Executive management – pleased with their own bonus models

# 37 – February 2014

Sahlgren and Skog just completed a survey of executive bonus programs in the Swedish market. 83% of management teams are pleased, or very pleased, with how their bonus models are constructed. This is quite different from how the management teams viewed the bonus systems of their sales forces. A survey we conducted a couple of years ago, found that only 33% of the companies believed they had successful bonus models for their sales people.

About the survey
The purpose of the survey was to explore how widespread bonus systems were among executive management teams, how they were constructed, and how they were viewed. The survey was a means to get reference data for the model Sahlgren & Skog have developed to create successful bonus systems.

The survey was conducted during November and December 2013, and targeted at CEOs and HR Directors in Swedish companies. Questionnaires were sent out to 710 companies with more than 100 million SEK in turnover.

Key findings:

A few comments on the results:
We find it encouraging that the companies are less inclined to use subjective assessments as a basis for reward. Such assessments make it difficult for owners and boards to predict the outcome of the bonus payment. On top of that, it may also prove difficult to justify this type of reward outside the company. In the past, there have been numerous examples of executive management teams being rewarded based on the perception of them doing a great job – in spite of measurable results indicating the opposite.

We know from experience that owners and boards have caped the size of the bonus to minimise financial risk. The debate which raged about uncontrolled bonus systems a few years back, has most likely led to more the more restrained solutions we find today.