Question

BONUS COMPENSATION

You have to make bonus recommendations for eight managers that you hired this year. The salary range for the job is ($63,000 - $70,000). They have just completed their first year with the company and are now to be considered for their annual bonus. Indicate the size of the bonus that you will give the managers by writing a dollar amount next to their names. You have a total of $15,771 available (3% of total salary).

$__________ A.J. Adams. Adams is not, as far as you can tell, a good performer. You established some fairly easy goals with Adams at the beginning of the year. Few of them have been met. You have checked your view with others, and they do not feel that Adams is effective either. However, you happen to know Adams has one of the toughest work groups to manage. Adams’ subordinates have low skill levels, and the work is dirty and hard. If you lose Adams, you are not sure whom you could find as a replacement. Salary: $69,000

$__________ B.K. Berger. Berger is single and seems to live the life of a carefree swinger. In general, you feel that Berger’s job performance is not up to par, and some of Berger’s "goofs" are well known to the other employees. Once again, the goals that you and Berger set at the first of the year were relatively easy and you are not satisfied with his accomplishment of them. Salary: $65,000
$__________ C.C. Carter. You consider Carter to be one of your best subordinates. Carter established some aggressive goals in January and has met them all. It is quite apparent, however, that other people don’t agree with your positive assessment of him. Carter has married into wealth, and, as far as you know, doesn’t need additional money. Salary: $69,200

$__________ D. Davis. You happen to know from your personal relationship that Davis badly needs more money because of certain personal problems. As far as you are concerned, Davis also happens to be one of the best of your subordinates. Like Carter, Davis has done an excellent job accomplishing beginning-of-the-year goals. For some reason, your other subordinates do not share your enthusiasm. You have heard them make joking remarks about Davis’s performance. Salary: $65,400

$__________ E.J. Ellis. Ellis has been very successful so far as judged by goals accomplished. This particularly impresses you, since it is a hard job. Ellis needs money more than many other people and is respected for good performance. Salary: $67,000

$__________ F.M. Foster. Foster has turned out to be a very pleasant surprise to you, has done an excellent job, has exceeded performance goals, and is seen by peers as one of the best people in your work group. This surprises you because Foster is generally frivolous and doesn’t seem to care very much about money or promotion. Salary: $63,600

$__________ G.K. Gomez. Your opinion is that Gomez just isn’t cutting the mustard. The few goals that were set at the beginning of the year are not being aggressively pursued. Surprisingly enough, however, when you check with others to see how they feel about Gomez, you discover that Gomez is very highly regarded. You also know that Gomez badly needs a bonus. Gomez was just recently divorced and is finding it extremely difficult to support a house and a young family of four as a single parent. Salary: $63,000

$__________ H.A. Hunt. You know Hunt personally. This employee seems to squander money continually. Hunt has a fairly easy job assignment, and your own view is that Hunt doesn’t do it particularly well. Performance goals are sporadically met. You are, therefore, quite surprised to find that several of the other new managers think that Hunt is the best of the new group. Salary: $63,500

Answer 1

Division of bonus payments usually are subjective to the performance and how much the employer wants to give to each employee. The size of the bonus to be awarded to each person is hence not completely quantifiable. To help solve this, I will provide you with a method to distribute the salaries among the employees.

Firstly, since there are 8 employees and 3% of the total salary, divide it into 24 parts of 1% of the total salary.

Now rate the performance of your employees' performance based on the type of goals, conditions, and quality of goal achievement. Assign a 5 point rating for each employee based on the performance assessment where 5 being the highest and 1 being the lowest.

Award 5 parts of 1% salary bonus to the best performer, 4 parts to the next best and so on. This could be either Foster or Ellis.

1 part to the worst performer that could be either or some or all of Hunt, Gomez or Berger.

Please note that personal matters should never affect the performance ratings and hence the bonus given to each employee.

This is how performance review and bonus recommendations happen if done fairly. There can also be the worse case where the bonus can be distributed as 3 parts of 1% for each employee. Bear in mind that this will have detrimental effect on the morale of the employees.