Question

Topic: Career/Training

Is My Boss Being Unfair With My Bonus Structure?

Posted by Anonymous on 4/4/2011 at 4:45 PM ET 250 Points
I started working for a small retail electronics company 4 years as an assistant manager working on a base salary and a commission. I quickly grew within the organization and outperformed all other staff, and before I knew it there was an opening in the General Manager position.

Long story short, over the last 3 years as GM and head of marketing (yes, I wear both hats), we've had tremendous growth ( 15 percent a year for the first 2 and 35 percent last year). Before the beginning of last year my boss wanted to create extra motivation for me, so instead of a raise in pay, he created a bonus structure where I can make a lot more money if company sales continued to increase. At the time I was getting a base salary, plus a small percentage of all company sales. The new bonus structure gave me a 3.5% percentage of all company growth, which was a huge motivation for me. The sales not only continued to increase, the increase more than doubled. We grew $800,000 in sales and I had a bonus pay out of almost $30,000.

Our new fiscal year has just begun and my boss has presented me with a new quota to meet for this fiscal year. Instead of a small increase that I expected from the quota that I received last year, the new quota was last years sales ( $3 million, up from 2.2 million the year before). If we do the same in sales as we did last year ( which was by far our best year to date and double of what the sales were before I was GM) I will make $30,000 less.

Am I wrong for thinking this quota is far from fair and unrealistic to receive a decent bonus?

I explained to him that this bonus structure is far from motivating and doesn't give me a real opportunity to make much more than what I made last year. Also, if this happens every year going forward, the company will continue to grow, while I will still be struggling to make the what I made in 2010.

He understood where I was coming from and has given me the opportunity to give him a proposal. No telling if he will approve it or not, I would assume he would as long as it's fair. I am looking for some help or suggestions? I am not sure by how much a quota should increase from year to year?

Thank you.

D
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RESPONSES

  • Posted by mgoodman on 4/4/2011 at 5:45 PM Accepted
    I think this is one where you have to create the plan and present it to him, along with some rationale for why it's a win-win plan. There is no formula or standard approach.

    One thing you might consider in addition to a performance-based bonus (based on sales/growth): An opportunity to earn a fixed amount for accomplishing some specific objectives that will put the company in a stronger position overall. Perhaps staffing, cutting costs in some area, creating a new advertising plan, etc.

    That kind of an MBO approach will give your boss tangible results that might ultimately be worth even more than short-term sales growth.
  • Posted by Frank Hurtte on 4/4/2011 at 8:08 PM Accepted
    I would suggest that you ask for something that pays you for the two things you are doing.
    1) pays you for growing the company
    2) pays you for making the company more valuable

    I personally like a plan which is tied to the bottom line of the company. Stock, phantom stock or similar options would be part of my request.

  • Posted by CarolBlaha on 4/4/2011 at 9:24 PM Accepted
    You have some great ideas for the counter plan-- but let me talk to you from a different point of view. Is it fair-- no. Is it done all the time? Yes.

    I am sure many of us can tell stories of exploding past goal and having territory cut and quota raised. While they haven't cut your territory, the end result is the same.

    I will tell you to carefully choose your words. Cause "unfair" should not be one of the words you use. Be prepared cause others before you have said "what's my motivation" and the come back is "you have a job".

    I'm not agreeing with your boss's plan. As you say, it's a huge de-motivator. I'm just letting you know it's not as unique a situation as it first seems.

    Now that you have had a record year-- that is your bench mark. I have never had a quota based on last years quota. It has always been based on my last year performance-- no matter the increase I had. Now if there were unusual one time orders, you would have an argument.

    For example -- a major order that most likely won't occur again. A special sale they marketed the heck out of and was a once in lifetime that won't be repeated.

    The core issue is changing the shift from bonus to ongoing commission on the front end. Or, as NuCo points out-- a plan on the bottom line. This should be an easy sell for you to management. You are wearing so many hats-- you can tell them you are ready for more responsibility -- and should have a plan not just based on growth, but bottom line.
  • Posted on 4/5/2011 at 2:45 AM Accepted
    Dear Damon,
    Don`t take it personally , take it professionally , the quota should not exceed based on quota of the last year it always increases on the basis of last performance or the average of a periodic performance, its fair both ways you preform the company earns & you also earn every time they do. If you are a performer you would love it. though getting the same incentive may be a De-Motivator.
  • Posted by michael on 4/5/2011 at 9:40 AM Accepted
    D,
    This is very typical type of incentive. The truth is that most people don't really want sales people to make that much money. I've sold for companies where the top sales person makes more than the VP and one, in particular, that told the sales people that we can be certain that will never happen. How's that for motivation?

    There will be a point where you just can't increase anymore. So, I suggest your target would be based on the industry increase. If the industry increases by 3.5% and you increase by 4.0% then you have a set bonus. I also suggest you do the math so he/she can see the ROI.

    Michae;
  • Posted by CarolBlaha on 4/6/2011 at 9:35 AM Member
    I don't believe those above you don't want you to make money. I have had many managers thrilled I make more than they do. Many have been in the trenches and are very happy to leave the street pounding to me while they are home every night.

    There are managers who do say what Michael says-- but I don't want you to think they are the norm. The comment the VP Michael made is irresponsible. Without sales he is looking for a job. And as a saleperson, I bet I can find one quicker than an over paid blow hard exec.

    However Michael does give valuable advice. The numbers expected should be tied to industry expectations and the BPI (buying power index) of your area.
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