IT and Business Insights for SMB Solution Providers

Bonus Plans Can ‘Magically’ Spur Operational Excellence

Offering meaningful incentives that align with your business goals is a win-win for you and your employees. By David Wilkeson

I WOULD NEVER HAVE EXPECTED a client to call one of my operational strategies “magical,” but that’s exactly what happened not once, but twice. As an MSP operations consultant, I encounter all sorts of efficiency-robbing problems in my clients’ businesses. Often, the root cause is employees who spend too much time on the wrong activities, don’t follow through on established processes, or otherwise don’t finish their work. My go-to strategy for solving these issues is to establish a meaningful bonus program that rewards employees for the quality of their work and aligns their interests with those of the business owner. Clients who have adopted this program say the results are like magic.

Many MSPs have bonus programs in place for their techs, but they’re rarely meaningful. A meaningful bonus offers a significant enough financial gain that employees would miss the earnings. It’s also—here’s the scary part—effectively unlimited. If your employees work harder, they should be able to earn a larger bonus. I call it an 80-30 compensation plan, where employees earn 80 percent of the market wage as their base pay, with the reasonable opportunity to make 30 percent more in bonus pay. Your superstars should regularly make more than 30 percent.

The other important component to a great bonus program is to base the triggers on the most critical things techs must do to be effective at their jobs. We aren’t talking about simple things like entering tickets. Bonuses should reflect the end results of having an effective tech, like higher billings and happier clients. Also, we don’t want to make our bonus metrics too complicated to measure or understand, and we don’t want to have too many. My rule of thumb is that techs should have no more than four metrics affecting their bonus.

A meaningful bonus offers a significant enough financial gain that employees would miss the earnings. It’s also—here’s the scary part—effectively unlimited.

Let’s look at two common scenarios:

1. Billable time and materials techs. In this simple scenario, quality work and maximum billable hours are key. Depending on the level of work they’re doing, industry best practice says that at least 60 percent of a tech’s time should be billable, so this should be the minimum they need to reach before they start getting a full bonus. The more they bill beyond 60 percent, the more you make, so your bonus plan should award them a percentage of their incremental billings. You could use a customer satisfaction survey to measure the quality of a tech’s work too, but it’s usually painfully obvious when billable work is not done well.

2. Managed services help desk techs. This scenario is more complicated. The results we’re looking for are happy customers who have their problems efficiently resolved in a predictable manner. Luckily, we can measure that with three metrics. The most important is customer satisfaction, which is easily measured with a tool like SmileBack. The second is timely ticket resolution, which we can measure using the SLA compliance tools found in most PSAs. Finally, we want to maximize efficiency, and a mean time to resolution (MTTR) metric can tell us the average amount of time it takes to resolve a ticket.

In this scenario, assuming our metrics are met, we’d base each tech’s bonus on a shared percentage of the billings for the customers they’re servicing. The more customers you add without adding more techs, the bigger their bonus grows.

These are just a few bonus scenarios that can help solve operational and service delivery problems. Once you roll out a bonus program, the challenge becomes doing the monthly calculations. You could do that with complicated spreadsheets, but users of the ConnectWise Manage PSA can also utilize a tool I co-developed called MySlice that helps you design your plan and then automatically does the math for you.

No matter how you run the numbers, a meaningful bonus plan can work like magic. Presto! You’ll have better operational efficiency.

DAVID WILKESON, an MSP operations consultant, is CEO of MSP Advisor and co-founder of MSP Gadgets.

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