Start Building 2026 Bonus Plans Now
Now is the time to start creating bonus plans for next year. What?!? It’s only April and you want me to worry now about something that will pay out about 23 months from now? Yes, absolutely yes. Why? Because well-structured bonus plans take time to develop. Creating plans should start now so that they can be fully documented by late summer and you can start communicating them this fall. To get the biggest bang out of your bonus bucks you need to start telling employees in the fall what they and the company will need to do in order for them to receive a bonus for the following year.
Annual Cash Bonuses can be an effective way to focus employees on the mission and annual goals of your company. But, it is necessary to structure bonus plans well in order to get the maximum ROI from them. And, it is important to note that discretionary bonuses do little, if anything, to incent future desired outcomes from employees, and are therefore a waste of money.
What are the hallmarks of effective bonus plans?
The bonus supports crucial business strategy and goals.
The bonus pays for extraordinary results. It does not pay for effort and it does not pay people to simply do their jobs (which is what base pay is for).
The bonus does not incent the wrong behaviors and results. It takes thorough analysis to determine if what a bonus is set up to do is what you really want, and if it will incent results that are not profitable or immoral (remember Wells Fargo?).
The bonus plan is in writing (some states like California have laws requiring all incentive and bonus plans be in writing), outlining when payments are made, when they are not, and does everything possible to get out in front of one-off situations that could put the company in a bad position.
At Conover Consulting we have spent decades building effective bonus plans for and with our clients. Reach out to laura@conoverconsulting.com if you would like to learn more.