CWS 3.0: July 27, 2011 - Vol. 3.17

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Heard on the Street: Linking Bonus to CW Results

There is an increased focus on what financial results the CW team can affect. It’s the search for controllable metrics within those workforce management groups or teams that will ultimately affect the bottom line. And some organizations are beginning to tie compensation to those metrics.
— Mark Donnolo, managing partner, SalesGlobe. The firm provides consulting and operational services to increase sales performance.

Today, contingent workforce teams are no longer viewed as overhead costs in an organization. Rather, company leaders realize that the CW group can improve the organization’s costs in by reducing labor acquisition prices through effective vendor and provider management. Because labor is a major component of cost for many companies, that becomes an outcome the CW group might be measured on.

As a result, some companies are beginning to tie bonuses to such metrics. This is still at the early stage, though, with the bonus award being more subjective based on the metrics, Donnolo says. In fact, the majority of organizations still pay CW managers a base salary with a discretionary year-end bonus.

But when the bonus is linked to metrics, it could be tied to key business objectives/goals and the evaluation of performance in those goals would be the manager’s responsibility. In fact, some companies actually have measure at the individual level and have goals that scale around that. Some of the key metrics that are being used or tested as part of compensation plans are cost savings, employee or workforce retention rates or turnover.

For example, a compensation plan might say 50 percent of the bonus will be tied to hitting the cost savings objectives of the business. And it would be a binary one.

Traditionally, things like time to fill and cost and savings are all tied in with judging how a CW program performs. So the organization would want to identify and work with the best vendors that it found to reduce its time to fill.

Having said that, the primary measures for CW programs are probably going to focus more on cost savings, Donnolo says. But to be effective, these compensation plans should be kept simple, using few metrics. There are some things that are important for management to take responsibility for rather than trying to include it in the compensation plan. Understand what the organization can influence most directly, Donnolo says. Make sure you have a good pool of suppliers. And spend time and effort developing relationships with them as they can help you fulfill your objectives.

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