“DISCRETIONARY BONUSES”

Key Features:  

After the fact cash awards paid annually.

Payouts are subjective.

Participation varies from year to year.

Advantages:

Minimal administrative burden.

Lack of structure provides flexibility to respond to changing conditions.

Comments:

Uses of these plans has declined in recent years

Used mostly in smaller companies where goal setting has not matured.

Disadvantages:

Does not drive behavior

Does not motivate performance.

No protection against favoritism.

Team performance responds best to predetermined Performance Targets & Behavioral Expectations

“COL ADJUSTMENTS” 

Key Features:  

Periodic adjustments made to base salaries due

to  “cost of living” increases.

Usually applicable to all non-management levels.

Advantages:

Administratively simple.

Protects against favoritism.

Requires no management judgment.

Comments:

This approach has declined in recent years.

Most companies include “COL” with competitive movement when making adjustments.

Disadvantages:

Does not drive behavior

Does not motivate performance.

No protection against favoritism.