Indexed Bonus Targets

With Indexed Bonus Targets, you reward only true operating performance, independent of economic cycles and other external effects. Your bonus system itself doesn't need to change, only the bonus targets are reset.

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Indexed Bonus Targets...

Compared with the Bonus Index, Indexed Bonus Targets provide more flexibility to design targets based on your specific needs.

Example

In the example below, one can see that despite higher EBIT in 2007 (6.0% vs 5.0% in 2005), performance is weaker in 2007 than in 2005 (Operating Rank of 28 in 2007 versus rank of 75 in 2005, see graph above right). Indexed Bonus Targets would have led to higher bonuses in 2005 because performance relative to the market was better than in 2007.

Year 05 Year 07
EBIT 5.0%
Rank: 75
EBIT 6.0%
Rank: 28

Depending on which financial metrics companies use, Obermatt recommends one of the following three options for indexing bonus targets:




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