StarPac is a mass producer and market leader of custom plastic containers, such as paint trays and soda bottles. The company is based in Chicago and has rejuvenated itself over the past few years. Much of the credit for this rejuvenation goes to its employees and supervisors.

Many StarPac supervisors believed that employees should be rewarded for having a productive year. When the company exceeded its production and profit goals, it believed profits should be shared with employees. But StarPac's bonus program was ill-defined. No employee knew precisely what entered into the bonus "equation," nor did any have a clue of how much bonus they could expect. In the past, the company president made these determinations. However, things turned sour once StarPac lost a major account. Furthermore, the organization became heavily debt-ridden as a result of building a new plant. As a result, no bonuses were given. Understandably, employees were puzzled. Some were even angry enough to become publicly vocal, claiming that the president had the money for bonuses, but was pocketing it all himself. That simply was not correct. Supervisors recognized why some of the employees were reacting this way: they had no information about how bonuses were awarded.

Then things changed. The bonus program was spelled out: a precise formula for an individual bonus to annualperformancewas established. The primary components of the formula were based on the company's financial statements; specifically, profits and monthly sales. Each month, supervisors would post in the cafeteria the company's current standing on these two variables. This data enabled employees to compare their past work to the projected targets set by the company. In this manner, employees were able to see whether or not they were ahead of, even with, or below the target. Additionally, posted next to the productivity trend data was a formula of how profits would be divided among the employees. Sixty percent of the amount would be divided among all employees, with the remaining 40 percent split between hourly workers and supervisory personnel. While this formula specified provided the amount of money available in the pay-for-performancebonus pool, the specific amount any one employee would receive was based on a formula that factored in their wages and seniority - in an attempt to reward "loyalty and commitment, too."

StarPac's new variable pay-for-performancebonus plan has been an outright success. Employees have been earning bonuses in the range of 10%, while the company has enjoyed a 23% increase in profitability. In addition, StarPac's productivity has increased by more than 18%. As for the new employees who are making this happen, they now understand how the bonus system works and their role in it.

QUESTION: What would you build into a pay-for-performanceprogram to safeguard against employee backlash?