High Output Management

by Andrew S. Grove

To design a good performance bonus scheme, we must deal with a variety of issues. We need to figure out if the performance is linked to a team or if it is mostly related to individual work. If it is the former, who makes up the team? Is it a project team, a division, or the entire corporation? We also need to figure out what period the performance bonus should cover, realizing again that cause and effect tend to be offset from each other, often by a long time, but a bonus needs to be paid close enough to the time the work was done that the subordinate can remember why it was awarded. Furthermore, we must think about whether the bonus should be based strictly on countable items (financial performance, for example), on achieving measurable objectives, or on some subjective elements that might get us drawn into a beauty contest. Finally, of course, we don’t want to devise something that pays out lavishly even as the company is going bankrupt.