Add a bonus to your boring employee benefits plan
Founder Friday is a weekly guest post written by a founder who is based in or hails from the Silicon Prairie. Each month, a topic relevant to startups is presented and founders share lessons learned or best practices utilized on that topic. August's topic is employee benefits.
Before you gouge your eyes out thinking I'm going to launch into a seminar on 401Ks or a rant on how screwed up our health care system is, let's step back and consider another side of employee benefits. Sure, we offer a health care plan and IRA plan to our to our employees, but that's not what I want to talk about today.
I've always felt that if this company is successful, the whole team should share in the success and be rewarded. Stock options are one traditional way to reward key employees after they meet certain benchmarks with the company. A stock option plan does a couple things for the company and the members of the team: (1) it creates an incentive for each team member to stick it out at the company; and (2) once exercised, it creates an incentive for the team member to do whatever they can to help the company succeed so that the stock value rises.
In our case, since we are a profitable company and probably not looking to sell our stock anytime too soon, we found that another plan was right for us that still accomplished the same objectives.
I was challenged by a fellow team member and this article to think about adding a bonus plan in order to create incentive to make the company successful. A bonus plan is a financial reward that is activated when a certain objective or goal is achieved. Think of it as the gamification of employee benefits.
In our case, team members become eligible for the bonus plan once they've been with us for a set amount of time. The potential bonus amount also increases the longer each team member stays with us. The bonus is activated when we reach certain strategic and financial benchmarks (in our case, when we hit a minimum profit margin). The amount is then calculated as a generous percentage of profits above the minimum with no cap and is then divided amongst team members.
Because one of our goals as a company is to create some revenue generating products that we have an ownership stake in, we've offered up a greater share of profits generated from these products.
I'm hopeful that version 1.0 of the bonus plan will allow us to create a better engaged and rewarded team as we build this company together. Knowing how we think about things though, I'm sure we'll iterate on this plan to make it better just like we iterate on the startups that we're building. But seriously, don't get me started on health care.
About the author: Josh Cramer is an internet entrepreneur currently living in Iowa City, Iowa with his family and friends. Cramer is founder and CEO of Cramer Dev, a U.S. based software development team that builds interactive products for startups. Previously, Josh built and sold an IT company based in Coralville, Iowa. Josh is currently working on a mobile payments startup called Koala Pay and has been actively helping to build the entrepreneurial ecosystem in eastern Iowa through efforts like IC|CR|eatives and others.
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