Mike Gore-Hickman offers production managers three compensation options matching their risk tolerance. Ryan, his production manager, can choose 80/20 base-to-variable pay with a low ceiling, 60/40 with 20% upside, or 50/50 with the highest potential but most volatility.
Chapters
We talked about job description, which is a key first step. One of the things you mentioned was having a scorecard for an individual to help making sure that their pay structure incentivizes them to accomplish what you wanted them to accomplish. Do you have any ideas, especially for maybe a production manager, what kind of scorecard might they have?
Whenever creating a compensation structure for someone like this who's like a very key role, what I like to do is give them a few choices in their compensation structure based on their risk tolerance. I brought on Ryan as my production manager. I created 3 scenarios. One was low risk. Low maximum reward. Highest base salary with the lowest amount of variable, but his maximum earnings was the lowest. Lowest risk, lowest possible earnings. Say it was like 80% base, 20% variable. And the middle was 60% base, 40% variable. He had the total potential to earn 20% more than what his base was if he chose the first one. The third one, 50% base, 50% variable. And that one, he had the maximum opportunity to earn because he was taking on the most risk, but he could make the most money.
