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roject net income they believe will impress top management but could be perceived by their key employees as unattainable. Such an unrealistic target could discourage rather than motivate the operating unit employees.

Targets must be clearly understood. It is critical that bonus participants participate in the setting of bonus targets. Their views and suggestions should be given serious consideration. When their suggestions are rejected or modified, the reasons should be clearly communicated. Misunderstandings concerning the bonus targets create unproductive time spent in discussions and demoralized employees who believe that they are being treated unfairly.

Periodically communicate the outlook for bonuses. To maximize the motivational value of the program, the financial staff of each operating unit should periodically communicate the current outlook for annual bonuses to bonus participants. This is accomplished by comparing a forecast of the bonus criteria with the bonus targets. Using the forecasted percentage of bonus earned for the unit, each participant can forecast his or her bonus. A review of the key actions necessary to accomplish or exceed the forecast should be included in this periodic bonus update. This can be a very strong motivational tool, because the bonus participants have an identifiable personal stake in the accomplishment of these actions. Many companies include a bonus update in their regularly scheduled operating review.

Resolve bonus problems early. One way to accomplish this is to periodically update the outlook for bonuses for each operating unit. Strong lines of communication are beneficial to both operating units and corporate staff. One of the benefits of a bonus update is early identification of problems, which require action on the part of senior management. By identifying problems in the bonus program as the year unfolds, it is possible to take prompt action, minimizing damage. If the bonus criteria have not been clearly stated, they should be modified with the participation of unit and senior management.

Pay bonuses as soon as feasible. A bonus can represent a significant portion of a key employee's compensation. This serves the purpose of getting his or her attention, which is a double-edged sword. The focus of attention should be the future, but for many employees the current year is not their chief concern until the previous year's bonus is paid. Delays in paying bonuses may create apprehension and tension which are counterproductive. If bonuses for the prior year cannot be paid within the first month of the New Year, some of the positive impact of the bonus program is lost.

Put it in writing. It is important to commit the bonus program to writing, even if there are no legal requirements to do so. A written program will help avoid misunderstandings and confusion, and will therefore benefit both the participants and administrators. Communication on how the incentive scheme works so that they are well informed on they are affected but them and how their actions affect the overall goals of Lincoln.

Summary

Lincoln should be more particular when designing the bonus scheme by more thoroughly cover the following issues:

1. who should participate - the front line employees who make actual customer contact vs the executives who are the decision makers

2. frequency of bonus payments - to be really effective in motivating performance Lincoln should ensure immediacy in payments and even more frequent payments.

3. target and maximum incentive opportunity - Lincoln has researched market base and total cash data to help determine not only the best motivational incentive but also a way in keeping the top performers who produce the desired outcomes. The performance measures must be readily achievable

4. weights and objective setting - Lincoln must ensure there is an appropriate mix of organization-wide, business teams and individual objectives. This enables the employee to gauge how their decision/efforts affect not only the outcome of their division but also the firm as a whole

5. market practice - Lincoln should also be aware of the developments of incentive schemes with comparable firms. This supports the firm in keeping their motivated employees and rid the firm those not interested.

6. communication - for Lincoln's incentive arrangement to actually achieve its worth - influence behaviors and performance through rewards - employees must understand:

a. performance and behaviors required

b. the link between their individual performance and the rewards

c. the financial value of the incentive

This helps Lincoln's employees answer what they need to do and in doing so how much they receive. After all the incentive plan provide Lincoln's employees a meaningful recognition of their sustained individual efforts.

For Lincoln employee compensation of small salary (40 percentile) and large cash bonus (for a total compensation about 75 percentile) will help the firm to align the firm's goals with employee efforts. Basing the performance on both individual and corporate measures will ensure that all employees are honestly evaluated and truly motivated. The performance measure should move beyond EBIT as self-serving managers can easily manipulate this value. Even if this is still used as a measurement tool it should be combined with other financial and non-financial measurements that can enhance the appropriateness and ensure accuracy. In 1997 an individual performance element has been added but both the supervisor and employee should develop this. Following some of the above analysis will

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