I get asked all the time how we incentivized our employees. In this post, I talk about how we developed a killer bonus plan structure for each and every employee.

First, you need to determine what your company is trying to achieve by creating a bonus program. Are you trying to motivate behaviors and tasks, or just tasks? Overall company profit? Creating a bonus program isn’t rocket science; just following a few simple guidelines is likely to result in a successful plan.

I knew we weren’t the highest paying agency out there; we couldn’t afford to be.  Because of this we needed to find a way to motivate the employees who went above and beyond their job requirements.  In turn, we came up with the 5 items listed below to help us outline our bonus program.

5 key elements of an effective bonus program

1. Fair—Eliminate resentment between job types or departments by making the bonus programs fair across your company.
2. Simple—make sure it is easy to understand.
3. Meaningful— the employee’s actions must have direct impact on the company results.
4. Objective— no subjective opinions. Only measurable results.
5. Check-ins—share progress against goals as frequently as possible.

Here is how we setup a bonus plan structure for our employees:

Goals-based

In the beginning of every quarter, we had our employees set their quarterly goals based on growing the company. This can apply to any role from HR, with increasing retention or hiring new qualified employees to Web Designers, based on how the customers rated the design. The goals could be anything that affected the company in a positive way. We approved the goals based on how valuable there were to the company. We weighted them as well, in order of importance.

The key to any bonus structure is to constantly do check-ins with the employee.  Let them know where they are in regards to hitting their bonus. Your job as an owner and manager is to help employees achieve those goals  and motivate them into taking action to hit their goals.  Once they hit their bonus, make sure to acknowledge the achievement in front of the company, giving the employee recognition as well as motivating other employees.

Profitability-based

We also tied the bonus plan to an increase in company profits. We would set a company goal of profitability at, say,  25%. We would put a weighted percentage tied to that goal in order to calculate the bonus.  One other unique thing that we did was put a clause in the bonus structure called a profitability gate. A profitability gate states that if the company was not profitable and the person met their goals-based requirements for the bonus, no bonus was paid. This wasn’t a fan favorite but the ultimate goal of any company is profitability. You can’t hand out bonuses when the company, as a whole, didn’t meet the goals.

You need to clearly communicate the bonus guidelines. The most common pitfall when creating a bonus program is not clearly communicating it to employees. It’s essential that it be clearly documented and that it addresses the structure of the plan including fairness, measurability, and an attainable target. The plan should be transparent and describe what you’re doing and why.

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Growing Your Agency

Keeping your team happy with a structured bonus plan will inspire them to work harder for your agency.

If there are other agency problems you are either ignoring or aren’t even aware of that needs your attention, this is where I can come in and provide you support.

In all my years, I have more than likely experienced all if not most of the different struggles you have and can help you from what I have learned. From what to do with your bad agency clients, how to develop agency products and how you can build authority for your agency.

If you want to know how to grow your agency even further, I have agency growth hacks, the best ways to improve management of your business as well as why building a remote team of freelancers can be beneficial in the long run.

As well as this, you can learn more about my career as well as tips, tricks and insights by checking out my blogs that cover a wide variety of topics.

I also hear the experience and advice from other successful agency experts in my Ask Swenk series and more of my videos on my Youtube channel.