Profit Pool Plans

Profit pool short-term incentives are created by the organisation allocating a percentage of their profit to a pool, which is distributed to executives based on predetermined criteria.

The incentive plan is then communicated to the participants in advance, and during the pool creation period.

The participants' reward or pool percentage will be based on a predetermined formula, i.e. a common distribution formula would give each participant a percentage of the pool based on their relative base remuneration compared to the sum of all participants' base remuneration.

Advantages - self-funding; flexible; can provide an organisational focus when the pool is created on an organisational basis, and a divisional focus when the pool is created on a divisional basis.

Disadvantages - rewards overachievers and underachievers in the same manner; performance in bad years or in start-up periods is not rewarded.

Contact OTA to further discuss how a profit pool short-tem incentive can assist your organisation.