Dear Rachel,
How do performance-based bonuses work? Based off of whose performance? Yours? Your agency's?-- Bonus Chick

Dear Chick,
Performance-based bonuses are payouts given to employees who meet set objectives. Essentially, bonus programs reflect an agency’s definition of success, and the criteria are often not unlike the performance criteria used to assess an employee for a salary increase.

Often as not, bonuses are tied to how well the agency is doing. In bad years, when business is off and the agency fails to meet its goals, individual bonuses will be chopped or eliminated.

But there are other bonuses as well. There may be a bonus tied to the performance of the team/account/department and one tied to the agency's performance, explains one New York media veteran.
 
“The individual employee can be eligible for all, some or none of these,” he points out.

“Often these bonuses are given to executives as a means of tying their compensation to their performance and the profitability of the agency. In theory at least, this assures that they are keeping the best interests of the company first and foremost. 

“As a matter of implementation, the people eligible to receive these bonuses have the goals and rewards spelled out beforehand, so they know what they are striving for. What the actual criteria are depends on what the company feels is important to accomplish.”

The agency bonus is typically based on how well the agency met goals in such areas as bringing in new business, growing existing business, controlling costs and increasing income and profits.

There tends not to be a great deal of difference between the criteria between bonuses for agencies and individuals.

“The individual bonus simply is based on what one person does, whereas the agency bonus depends on a lot of people. But the goals and rewards tend to be the same," notes my media friend.

The team bonus can be tied to the clients, agency review, new initiatives, doing more with less--and of course profitability. 

More and more we're seeing less-concrete, more touchy-feely goals as the basis for bonuses, beyond meeting specific number goals, like reducing turnover, development of staff and mentoring.

Generally the bonuses are based on your current salary. For example, a bonus range can be from zero to 20 percent of your salary.

The specific criteria vary from company to company but generally "met goals" is the midpoint of the bonus range. Few people get nothing. If they're doing that poorly, they're shown the door long before bonus time rolls around.

Now a cautionary note: Bonuses are a little like candy. They're wonderful additions to one's income, a surprise that comes once a year. The big mistake people make is becoming hooked on them, and it can cloud their judgment.

They'll stay in a job rather than considering other opportunities because they have become dependent on that bonus.

Always look at a bonus as just what it is: something extra.