During the economic turmoil, it’s critical to make sure all of your employees feel like they have a stake in your company’s performance.
Of course, there are many types of employee bonus plans and compensation plans for managed service providers. But MJ Shoer, president and virtual chief technology officer at Jenaly Technology Group Inc., has caught plenty of attention for his intriguing approach to bonuses.
Here’s how the bonus plan works at Jenaly, one of last year’s MSPmentor 100 companies.
1. Jenaly has a quarterly bonus pool based on the net profit for the quarter.
2. Two-thirds of the net profit gets reinvested in the company to fund growth.
3. One-third of the net profit goes into a bonus pool.
4. Staff gets their percentage of the total salary of the pool. For instance, if your salary represents 5 percent of the total company payroll, you’re eligible for 5 percent of the bonus pool.
5. Once Q1 bonuses are calculated, they are paid out in weekly increments in Q2. Then, Q2 bonuses are paid in weekly increments in Q3, and so on. That approach, Shoer says, gets people used to earning more than just their salary and keeps them focused on keeping that extra pay coming.
6. Jenaly sets individual bonuses based on four criteria:
- A. Utilization
- B. Compliance (getting time sheets in on time, etc.)
- C. Client satisfaction
- D. Team contribution
Jenaly’s bonus plan has been a hot topic of conversation at MSP events hosted by CompTIA and ConnectWise. Shoer (pictured) credits a pal who’s an HR manager at Timberland for helping to create the plan.
Another intriguing approach, known as a Sunset commission plan, caught my attention during the Ingram Micro Seismic partner conference in August.
I am not suggesting that one plan can fit all MSPs. And I’m all ears if you have other suggestions.
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Tags: Jenaly Technology Group | Managed Service Provider | Managed Services Bonus Plans | Managed Services Compensation Plans | MJ Shoer | MSP
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Talk about timing. We were discussing 2009 bonus structures at our company yesterday. Hadn’t considered a pool for all staff members. I imagine it increases staff loyalty. Thanks for the great piece of info.
Guys you have to make these articles printable!!!
The IT Guy: You’ll see a great many new features debut on MSPmentor by Q1 2009. A few surprises coming. And the feature you requested is on our shortlist of efforts. Sorry for the delay.
What a great insight on a topic that could literally be discussed for days!
I’m in the process now of re-tooling our bonus comp plan for our Managed Services Engineers… and I must say, it is difficult. Like the bonus plan at Jenaly we measure on compliance and customer satisfaction (that’s the easy part!), but it’s proven difficult to truly capture the competing objectives of a Managed Services business, and then compensate fairly on them.
It’s part of our own demise though because we historically have measured things such as billable utilization and total utilization for all engineers and compensated them accordingly. But, when you transition to a managed services model all that is thrown out the window - it’s all about working smarter rather than harder. So, at that point do the old billable utilization objectives (and subsequent comp plans)get thrown out the window? We measure our MS contract profitablility on how much time we post into an account - not how much our total portfolio minus the salary overhead of all engineers (and managers) equals. Sure, we calculate profitability based on overhead but we don’t compensate engineers on that number because we don’t run -just- a managed services business. How would we divide the accounting team’s overhead into 5 pieces of our core business (hardware contracts, projects, managed services, T&M network engineering, staffing)??
See where I’m going? It becomes a competing objective when compensating engineers on profitability vs. utilization. If they work a lot and log their time they are super-utilized, yet managed services contracts appear to have poor profitability. Likewise if they log little time, profitability is up but personal utilization is down. It’s a fine line to walk.
Then it gets even MORE complicated. What if your managed services contract yields a project through your relationship? Does some portion of that get put into the ‘pool’ because your managed services engineers identified a project and properly cut that to your project manager and sales guys to go sell?
What I have figured out are ways to compensate on team objectives, which is part of our comp plan. Things like first-time-fix, percentage of closed tickets for the team, meeting SLA’s, & team customer satisfaction index are easy things to measure and compensate on that instill team loyalty.
I have to imagine that if your only core business focus stems from Managed Services all of my points are moot.
If anyone figures the compensation plan out, please - please - please let me know.
John: Speak directly with MJ at Jenaly. I bet he’d be happy to tell you what has worked — and hasn’t worked — for him.