Setting Pay for Performance Payouts - by Ravi Patel

 

 

If Entrepreneurs buy into the concept of Pay for Performance (P4P), then setting payouts under the program become important.

 

While establishing the payout levels for a P4P Program, three factors need to be taken into account - expected performance level, level of difficulty, and likelihood of achievement.

 

Based these factors, one can set up a matrix to develop different payout levels. For example, for a level of performance at 75%, with a level of difficulty of 80% and likelihood of achievement of 85%, the payout level could be 70% of target P4P bonus.

 

 

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