Transparency is one of POWER SHIFTER's core values. We believe that the trust between an agency and its employees, clients, and stakeholders must be built on a foundation of honesty and open communication. Inspired by Peter Kang, fellow Bureau of Digital member, who regularly documents the monthly happenings at his digital marketing agency Barrel, we have decided to be more open about our journey. In the spirit of transparency (and to help other agencies start a similar program), we are sharing how and why POWER SHIFTER implemented our bonus pool.
Profit-sharing, or a bonus pool, is a way for companies to distribute a portion of their net profits with employees over and above salary. At POWER SHIFTER, we sought to create a program that ensures the agency's success is shared with the people who contribute. We recently launched an opt-in program to reward team members in a way that emphasizes overall team performance rather than a single individual.
Deciding how to allocate funds can be the most challenging part of creating a program. Product companies offer stock options, which is a difficult route for service-based businesses to take. Stocks and stock options are issued based on the expectation of events such as IPOs or high-value acquisitions—neither of which are likely to happen for small or medium-sized agencies. Looking at agencies, the most common approaches to distributing wealth are based on a salary percentage or evenly share among all staff regardless of salary, seniority, or years spent at the company.
We felt it was important to recognize contributions over time and responsibility level, so our bonus pool is distributed based on seniority and years as a full-time employee. Every full-time employee receives one share per year with the company. These shares are then multiplied based on seniority (Director = 3x, Senior = 2x, Mid-Level = 1.5x and Intern/Entry = 1x). All employees are aware of how the bonus is calculated, which we feel is important.
We decided to calculate allocation this way for several reasons. First, we wanted it to be simple for everyone to understand how the bonus pool is distributed. We explored our options and decided that this calculation was the most transparent, straightforward, and objective method. For further transparency, we keep a table where each person's share amount is listed. Every employee has access to this table. There are no secrets because we don't need them. We believe the system is fair.
Giving everyone a seat at the table
Employees aren't the only ones who benefit from a bonus pool program. Employers have much to gain from implementing an open policy that encourages teamwork and agency growth. Under a bonus pool, employees have a vested interest in the development of the business. Rather than focusing on themselves or their direct team alone, employees are focused on supporting everyone's success. There is also more incentive for employees to stay with the company, which improves retention.
A bonus pool encourages employees to think about the business and understand how it runs. They are encouraged to bring in new clients, boost productivity, and be efficient with projects. Employees can also grow their shares by moving up in title, which fosters excellence in everyday work.
This approach felt aligned with the principles of Open Book Management, which is a practice we have been implementing to help employees feel more involved in the success of the business. POWER SHIFTER employees have full transparency into how the company is functioning from a financial and operational standpoint, so they can help influence decisions.
We are excited to be implementing this system. We have thought about it for years but didn’t want to move forward with anything until we felt it genuinely aligned with our values. We wanted every employee to fully understand how important they are to the success of POWER SHIFTER. After 13 years in business, we have a solid grasp of how we operate and how we can best serve employees, and we believe a bonus pool is a big step in the right direction.