Many companies offer a variable pay or bonus pay system. The amount of payout is calculated based on performance, usually a combination of individual, team, and overall business performances.
The respective weights allocated are often subject to debates. Why wouldn’t an individual’s initiative and performance carry the most weight? Is it fair to penalize an individual when the business can’t meet the net profit margin?
Let’s take a look at the some of the key functions of a business.
Sales is the face of the business. Its discipline in generating a healthy pipeline, diligence in reaching out to prospects and closing contracts are paramount to the top line. A focused, confident and strong relationship builder makes an excellent sales rep. So allocating a bigger weight to individual performance makes sense here.
Marketing focuses on developing strategies for the target markets and product offerings. The marketing team has unique knowledge of the marketplace. But to be impactful, they need to work closely with sales and operations. So it would make sense to allocate more weight to team and business performances.
Operations delivers the goods. They need to work with different departments to produce and deliver the promised goods and services. Cross-departmental collaboration is key. Rewarding Individual performance would not be very effective if you want to run a highly efficient business. So, assigning more weight to overall business performance is more impactful.
Support functions such as technology, finance and accounting, and human resources need to work with other areas. They are in a support role. Their work requires much coordination. So assigning more weight to overall business performance makes sense.
In determining how much weight to assign to individual, team and overall business performances, you need to assess the impact of the work performed to reveal what the focus needs to be in order to drive the desired behaviour. Adopting a standard allocation would not work.