A New Standard for Bonus and Retention Plans

Posted on Tuesday, March 24, 2009 by Frank Roche

I’ve been doing a lot of thinking and talking about the AIG bonus debacle over the past few days. All that made me say there should be a new standard for bonus and retention plans:

Your bonus plan must be explainable in plain English.

You should be proud to explain to your best friend and your mom how your bonus plan works and what behaviors it’s designed to motivate.

If your retention plan requires a bevy of lawyers and days of PR prep to talk about it in the media, you had better think twice.

When it all comes down to it, simplicity wins. Anything more than that has unintended consequences.

User Comments

Angela

Mar 24th, 2009

Hi Frank, your post made me laugh! I’m relatively new to the corporate world and received my first bonus last month. It took quite an explanation on my part to explain how my bonus was calculated and why I received a certain amount of money opposed to a different amount. I agree with you, it needs to simplified. I remember one of my college professors teaching me the acronym: KISS – keep it simple stupid!!!
Frank Roche

Mar 24th, 2009

Hi Angela, The KISS Principle is right….glad you got a bonus, though, even if it was tough to explain. It means you’re doing great work at a profitable company. Nice.

Thanks for the comment…it’s always good to hear that an article got a chuckle…80% of joking is based on the truth!