Quality Bonus Plan - Determining how much money the company saved?

[OCCUL - 2007]

Hi All,
Well I'm in a bit of a dilemma -as usually when I accept a job -these kinds of things are all worked out, but the hiring process was very informal (Hired in July). It so happens that our company has a very generous bonus plan for each department, but the woman I replaced was not experienced and just maintained (had no real bonus structure, dept a mess). I’ve basically re-built QSM at our Company and pulled us through an ISO Audit (acquiring our 13485 Cert in Nov.). ..So it's now bonus time. At the beginning of the year I presented a plan to my Director with Goals and Objectives as well as a hefty bonus plan and he never had it approved. He just this week addressed it with the CEO and he (the CEO) wants a revised plan with equations/detail on how (and how much $$$)Quality saves the company money.. As you know-quality is a Non-Value Added Function. -I'm the only Quality Rep here....We are a small/med size company (import/distribute health care cosmetics manufactured in China)... this is a difficult one -as I’ve only worked for larger companies where the Director had the plan established prior. Can someone help me on this????
Thank you for your assistance !

[Jim Wynne]

In Reply to Parent Post by OCCUL

Hi All,
Well I'm in a bit of a dilemma -as usually when I accept a job -these kinds of things are all worked out, but the hiring process was very informal (Hired in July). It so happens that our company has a very generous bonus plan for each department, but the woman I replaced was not experienced and just maintained (had no real bonus structure, dept a mess). I’ve basically re-built QSM at our Company and pulled us through an ISO Audit (acquiring our 13485 Cert in Nov.). ..So it's now bonus time. At the beginning of the year I presented a plan to my Director with Goals and Objectives as well as a hefty bonus plan and he never had it approved. He just this week addressed it with the CEO and he (the CEO) wants a revised plan with equations/detail on how (and how much $$$)Quality saves the company money.. As you know-quality is a Non-Value Added Function. -I'm the only Quality Rep here....We are a small/med size company (import/distribute health care cosmetics manufactured in China)... this is a difficult one -as I’ve only worked for larger companies where the Director had the plan established prior. Can someone help me on this????
Thank you for your assistance !

Why would you expect a "hefty" bonus for something that you say doesn't add value? I don't blame the CEO for wanting to see numbers. If what you're doing does add value, then you need to quantify it in terms that the CEO understands. Start with trying to get a handle on the cost of poor quality. How about the value of your ISO registration? How many of your customers require it, and how much revenue is realized from them per annum? What is its potential value in terms of new business? Talk to your sales/marketing people and ask them how important it is in getting new customers. The CEO is much more likely to pay attention to the marketing department than to Quality. What's been significantly improved since you took over? How does what's been improved translate into profit? Some of these things are hard to quantify, I realize, but you need to build a positive before/after case, and you need to have numbers that have at least a reasonable basis in reality.

[Wes Bucey]

To echo a character from an old Tom Cruise film, "Show me the money!" or from an even older fast food commercial featuring a dear acquaintance, Clara Peller (http://en.wikipedia.org/wiki/Clara_Peller):
"Where's the beef!"

The point is bonuses are directly related to the bottom line. You have to connect the dots to show the relationship between your efforts and the effect on the bottom line.

Just incidentally, this also reflects the importance of "Contract Review" to make sure you and the customer (in this case, your bosses) are all on the same wavelength regarding specifications and expectations BEFORE the work is complete.

[Jennifer Kirley]

So, let's see if I understand you right.

You started working in a small/medium sized company last July, and after about six months you developed a (hefty) bonus plan without clearly establishing the value performance basis upon which the bonus was to be awarded. Now you need to be ready with the math to show just how and why you've delivered necessary to collect reward...only thing is, the reward wasn't agreed upon by top management.

Now I don't want to be unkind, but you've dug yourself a hole haven't you?

It's high time to do some serious homework. This will not be quick, and you will need some cost figures from your controller or accountant.

But, it's still possible to show your department's value with a coherent project plan that talks the money with articles and (two) calculators available through this thread:
http://elsmar.com/Forums/showthread....ost+calculator

Now I have a hard question for you. What makes you believe you're the rightful owner of all that bonus money? What have you done to structure your department's bonus plan after your predecessor left? Did you only make your plan, as though your singular efforts yanked this company from peril?

Anyone who's effort joined toward a successful venture in improvement should be recognized. If you take a (hefty) bonus and others receive little or nothing while they run like hamsters in an exersize wheel, soon enough you'll have a larger problem than math.

I'm happy to supply calculators and such for showing the value of our work. However, IMO you have a long ways to go in your journey.