getting a bonus based on their own efforts. All-or-nothing rewards can be a disincentive and create discord and resentment.

4.      Share the scorecard. Whatever metrics you plan to use for calculating bonuses, ensure clear communication with employees. Displaying daily or weekly results in a central location like a warehouse or break room maintains momentum and excitement.

Setting up your bonus structure requires evaluating your business metrics and projections. You’ll need to understand your margins on different revenue streams, such as installation and maintenance. While bonuses add to overall wage expenses, they should also lead to increased revenue and/or decreased costs. You may also want to evaluate other areas that could be improved by becoming part of the bonus criteria. For example, setting goals for safety can result in lower loss time and savings on insurance premiums. If that level of analysis isn’t your strong suit, consider working with a business consultant from the Small Business Administration, your state economic development department or a local college.

For owners, software dashboards can provide an immediate snapshot of how the business is doing. Sharing that information across the company takes that knowledge to another level.

Transparency for team leaders and crew members was a key requirement in the design process for EServ’s goal dashboards. Data from the system’s work order and invoicing functions feeds into a simple graphic interface showing sales yesterday, year to date, and last year to date by division. EServ sister company Millard Sprinkler used the system to set a qualifying number each division must reach to earn bonuses. Using previous-year results and current-year projections, the company set expected daily revenue amounts for the teams within the divisions. The dashboards are shared on large screens in the warehouse so every employee can see how their team is doing and their progress toward earning bonuses.

As with all aspects of the EServ small business operating system, goal setting metrics and dashboards can be customized to your company’s needs. Because EServ provides a completely automated and paperless system for managing your business, you won’t need to learn yet another app or software to create and track an effective goal-based incentive program for your employees.

In its first year operating partially on EServ, Millard Sprinkler realized a 20% increase in net income. The company fully transitioned to EServ in early 2022 and now makes the platform available to other businesses. From initial customer contact to invoicing, inventory and incentivizing workers, EServ provides paperless processes that give small- and mid-sized businesses greater efficiency and higher revenue.

If you’re interested in being part of the EServ Evolution, please complete our contact form and a member of our team will be in touch.

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