Some companies change bonus/penalty systems several times a year and are surprised that new building sites keep opening up. Then, quite actionistically, the targets are set on the respective trouble spots. In the medium term, you can counteract your own remuneration and incentive system with this approach.

If goals are no longer achievable because they vary, they are no longer pursued. The quality of the service suffers from this. Additionally, the comparability of results is lost.

Therefore, maintain continuity. Rule of thumb: You should not adjust your performance-related remuneration more than once a year.

Anyone who has ever mixed concrete knows that all components are indispensable in the right proportion. If you leave out the water, you won't get concrete. If you take too much gravel, the building will not withstand any wind. The same applies to bonus/penalty systems.
The components are:

• sound performance specification
• holistic measurement of all aspects
• consistent control

Here, too, it all depends on the mix. Too little of one (e.g., performance description) cannot be compensated by more of the other (e.g., control). As with concrete, the bonus/penalty system does not withstand any wind shock in this case.

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Have you ever experienced a situation like this before?

"This can't be true," says the service provider manager, annoyed by the repeated lack of response from his contact person at the outsourcer. "This must have consequences," is the thought. He would prefer to have the point anchored in the bonus/penalty regulation right away. The emotional component is understandable.

Who does not feel unappreciated and hindered in their work by a lack of response? In fact, however, it makes sense to separate the two levels:

• 1. The project, the outsourced service provision itself
• 2. The cooperation between service provider management and project management on the other hand.

For example, a service provider must be able to reduce the cost of project management if the actual service delivery, the project, is going well or very well. This is the economic freedom of the contractor.

With the bonus/penalty scheme, you control the services you outsource, such as customer service. If you mix up both levels, at some point the service provider will ask you this question:

What is more important? The satisfaction of the final customer (the recipient?) or the service provider manager?

That's the wrong question. Both puzzle pieces are important individually, so that a complete picture is created. Of course, a second system of cooperation could theoretically be created, but in practice this will be omitted from the point of view of costs and benefits. In order to heal a deadlocked situation in concrete cooperation, it is better to consult an experienced advisor such as eisq. That is the better solution.

Separate the two puzzle pieces collaboration and project work. eisq heals deadlocked situations.

If you contract out a service, you can hardly take out one slice of the pie and agree on a bonus/penalty scheme only for that slice.

Why? The service - like the pie - is created as a complete work and is also controlled as a whole. This was also the experience of a company that outsourced its European customer service and wanted to agree on a bonus/penalty scheme for a country.

Bonus/penalty therefore either applies to the entire pie or not at all.

Do you know this saying? "Rome was not built in a day." Even bonus/penalty systems rarely develop their full effectiveness at the beginning.

It takes until both sides - i.e. the client and the contractor - fully internalise the system and act accordingly. But then it shows why it's the most proven tool for performance-based control and remuneration.

Experience shows that it takes three to six months for you to experience the full effect. You and your environment should exercise patience until then.