Avoid the "Dear John" Bonus Letter – Keep Your Top Talent Happy!

By -

Many of you are familiar with “Dear John” letters, which are
typically sent to a sweetheart serving in the armed forces, breaking off a relationship with their partner back home. In today's modern world, we've taken the initiative to draft a “Dear John” letter addressed to that financial person at corporate, the one responsible for calculating and distributing bonuses.


Dear John,

I hope this finds you well, and I hope in time we can be friends, but I’ll get straight to the point. This relationship isn’t working any longer. A guy cannot expect a girl to wait around forever for a bonus. The fiscal year ended back in December. It’s April, and I still haven’t received so much as a statement from you. You’ve been so opaque. I may not have a degree in Math, but I can balance my checkbook. Surely, by now, you know the numbers and the results!


It was bad enough when I couldn’t figure out the exact math and bonus structure. What’s worse is you are dragging your feet while I hear through the grapevine that you’ve added some other criteria I have no control over! It would have been nice to know the criteria earlier in our relationship when I might have had some control over the situation. 

As I see it, you’ve changed the rule of engagement after we got involved, you’ve strung me along, and I’m done. I’ll find another employer who will appreciate me and not play games with my bonus.

Good Riddance,

Your Ex, Maxine


We all know this story, and it is all too common. Maxine worked long and hard, exceeded her quota, and is waiting for a final tally of her and the organization's results. There is no word from Finance, the rumor mill is running overtime, and Maxine is running out of patience. During all this foot-dragging, another company comes courting, and she decides it’s time to move on. Don’t let this happen to you. Good talent, like good women and men, is hard to find. Keep them happy by having a transparent and timely bonus plan, process, and pay-out, or you, too, will receive a “Dear John.”


How do you avoid the dreaded “Dear John” letter or the sad resignation of a promising person in your organization?  Put time, thought, and effort into designing your compensation plan. It sounds easy, but experience says otherwise.  Further exacerbating the misperception, many existing plans have been shifted, modified, and added to, creating poorly understood messes.  The employee has no idea how performance and activities are tied to their commission or bonus incentives.  As a result, bonus plans don’t drive the desired behaviors and outcomes.  In many instances, even sales managers struggle to provide the employee with a solid estimation of income without spending hours doing the calculations. They lose valuable time that could be spent coaching the employee to success. 

 

Effective compensation plans are:

• Transparent to the employee – they can easily predict their income and connect their actions to their desired results.

• Incentives for the employee match the needs of the company, and they are clearly communicated.

• Designed with the future in mind – this is especially important with new additions and emerging territories.

• Fair in their outcome – and designed to match the value of the employee with the employee’s market value.

• Designed with the understanding that the agreement will be modified again to match company objectives – but done fairly.

• New plans are individually rolled out with data showing the employee’s future compensation potential over the next three years.

• When changes are made, they are done in conjunction with the fiscal year and performance cycle and communicated well in advance.

 

River Heights Consulting is on the cutting edge of distributor compensation plan creation.  We’d love to help you avoid some of the pitfalls and relationship killers associated with poor compensation plan design and implementation. 



Desiree Grace is an advisor, consultant, and mentor with 30+ years as a senior leader in the electrical

distribution and manufacturing sectors. Desiree leads and supports special projects for River Heights
Consulting. She builds brands, grows revenue and motivates teams, facilitates strategy and execution, and offers special expertise in helping international companies enter the North American market.  Experience with Fortune 100 companies, private start-ups, and mid-market businesses enables Desiree to help a variety of B2B organizations improve market share, revenue, and profits. She is a sought-after speaker for topics such as professional development, sales leadership, industry trends, and team leadership and motivation. You can connect with her at www.linkedin.com/in/desireecgrace.




...


 


Comments

Post a Comment

Popular posts from this blog

The Dance of Onboarding: Integrating New Hires into Your Corporate Culture

By -
Image
Have you ever tried to waltz or swing dance with someone who couldn't match your rhythm or didn't know the steps? It can become a clash of styles or cultures, or, worse—somebody gets their toes stepped on. A similar thing can happen when a new hire doesn't quite 'get' the culture. Much like dancing, though, skills can be learned. I recently facilitated a panel on Cultural Quotient (CQ) where we discussed best practices for increasing CQ. This involved intentional learning, self-awareness of physical cues such as body language and personal space, and the willingness to adapt to new cultures. I have some amusing stories about what not to do based on experiences with insensitive former colleagues. However, it's more productive to focus on how employers can improve the onboarding experience and subsequently enhance retention and employee engagement by welcoming people into their corporate culture. Maybe someday in person, over drinks, I'll share a funny story o...
Read more

50 Questions for Distributors

By -
Image
Last week I wrote an article titled “Six Questions that Demand an Answer.”  Sharing the article with a few trusted advisers, I received one consistent bit of feedback best summarized by this response. “Frank, I agree these are questions we must ask ourselves; they caused me to pause and ponder.  I used them as an exercise with my team to think about our overall strategy.  I believe taking the time to think about our business from an outside perspective to be justified and worthwhile.   Sometimes it’s hard to do this subjectively.  I would like to see more questions just like these.” The following is my first round of questions.  I have put them into categories to make them easier to digest.  Some will apply to your position, some will not.  I suggest spending a moment visiting these topics with members of your own team. A note:  The readers of this blog come from a variety of backgrounds, hold a diverse collection of positio...
Read more

Ship and Debit Programs

By -
Image
Special Pricing Agreement and Thoughts about Ship and Debit Programs Click here for a brief tutorial on Ship and Debit Programs. Special Pricing Agreements (SPA) have been around for a very long time. The concept is simple; a manufacturer uses their distribution channel as a vehicle to service a customer who requires very low pricing to match some commercial situation. The details of the commercial situation aren’t really all that pertinent. They can arise due to customer potential, competitive pricing pressure, or supply contracts driven with large mega-corporations. The point is normal distributor margins no longer support the selling price and the distributor plays a critical role in providing some service to the customer. In years gone by, distributors involved in these situations purchased products earmarked for the special priced customer at sub-distributor price levels. The freshly purchased (at lower than normal cost) products were either brought “into stock” to sell...
Read more