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There is no more powerful tool a manager can have than a good bonus program. If a bonus program works, it can be an incredible motivator. It can get people producing at levels that make the cost of the program seem like peanuts, no matter how much you may have spent to set it up.
What a bonus program does is communicate goals in the most effective way possible— by putting a bounty on them. It says to people, “These targets are so important we’ll give you a reward if you hit them.” When you do that, you get people’s attention very fast. You send them a strong message. You provide them with a focus. You give them a challenge and a very good reason for working as hard and as smart as they can to meet it: they’re going to get paid. We get all that and much, much more from our bonus program, and we didn’t pay anyone a dime to come up with it. We call it “Skip the Praise— Give Us the Raise,” or STP- GUTR— pronounced Stop- Gooter. Here are some of the things we like about it:
1. Stop- Gooter (our bonus program) is our most effective educational program. We use it to teach people about business.
If the goal is to improve the debt- equity ratio, people learn about debt and equity and how they can affect both. The same holds for pretax profits, or inventory accuracy, or the overhead charge out rate. Whatever the goal, it gives people a big incentive to find out about some aspect of the accounting system, the company, and the competitive environment. Otherwise people won’t have much fun, they won’t earn the bonus, and they’ll take a lot of flak from their peers.
2. The bonus program serves as a kind of insurance policy on the company and our jobs.
That’s because we use it to target our vulnerabilities. Every year, we figure out what is the greatest threat the company faces, and we get the entire workforce to go after it in the bonus program. In effect, we put an annual bounty on fixing our weaknesses. That gives everyone an additional reason to achieve the goals. These are musts, not wants, and so they are worth the extra effort. Interestingly enough, once a weakness is fi xed, it tends to stay fixed.
3. The program brings us together as a team.
It ensures that everyone has the same priorities and that we all stay focused on the same goals. It eliminates mixed messages. When one department is having trouble, another department will send in reinforcements, and everybody understands why. Often people don’t even have to be asked. They will help each other out spontaneously, sometimes at great inconvenience. That’s because the program makes everyone aware of how much we depend on one another to hit our targets. We win together or we don’t win at all.
4. The program helps us identify problems fast.
If we don’t achieve a goal, we find out very quickly why we missed it. Everybody is looking through the numbers to see what the problem is. Maybe it’s receivables: customers are slowing down their payments and conserving cash. Maybe it’s productivity: people are new in their jobs and can’t absorb overhead fast enough. The bonus program forces the problem out into the open. Once it’s there, you can go to work on it. You can solve it.
5. Stop- Gooter is the best tool we have for
increasing the value of our stock.
We always set it up to guarantee that the stock value will rise substantially if we hit our targets—and will be protected even if we don’t. That’s one of the most important messages we send through the program: “This Game is all about equity and job security.” Short- term incentives like bonuses are fine, but we want to make sure people never lose sight of the long- term payoffs.
6. Most important, the bonus program provides
the structure of the Game.
It puts the ball in play. It sets the tempo. It keeps the action going week in, week out, all year long. It gives us a language, a way of communicating. It creates excitement, anticipation. It gets the adrenaline fl owing. It makes sure that people stay involved, engaged, and on their toes. It is, in short, our most important motivator, which is its primary function. If it weren’t raising the energy level, we’d stop using it, although I find it hard to imagine how it could fail to motivate. That’s a question we constantly pose, “Is the bonus program motivating people?” But I have to admit that if anybody ever told me it wasn’t, I’d think that he or she was a dirty liar— or that our education program was in deep trouble.
Pro tip: Giving people a long list of goals is like not having any goals at all. Build your bonus program around two or, AT MOST, three goals per year. More than that just gets too complicated.
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