BONUSES Explained | Linking #kpis to bonuses | Achieve KPIs using #bonuses | PROS and CONS

#bonuses #kpis #keyperformanceindicators #hr #motivation #sales #financialreward
Key Performance Indicators (KPIs) & Bonuses - Financial Reward System

Lesson Summary:
A bonus is a payment made in addition to the contracted wage or salary. This is usually built upon criteria agreed between managers and workers such as increased output, productivity or annual turnover. Such criteria are known as business KPIs.

A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs to evaluate their success at reaching targets. The most frequently used KPIs to measure business or management performance are:
1) Revenue and sales
2) Profit, cost of production, and selling price
3) Liquidity level - cashflow
4) Inventory turnover, because you should aim for sales and not for building stocks by blocking your cash into it.

The advantages of using such a financial reward system are linked to personal motivation. Employees tend to be sharper and keener in doing better what they do in order to achieve certain KPIs, as a result of the financial gains. They seem more willing to go the extra mile, work harder, do extra tasks and even tasks that are not specified in their job description, as long as in the end, it will get them the bonus that they expect as a result of the performance encountered. Last but not least, even if you don't pay the most competitive wages or salaries, you can still attract qualified applicants who are looking to work for a company that values its employees by offering such bonuses.

The disadvantages of using such a financial reward system to motivate your employees are linked to company cost and jealousy between staff members. When bonuses are distributed amongst all employees, it can end up costing the company a great deal of money, whether the amount is supplied on a quarterly or annual basis. Companies that wish to consider this financial reward option should make sure that the gains they have from reaching certain KPIs cover in full the current and potential costs associated with such bonuses. Bonuses are intended to reflect how well an employee has done within their workload; therefore the amount that you supply may vary from one employee to the next. However, employees aren’t hesitant to talk amongst one another; and once one finds out that the other received more, tensions may arise and people may become jealous. This could result in more problems than benefits.

Chapters:
0:00 Intro
3:04 Bonuses & KPIs
11:20 Advantages of such a financial reward system
14:24 Disadvantages of such a financial reward system
18:00 Conclusions

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Chapters:
0:00 Intro
3:04 Bonuses & KPIs
11:20 Advantages of such a financial reward system
14:24 Disadvantages of such a financial reward system
18:00 Conclusions