Owner experience in creating exec comp plan for day-to-day operator?

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November 22, 2020

by a searcher from Hampden-Sydney College in Atlanta, GA, USA

I own a commercial landscaping business, and I'm looking to create an incentive plan for my long-term managers at the company. I'm not interested in selling, so traditional equity isn't a good option for us. We've tried some things in the past that were overly complicated and didn't work well for us. Has anyone tried an executive compensation plan that has worked well for both the owner(s) and the manager(s)?

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Reply by a searcher
from National University of Ireland, Galway in Seattle, WA, USA
There is no perfect system. I suggest balancing between immediate performance and building capability to drive future value. Every business needs both on an ongoing basis. . Split the bonus 50:50 between profits and achieving a target list of upgrades for the organization. These can be new services, new territory, correcting a culture dysfunction etc.. It gives you huge power to drive change. Make sure to agree the goals with the performers. State the capability goals as positive statement that will be true when the goal is achieved. I also recommend paying capability bonus quarterly and the profits annually. Seems counter-intuitive. The challenge with annual capability bonuses is folks leave the work until Q4 and you get only a quarter of what could be achieved.
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Reply by a searcher
from Massachusetts Institute of Technology in Los Angeles, CA, USA
You can create a bonus-based compensation plan that ^redacted‌ suggests, but can introduce the concept of vesting or payout over time. In my time in enterprise sales, we would get huge commissions ($100k+) when we closed a contract, but the payout occurred over 5-6 quarters to keep us motivated to sell more...if we left, we would leave money on the table. Once could construct something similar where the payout occurs 8+ quarters, to continue the managers aligned with long-term planning/view of the company and manager also has golden handcuffs.
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