11 Jan Using Data to Optimize a Compensation Plan
A major health care insurer was experiencing high levels of turnover in several departments. Senior management suspected the at-risk (bonus) portion of the compensation system was one of the key causes, but they did not know how to prove this or what to do to fix it.
Assess the at-risk portion of the compensation plan across a broad section of the organization and, if flawed, modify the system to properly reward employees and increase retention.
eMRI consultants determined that the bonus system was in fact flawed. Bonuses were paid based on flawed statistical models that did not reflect actual employee and departmental performance. Once the correct statistical models for bonuses were determined for each function in each department, a software solution that automated the performance assessment statistics was created and implemented. Some departmental bonuses increased by over 1000% and others were reduced by over 50%. Turnover dropped by over 50% with no increase in total compensation.
Estimated $1,250,000+ per year in new hire costs.