b'YOUR TOOLKIT FOR BUILDING EXCELLENCErelationships, productivity, etc.marginsThey also offer input on how to improve the companyRevenue growth if expenses are below a certain (whether solicited or not). Key employees are knownpercentage of gross saleswithin an industry and may even be the focus ofPercentage of savings from reduced expenses as recruiting efforts from competitors, especially givena percentage of salestodays limited and competitive talent pool. Top employees want tangible recognition and appreciationBenchmarks might be achieved as a team:for their efforts in helping the company succeed.Division/department: Percentage of growth or So, how can you encourage high-caliber talent to staysalesthe course? While offering higher pay is a commonSales/estimating/business development team: response, it does little to prevent competitors fromNumber of new and/or returning customersoffering even higher pay and/or better opportunity,PMs: Percentage of profit per jobnor does it necessarily encourage a leadership mentality. In addition, restrictive economic andOr, they may be individually based:regulatory factors often prevent owners from singlingIndividual productivity rewardout top performers with traditional benefit plans. This is where properly designed key employeeIndividual business development/sales territory incentive/retention plans can help. They allow ownersperformanceto hand-pick their plan participants, are subject toPercentage of savings or growth compared to minimal IRS intervention, carry no minimum orbudgetmaximum contribution mandates, and encourageThe financial/performance benchmark must be productivity and loyalty. Best of all, if properlywritten, objective, and easy to calculate and track. It designed, they should pay for themselves in the formshould not reward status quo results or be based upon of increased profitability. So how do you design anemployee expectations of an annual award. effective plan? PLAN DESIGN VARIABLES Substantial Reward PotentialA well-designed incentive/retention plan must includeIn order to positively impact and motivate behavior, four key variables: an owner must ensure projected benefit awards are substantial in the eyes of plan participants. According 1.Financial/Performance Benchmark Attainment to Maxim Consulting Group, variable compensation 2.Substantial Reward Potential should be at least one months pay and up to 25% (or 3.Deferred Benefit Payout higher) of the employees base pay the further he or 4.Communication she moves up in the organization. Remember, this is a key employee incentive/retention plan, not a seasonal Financial/Performance Benchmark Attainment bonus paid to all employees.The first and most important step is to identify at leastDeferred Benefit Payoutone financial and/or performance benchmark thatSome percentage (if not all) of the annual award must must be achieved in order to earn an award.be deferred for future benefit payout. This is where Benchmarks should be easily identifiable and translatethe retention feature is achieved. Absence of benefit to an increase in bottom-line profit. As such, thedeferral is the most common mistake when designing companys obligation to fund the award only existsa key employee incentive/retention plan. when the company reaches its profitability targets.Financially astute key personnel often understand While performance benchmarks tend to be subjectivethe benefit of deferring additional dollars (and by nature, financial benchmarks are much easier tocorresponding tax obligation) for future payout, identify. Examples may include: especially if their participation in your companys Percentage of profits above a certain threshold qualified retirement plan (e.g., 401k, Simplified Percentage of increase in net profit or profitEmployee Pension (SEP) plan, etc.) is limited by IRSFRAME BUILDER - MAY2023 / 9'