Set Bonuses that Please Staff
As Published in the January 2006 Issue of Law Office Administrator
Set Bonuses That Please Staff but Give the Firm a Return on Investment
There’s an art to giving bonuses.It covers what’s given, how it’s given, when it’s given, and how the amount is determined.
It covers what to do when the office can only afford a tiny bonus or maybe no bonus at all.
It even covers psychology, says Adrianne Court, SPHR, vice-president of human resources for Oasis Outsourcing, a human resources, benefits and payroll outsourcing firm in West Palm Beach, FL.
And all of it determines how much benefit the firm gets from the dollars it puts out.
Two Types to Choose From
What many administrators don’t understand, Court says, is that there are two types of bonuses– discretionary and nondiscretionary.
“People tend to blend them,” but it’s important to keep them separate, because they have different effects on staff.
The discretionary bonus is given at the pleasure of the employer, and it’s a show of appreciation, an after-the-fact acknowledgement, a matter of “we’ve done a great job and at my discretion I am going to give you a thank-you.”
The nondiscretionary bonus, on the other hand, is promised before the fact and is given only if specific goals or objectives are reached. It’s a matter of “if you do X, you’re going to get Y.”
Of the two, the nondiscretionary bonus is the better approach, because it carries an incentive to do more than what’s required. It can generate improvements in staff performance and give the office a better bottom line. By contrast, a thank-you with no requirements attached “does little to drive performance.”
How to be Nondiscretionary
To set up a nondiscretionary bonus system, the office first has to assign specific goals that can be measured, Court says.
To ensure the best payoff for the firm, set the goals at three levels – for each individual, for each department or team, and for the office as a whole. Base them on what the partners want to see happen, and make them things that will take everybody beyond the basic requirements of their
jobs.
The bonus amounts are set by a scorecard of the three levels put together.
To coordinate it all, let the partners decide what they want to achieve, and then ask the departments to decide on what they can do to achieve that and also what each staffer should do to fall in line.
So suppose the partners set a goal of increasing revenues by X%. The billing department might say it can help that along by setting a goal of getting bills submitted every day. And it might then set a goal for Staffer A to get all the bills out by the end of each week.
The Three-Way Score
To determine who gets what money, decide on the amount the firm can give out and set a percentage potential for each of the three levels.
For example, suppose the firm decides it can give a possible $1,000 bonus to each staffer. It might set the percentage potentials so that
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each staffer’s individual performance can earn up to 80% of that amount, or $800,
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the department or team performance can earn up to 20% of it, or $200,
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and the sum of the two will be multiplied by the firm’s success percentage.
So if Staffer A achieves 100% of her personal goals, she gets 100% of her potential $800. And if the department achieves 100% of its goals, Staffer A gets $200 added to that.
Then multiply the total of those two by the firm’s performance percentage.
Thus, if it’s been a great year and the firm has met it’s goals by 150%, the $1,000 get multiplied by 150%, and Staffer A gets not $1,000 but $1,500.
On the other hand, suppose the picture isn’t so rosy and the success rates are only 80% for the staffer, 50% for the department, and 80% for the firm.
In that case, Staffer A gets just 80% of that $800, or $640, plus $100 from the department. And with the office hitting only 80% of its goals, Staffer A's bonus is 80% of the $740, or $592.
Court points out that it’s also possible to give a staffer or a department two or three goals and score the outcome by the number of goals reached. That way, if Staffer A has three goals and only achieves two of them, the score is 66%, and the calculation goes on from there.
