weoughtodryrun

Here is some background for this idea. I am sorry it is so long.

On and off over the last months, the New Products team has discussed rewards for the creation and development of New Products. Below is an initial recommendation that is provided as a target to elicit discussion of this concept from the New Products team, as well as ICMA employees. But before the recommendation for sharing revenues is reviewed, one should also understand the precepts on which these recommendations are based. They include:
1. We have to energize ICMA—we have to create some excitement if New Product creation is going to become a reality.
2. People are motivated by money.
3. People will be creative (and work harder) if they have a financial stake in the outcome.
4. It is equitable to ‘share the wealth’. People who come up with a new product that makes money will make money for ICMA should be rewarded.
5. People will put in the extra time necessary if there is a financial reward. In many cases, the reward will be little more than compensation for the amount of time it takes to develop the idea.
6. The money cannot be a token amount if we want people to engage. Worse yet, if the reward is too modest, it will be viewed very cynically, and it will be counter-productive.
7. Providing financial incentives will focus the organization, and our team. We need to make money for ICMA. In my view, the New Products team isn’t about ‘doing it better,’ and we aren’t about member services or a whole host of other honorable tasks. We need to make some money, consistent with the organization’s values, so that some of those other services can be provided, or so employees can get a raise, or so membership dues can remain as low as possible, or for however else the money is spent. Not our problem. If we focus on products that make money, and reward their generation, our co-workers will get the message.

We really need to agree on these values/beliefs. Otherwise, I fear we will never agree on what kind of compensation should be provided. Assuming that we can agree on these values (as amended by the team), then here are the recommendations:

Recommendation: Idea/Product Creators—the person(s) who creates a tangible product, and moves it to the point that ICMA adopts it to take it to production, should receive 10% of the GROSS proceeds of the product over the first 7 years of production.

Discussion: We currently reward ideas with $50. But the goal is to create for products that work and make money, and THAT is what we should compensate far beyond a token amount. Thus, once the initial approval is given by our Team for the development to move forward, the person will be empowered to take action. Once the business case is completed, and we decide to move into production, the person’s work is done. Then, it becomes a marketing/production issue.

Here’s the example. It is 1962, and Fred, who works at Ford, has the idea of creating a new kind of sports car that would be really cool to drive around town in. He gets the go-ahead from the New Products team, and he develops a new concept car—the Mustang. The presentation includes a full-scale model of the car. The New Products Team agrees to take the car into production. Fred gets 10% of the gross revenue for the first 7 years Mustang is produced. Nice reward. However, the Mustang was a collaborative process—Fred couldn’t develop the product in isolation—he needed a team of experts in various components of the car’s design. So the TEAM that created the Mustang will split the money. It will be like World Series checks—Fred’s team decides who gets what share of the money. As leader, Fred may get 5%, while the guy who designed the convertible top may only get .25%. We have set aside the 10%--the team decides how to divide. In case of a dispute, the New Products team will be the final arbiter. For every $100,000 of net sales, the Team gets to split $10,000.

Production Team: The production team, which is the person or group of persons that actually bring a product to market, will also be rewarded. In this case, they are in charge of placing the product in the market, producing the product, and making sure that profits are optimized. This team will split 10% of the NET proceeds.

Discussion: Maximizing profits is the responsibility of the Team that takes the project to market. Thus, their reward will be based on the NET proceeds of the product. This will encourage each team to work efficiently and effectively, so that the NET will be maximized. Also, different participants will make different contributions, so again the 10% will be set aside, and divided based on the vote of the production team. This reward fund will also be available during the first seven years of the product’s life.

So that’s the concept—new products would result in a 10% share of GROSS revenues to the creators/developers of new products, and 10% of NET revenues to the production team. But there is nothing magic about these numbers. In the end, it is simply as assessment of what will motivate the creation of new products, and what is fair for ICMA employees who share their creativity and hard work. Please offer comment below, so that we can think this through, and make the rough concept into a finished plan.
 

'Are you crazy?' is the perfect response to this idea. It means we are where we want to be. I know of no better way to break through the fog, and get folks motivated to offer ideas.

The 10% gets rolled into the financial analysis. We plan for it as a cost from the outset, and make decisions based on the analysis, just as we would any other cost.

Are we worried about people getting rich? I doubt we will be that successful, though I do think (hope) that people could make a substantial amount of money. Also remember that often the money will be split among team members, so the 10% can be/will be much less per person. But the best thing to happen to ICMA would be to have employees who took this opportunity, and were generously rewarded--it's the proverbial win-win.
 

Gotta be net. Gross produces a big pie but bad vibes for the bottom line if the expenses skunk the profits. Term: shorter of product life cycle or 5 years. Can't ride the train forever. Distribute like Super Bowl shares. Team implementing votes who receives and how much. Soooo egalitarian.

$$Man--posted last year during the original discussion
 

Gotta be gross... this may not be Hollywood or car sales, but the bonus should be an expense of the project, which comes off the top.

Let's say a product/service grosses $100,000 over one year. The originator earns 1% or $1,000. Expenses (labor, material, overhead, or percentage bonuses) should come off the top b/c we'd be rewarded with what the idea is worth, not a cut of the profit margin. The bonus expense can be factored in to the sale/cost of the idea. Net doesn't provide incentive.

It's up to project management to control the profit, not necessarily the person with the idea.

I understand that there are tax considerations like profit limits; I'm just sharing my two cents (or a percentage thereof).
# posted by Bryan B--as part of the discussion during last year's posting.
 

Good points on either side. Perhaps there is a compromise. Gross revenues could be a basis for the amount of the bonus provided the idea is planned to generate a net profit. Gross revenues are not the measure of success of an idea if it costs more to produce the product than the revenue earned. In the same vein, if threshold return standards and rigorous analysis during the pre-implementation phase are followed then the individual receiving the bonus should not be penalized for poor implementation (unless of course they are also the implementer.)
(Originally posted as part of last year's discussion.