Scenario: a consulting shop with 30 people. The consulting shop charges by the hour. Everyone is paid hourly or in salary. Management wants to grow the company. Employees like what they do and, at the end of the day, growth won’t benefit them because the company charges the same amount per hour per person irrespective of whether it is a 30 person company or a 300 person company. How can you get the company to grow?
What we’ve recently realized with one of our clients is that FairSetup creates an opportunity for a team to participate in growth of the business. For example,
let’s say the company grows from 100 to 200 people and the business bills, on average, $100 per person per hour. The business allocates $10 per person per hour into a shared bonus pool. Then, when a new person enters the system, those who helped the system grow get compensated to a larger extent for some time until everything levels out.
Here is how it might look like:
So, in our example, the pool started at 30 people * $10 per hour per person = $300 per hour, which means that the 30 people get a bonus of $10 per hour. If the system grows, then the bonus pool grows to 60 people * $10 per hour per person = $600 per hour. Note that the newcomers would get a smaller portion of that $600 pool than the veterans initially. So the veterans make $20 per hour in bonus and new employees don’t make anything. Half way to saturation, veterans make $15 per hour in bonus, while new employees make $5. And eventually, veterans make $10 and new employees also make $10. However the company is now bigger.
The practical impact of this is that business development personnel becomes more accountable to the staff that is responsible for implementation and those who are implementing are now more interested in pushing information to and collaborating with business development in order to grow the business.
If you are confused on how bonuses are calculated, please review the concept here.