Partner Logo
Home  > Employee benefits and motivation plans
 Share  Print Version  Email

Employee benefits and motivation plans

Simple Alliance, Kenya Limited


Achieve employee satisfaction by using well planned motivation and employee benefits systems

Recognition in your business means creating a business structure that gives authority and responsibility to the key employees which is in turn tied to profit and accountability. With such a structure you create “profit centres” managed by each key employee in the business and adopt a system that separates the profit and loss accountability of each profit centre and this should be determined frequently. The frequency would for example be operating on a weekly profit and loss statements. The idea here is to create an atmosphere where the key employees feel that they hold key to entrepreneurial decision making and have the authority. Incentives and compensation is hence made based on how each profit centre brings in.

Even as you delegate duty to your key employees it is important that the following two roles remain your sole responsibility:

  1. Capital expenditures
  2. Signing checks

Control loses arising from managerial mistakes

With enough latitude given to your key employees in their profit centres they make some mistakes once in a while.

The mistakes by the key employees that may expose the profit centres to losses can however be controlled by the two non-delegator roles above, frequent financial reporting and recruitment of well-motivated managers. This to a great extent limits your exposure to big losses.

Treat each unit separately

It is important that the incentive plan is tailored to each business situation and based on the profit and loss report of individual’s separate responsibility.

Through the rewards offered to managers through profit participation you create a system that drives them to success and to a great extent by establishing employee satisfaction. Through this the overall business will benefit and experience success.

When working on how to motivate employees, you could choose to use one of the many plans there are that have been used to structure a manager’s incentive or employee benefit. Below are three of these:

 Leveraged plan

Under this plan managers receive all, or a large part of, unit earnings over a fixed target. This type of plan has been known to work very well for fast food chains that are company owned or operated rather than franchised units. An example of company owned food chains in Kenya would be the Java Coffee House. Here is an example of a simplified weekly income statement, the plan is "leveraged" because every penny saved becomes a penny going into the manager's bonus check.

Sales

 

KES5,000

Wages

KES1,500

 

Purchases

KES1,500

 

All other expenses (including co. Profit)

KES1,500

 

Total expenses

KES4,500

KES4,500

Weekly profit and manager's bonus:

KES500

Unleveraged profit sharing plan. 

In this case your manager receives a percentage of earnings of his or her profit centre. Here is an example:

Sales

 

KES5,000

Wages

KES1,500

 

Purchases

KES1,500

 

All other (actual) expenses

KES500

 

Total expenses

KES3,500

KES3,500

Net profit

 

KES1,500

Manager bonus @ 10%:

KES150

Commission plan

 In this plan, the manager receives a percentage of sales for the accounting period. Assuming, as above, that sales for the period are Kshs. 5,000 and the commission is 5%, the compensation would be Kshs 250. In many instances, commission incentive is not appropriate because it does not include provisions for expenses. Your manager could get rich while you go broke. But commission incentive can work well when the manager does not control pricing. Salespersons in aa retail clothing store would be a good example of a commission structure.

Copyright (C) 2016, Simple Alliance Kenya Limited

 Share  Print Version  Email
Comments &Ratings (0)
If you are a human, do not fill in this field.
Click stars to rate.
   Comments are truncated at 1000 characters