Top 10 Tips for Great Profit Share Schemes

Profit share schemes

Top 10 Tips for Great Profit Share Schemes

Dear Reader,

There is nothing like giving your employees a share of profits to attract their attention and motivate them to helping achieve your goals.  Well designed and implemented Profit Share Schemes do this without the complication of issuing Shares.  In this Game Plans for Growth we are giving you our vfdnet top 10 tips on these great schemes.

The Idea

Profit Share schemes can be well thought through and these are typically objective schemes which are properly documented and communicated.  In contrast many profit share schemes are subjective and go un-recorded; such businesses are missing a trick. In addition, many bonus schemes can encourage individual performance rather than reward the overall team achievements.

Game Plan

So here are our top 10 tips for great Profit Share Schemes:
1. Accurate Accounts – this is a pre-requisite to any objective scheme.  Do you need to transform your finance function?
2. Which Profit level? consider and pick the right Profit level for your business.
3. Payout timings – the best schemes are designed by carefully planning both the amount and timing of payments.
4. Maximum payout – what will be the maximum payout that you are comfortable paying?
5. What about leavers? Design fair rules for the treatment of good and bad leavers.
6. Joiners –  again design fair rules for new employees.
7. Strategic changes – how will the scheme cope with strategic changes such as an acquisition or a major capital purchase?
8. Budget as Target? What is the quality of your Budget? (check our top 10 Budget Blunders) Would it make a fair target?
9. Communication – think through the level and frequency of communication to employees.
10. Use an experienced VFD – These tips will get you 80% there but you will probably have only one Profit Share scheme so it pays to get it right!

The End Result

Well designed and implemented, objective Profit Share Schemes are really great for creating a valuable link between the business performance and paying employees bonuses or profit share.  We love designing and implementing these schemes as they tend to lead to a double win – the owner achieving the results he or she seeks and the employees gaining a good payout. We follow a structured process:
1. Brief the owners
2. Design – Use our decision tree to bespoke the scheme
3. Test
4. Implement

Please contact us if you would like to understand more.

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