With the right motivation tools, your team can be inspired to reach new heights. Whether that be working towards a new revenue goal, completing a daunting new project, or signing on a specific amount of new customers, your team might just need a financial incentive to light the fire.
A bonus pool may be just the fire needed to spark momentum. A well-structured pool can reinforce employee performance goals and encourage team-building, with the added perk of moving the needle on key business objectives.
What Is a Bonus Pool?
Similar to commission pool, a bonus pool is a designated sum of money set aside by an organization to reward employees based on predefined performance or business criteria. While they essentially operate the same way, a bonus pool is more likely to include non-sales staff, making it a true team effort and benefiting everyone for their contributions.
Structuring a Bonus Pool Step-By-Step
Step 1: Establish the Goal of the Pool
A bonus pool initiative needs to be rooted in the goal of achieving a specific outcome. This could be anything from meeting a key revenue target, a goal of signing on a specified number of new customers, or perhaps encouraging team members to focus on professional development.
Whatever your current company goal is, it should serve as the basis for the pool. The whole point of a bonus pool is to incentivize team members, so you need a goalpost for your employees to work towards with a specific date outlined to accomplish it.
Step 2: Identify What Employees are Tied to the Outcomes
After establishing your goal for the pool, you need to determine what members of your team play a role in achieving that goal. A goal as broad as reaching a key revenue target may mean a company-wide initiative, whereas, signing on a specific number of new customers would likely only be confined to employees associated with sales, marketing, and/or business development departments.
Who is included in the pool is closely tied to whatever your goal is, but don’t overlook the value of supporting roles. Even if their contributions are indirect, they play a meaningful part in driving success.
This is also a good time to establish any additional criteria needed to be included in the pool such as tenure at the company, full-time vs. part-time status, etc.
Step 3: Determine Incentive Structure
Once you have a goal and idea of how many team members are included in the pool, you can move on to structuring the incentive component. When building an incentive structure, first things first, you need to confirm what sort of budget you are working with. There’s no faster way to upset your employees – or your leadership team for that matter – than by creating an incentive pool outside of the financial means of the business. A good rule of thumb is to allow a buffer of ~5–10% for unexpected adjustments.
After that, make the decision on whether your bonus pool will be a fixed amount – say, $25,000 for your IT department to implement a new software for your business – or a variable amount, such as 5% of revenue generated from Q1 to be divided among the entire company. Again, a lot of this will be influenced by the goals established in step 1.
Then, determine whether each employee will receive an equal portion of the pool, or whether their bonus will be proportional based on their efforts towards achieving the goal.
Step 4: Get the Word Out About Your Bonus Pool
In order to achieve the intended effect of motivating your team, you need to communicate the details of your bonus pool clearly to your team. It could be helpful to include this in a team or company-wide meeting – depending on who is involved – and then sending follow-up details in an email. Additionally, while you want to be sure to communicate the details of the plan at the beginning of the pool, it’s important to also maintain consistent communication to your team throughout so they have visibility into their progress.
Pro tip: create a custom dashboard using Core Commissions that tracks individual and team progress, so your team knows exactly what tasks still remain to achieving the goal at hand.
Calculating the Bonus Pool
Congrats! Your team met their goal. Now it’s time to divvy up the pool to eligible staff members.
Below are formula examples of some common bonus pool structures and how to calculate employee payouts.
Example formula for a fixed amount bonus pool with an equal bonus distribution:
Bonus Pool = $25,000
# of Eligible Team members: 5
Allocated Bonus Amounts: $5,000
Example formula for a fixed amount bonus pool with a proportional bonus distribution:
Bonus Pool = $15,000
# of Eligible Team Members: 3
Allocated Bonus Amounts:
- Person 1: Accomplished 45% of the work, bonus = $15,000 x .45 = $6,750
- Person 2: Accomplished 30% of the work, bonus = $15,000 x .30 = $4,500
- Person 3: Accomplished 25% of the work, bonus = $15,000 x .25 = $3,750
Example formula for variable bonus pool with an equal bonus distribution:
Bonus Pool = 5% on Q1 Profits
Profit = $100,000
Allocated Bonus Amounts = $5,000
Example formula for variable bonus pool with a proportional bonus distribution:
Bonus Pool: Dependent on performance
Profit = $100,000
# of Eligible Employees: 5
- Person 1: Accomplished 30% of the work, bonus = $100,000 x .30 = $30,000
- Person 2: Accomplished 20% of the work, bonus = $100,000 x .20 = $20,000
- Person 3: Accomplished 25% of the work, bonus = $100,000 x .25 = $25,000
- Person 4: Accomplished 15% of the work, bonus = $100,000 x .15 = $15,000
- Person 5: Accomplished 10% of the work, bonus = $100,000 x .10 = $10,000
Use Core for Hands Off Bonus Pool Tracking
A bonus pool is meant to motivate your team to meet a specific goal. Additionally, a pool acts to inspire collaboration among your team who use this collective sense of responsibility as a way to work together to make it to the finish line. While they may be incentivized by their own potential monetary reward, the shared accountability also encourages employees to reach higher in order to avoid letting the team down. The culmination of this process can directly impact their performance in a positive way.
The excitement that a bonus pool generates means your pool is off to a great start. You want your team to be energized to regularly track their process. However, for the administrative team tasked with managing it, that excitement can quickly turn into a burden. The point of a pool is to make your team more efficient, more collaborative, and improve performance – not add to the workload of your already over-stretched administrative staff. Make it easy for everyone by automating the process.
Core’s platform is perfectly equipped for you to design your bonus structure. From the ability to project future revenue as a target for your team to hit, to creating custom dashboards that allows employees to track their individual contributions and overall performance, Core makes the bonus pool process hands off for your administrative team. Generate reports as needed to evaluate performance, calculate bonus allocations, and give your reps complete visibility to documentation outlining details of the pool – all within the Core application. With Core, managing a bonus pool is a seamless experience from beginning to end.
Contact us for more information or schedule a demo to learn how Core Commission can help track and calculate your bonus pool distributions.