How to Fairly Decide Bonuses for Creative Teams Without Revenue Targets?

Dear Seniors, please help! How can we decide how a bonus/incentive should be given to a particular employee when you cannot measure achievement in terms of revenue target? My organization is in the entertainment industry and is planning to start an incentive/bonus plan for client servicing, creative, and operations staff. How can we decide how much we should give as a bonus? For Marketing, there already exists one plan which they do not want to change.

Objectives and Considerations

I have developed a list of objectives that are important in these areas. Also, as we work on a project basis, should I consider the project value as well? Or should incentives be some percentage of employees' salary or a fixed amount for all (irrespective of salary)?

Please help me as this is very important and urgent.

Kind regards,
Shruts

Understanding Incentives and Performance Measurement

Incentives are nothing but variable pay based on an individual's performance. Why can you not measure performance if you have set KPIs?

Regards,
pon

Dear Pon, Revenue generation is the work of the Marketing department, those who are working for business development. Once the project is secured, the entire staff (operations, creative, client servicing) works on it, but it is considered the project of the Business Development personnel who obtained it from the client.

Incentive Structure: Project vs. Monthly Salary

So, I want to know, should incentives be based on a project or on a monthly salary since they are expected to work on every project the company secures, and thus, revenue generation on their part cannot be measured, even though we have KPIs? Please provide your views in broader terms.

Regards,

In that case, you can consider offering incentives on a project basis and allocate them annually. Normally, Performance-Linked Incentives (PLI) are measured and distributed based on the financial year (April to March). PLI varies, and you should have a system in place to measure individual performance.

Regards,
Pon

Incentives Based on Project Value

Incentives on project value would be more appropriate. It will work as good motivation to get more projects or big projects.

You can outline the general working methodology or achievement criteria in terms of GOALS for each employee category separately, such as Operations, Creative, Client Servicing, etc., from the start-up of the project to its successful completion. Give weightage (say 10%, 20%, etc.) to each goal. At the end of the financial year, you can measure the performance of your employees for each goal and calculate the incentive amount. Put a limit on the rating (e.g., 90 out of 100 is the highest marks or rating) which will take care of your project margin.

Hope this will help you.

Regards,
Vaishalee

Hi Tunde Babs, identify the criteria upon which employees' performance will be based first and determine what percentage of project income will be the incentive budget.

Thanks, Tunde Babs

Surely, incentives are based on performance measurement. Since you are using Key Performance Indicators as a way to measure performance, you measure according to their deliverables. You give weight to the deliverable in percentage linked to the total score. All projects are measured by agreed deliverables.

However, you can make it more competitive and time-bound. If you want to have your evaluation efficient, you can design your performance appraisal evaluation into quarters where you check how your employees are progressing with their projects and deliverables and assign weights for each quarter. This way, you have an early warning on projects that are not progressing or facing problems.

A similar situation exists in the Power Generation sector. I am not sure about the private players, but NTPC has a model in practice for over 25 years.

The total incentive payable is usually divided proportionately among the various departments that contribute to power generation. The Operation & Maintenance staff receive the major share—they are similar to the BD/Marketing guys in your situation. I don't recall exactly, but all the other departments receive the rest of the share equally distributed among them—right down to the office peon who supports the whole effort indirectly, albeit on a minor scale.

All those eligible for the incentives (probationers and those on leave beyond a specific period are not eligible) receive the incentives based on their salary scale/basic. Additionally, the model, if implemented, will need to be preceded by a very clear and transparent discussion among all the departments concerned to avoid any situations causing resentment (the BD guys may feel somewhat disappointed to lose a part of 'their' share, but they need to be convinced to consider the bigger picture where they also stand to gain much more in the long run).

I hope these insights are helpful to you. It would be beneficial if there's someone in this forum who works there—they could provide a more detailed response.

Regards,
TS

Thank you to everyone for your valuable inputs. Keeping the situation and your inputs in mind, I designed the incentive slabs, and my boss really liked them. Thanks to everyone.

Warm Regards

If not confidential, why not share the model you implemented? Many could benefit in the process.

Regards,
TS

I cannot share it in totality, though the basic idea I can definitely share. I combined the project value with the salary, then decided upon the share that we can offer as an incentive. After that, I set goals and created different levels of achievement for every profile and fixed the incentive amount. Based on the level of achievement, we will pay incentives. The levels are clear, and anyone can objectively measure them.

Please provide me with your input and if any improvements can be made.

Thanks and regards

Since you have just implemented the slabs, I suggest watching for a few months or until the first few projects are completed—whichever is later. You will then have first-hand feedback directly from the employees themselves. What you have right now is akin to the recipe of a good dish in the cookbook—you need to wait until you actually cook it and taste it to give the final OK. Any changes would be better attempted then.

All the best.

Regards, TS