Do you set targets for bonus plans, incentive compensation that is, on an annual basis? Why?
"Well, that's what we've always done."
Today's business pace-of-change is such that objectives and bonus plans based on a 12 month period are interesting antiques. Such a process is antique, and the objectives are antique by the time they're realized. If you simply use bottom line financial performance as your only metric (a rather lazy bonus-setting approach) then you can get by, I suppose, with annual targets and payouts. But if you set specific, establishing targets for those items that set the stage for future growth then a much shorter fuse is appropriate. See the follow-on for such objectives.
- Create and get government approval for new product xyz by ---.
- Fully implement a changeover from manual to MRP operating systems by ---, as demonstrated and proven by (a), (b), (c).
- Improve productive capacity by 20 % by --- as demonstrated by ---
- Create a program to reduce bid contracts' costs by 15% by ---
- You get the idea; these are perhaps more important for the long term than short term financial performance
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