Incentive Planning Shortcut
A shortcut to guide your Exit Planning client in developing a successful incentive plan for key employees requires you helping them to answer just three critical questions:
1. What do you want the key employees to achieve?
Define the goals that the Business Owner wants their key employees to achieve. Examples can include growth in profitability, growth in customer base, increase margins or developing a new line of products or services.
2. How will you know if the key employees have been successful?
Objectively quantify performance metrics to determine whether the key employees have achieved the goals of the Business Owner set. Make sure the goals set are measurable. Examples include profitability increase of X%, expenses controlled as X% of gross revenue, or a target number of customers purchasing above a stated threshold in products or services.
3. What is an appropriate reward for the key employees’ success?
Key employees should “pay for their own benefits.” In other words, their success will generate the revenue/earnings that will not only cover the cost of their incentive bonus but will put additional money in the Business Owner’s pocket. If the key employees participating in an incentive plan are successful, what is the expected financial upside for the company? How much of that financial upside is reasonable to share with incentive plan participants?
Use these three questions to guide early discussions on incentive plan design. Additional details and illustrations for how an incentive plan might operate can follow these initial decisions. Use the Recommendations available in the EPIC™ Software to summarize the incentive plan that will become part of a more comprehensive Exit Plan.