Our Approach:
Increasingly, companies are finding, that more "leveraged" forms of rewards, e.g., plans that entail lower base pay or draws and concomitantly higher variable rewards, result in greater efficiency and improved results and outcomes. The Croner Company, for over 30-years, has assisted a wide variety of clients with the development of their cash incentive plans and bonus programs. In many of the industries that we serve, a short-term incentive plan is a critical rewards element that enables the company to compete for talent and to gain or hold market share. Often, we design short-term incentive plans as part of our work in developing comprehensive compensation plans. At other times, we will work only on the design of short-term incentive plans.
We believe the best incentive plans are those that clearly link individual pay and awards to company or unit financial results or to other, important measurable outcomes. The best sales incentive plans clearly link individual pay and awards to individual or team sales goals. The most successful short-term incentive plans reward only the achievement of exceptional results and outcomes; are easy to understand and to administer; and, clearly reinforce the achievement of important company results. It is important that such plans do not become "entitlements" to the plan participants and that the goals set are neither too easy nor too stringent. Typically, incentive plans are based upon the market rates for such plans.
Key Project Steps in the Design of a Cash Incentive Plan:
Primary Objectives.
Working closely with management, we define the primary objectives for the cash incentive plan (i.e., what outcomes or business results is the plan intended to reward). In this initial step, we also identify the employees who will participate in the cash incentive plan and the basis for selecting plan participants.
Award Levels.
Next we work with management to determine target award levels and the range of awards, including, as appropriate, incentive "caps" or limits. In this step, we also define the mix of compensation that is, how much fixed and how much variable pay. We address the following questions: What will be the "leverage" or relationship of incentives to base pay? How will incentive awards be determined? How frequently will incentive awards be paid? What part of each dollar of revenue is being paid out in the incentive plan?
Annual "Updates".
In most cases, we conduct an annual "update" of the cash incentive plan to bring the plan, in all respects, into a competitive market position, to track changes in product or service offerings and to make other needed modifications.
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