People Focus Spring 04 NA - CIPD

Pay Trendstiming of your bonus payouts are aligned withthe sales cycle that the employee or his/herteam are managing. Avoid wasting money ona performance bonus that is widelyconsidered to be a ‘13th month paychequethat everyone always earns’.4. Reward over-achievement: link more pay toindividual performance to encourage moreownership of the sales performance goalsand to enable more leveraged payouts foryour over-achievers. Avoid diluting the upsidewith MBO/KPI bonuses that rarely vary, orteam bonuses that employees perceive theycannot impact. You can still reward andrecognise a team effort through a bonusmodifier linked to the team/company salesgoal.5. Convert any sales ‘blockers’: ensure thatvariable pay is available to all the employeesthat touch the account and the salesprocess; sales growth can mean more pay forthe reps but simply represents a newheadache for sales support if they do notshare in the incentive. From acompetitiveness standpoint, could youpossibly get the best game from your goalkeeperor your full-back if you didn’t sharewith them the score of the game? Whatwould the score be if you only paid your pointscorers?Companies are now reviewing the variableelements of their total pay systems to make surethat, at a minimum, this portion of payroll costswill grow in line with the business. Accordingly,companies are ensuring that these variable payplans really communicate and truly reward thenew performance, events and activities that willdrive profitable growth in this new marketplace.Profitable growth is still available in anyeconomic environment through cost savings,smarter selling, organisational change, businessinnovation and better employee commitment.Your existing variable pay arrangements areeither motivating or de-motivating suchinitiatives. Now is a good time to start findingthe answers to the ten questions above.For more information on the trends, approachesand questions outlined in this article pleasecontact John Treacy at 01.6616448 or by emailto john.treacy@eu.watsonwyatt.comVariable or Bonus Pay plans are continuing to emerge in Ireland for several reasons ranging from management’s desire to motivate employee engagementby sharing the upside opportunity of business results, to the finance department’s desire to share the business risk and downside with the same employees.Research undertaken by Watson Wyatt with top-performing employeeshas demonstrated that dissatisfaction with pay is the key reason for topemployees parting company with their employers (Strategic RewardsSurvey 2002/2003). Results of the survey also provide insight into thereward practices that are most effective in attracting, retaining andmotivating the employees critical for restoring and maintainingcompetitiveness. Both short and long-term bonus/incentive plans featureprominently in the top-performers wish lists. Crucially, top-performersnote the necessity for organisation’s to differentiate pay effectivelybetween top-performing and average employees. Interestingly, the surveydemonstrates that less than 40% of top-performing employees say thattop performers at their companies receive moderately or significantlybetter pay rises, bonuses or total pay than their co-employees withaverage performance. Clearly, there is room for employers to leveragetheir reward costs to drive increased ‘returns on payroll investment’.90%80%70%60%50%40%Percentage of employees eligible toreceive performance bonuses 1998-20021998 2000 2002Senior Management74% - 85%Middle Management68% - 79%Employees49% - 67%Source: Watson Wyatt General Industry Compairson Reports: IRELAND1998-2002Figure 1% of Bonus Plans That Are Linked to Performance/Formula -(i.e. Not Discretionary)100%95%Figure 290%85%80%75%Middle ManagementEmployees70%1998 2000 2001 2002pg12 Autumn 2004