It surprised me to hear recently that sales people believe that Procurement Managers don’t give in during negotiations because every penny they give as a concession has a direct impact on their bonus.
I wish – in my many years in procurement I have never been paid a percentage of the value add / negotiated savings and I don’t know of anybody who has. I have contributed up to £20million savings a year and a 1% or 2% bonus would have been very nice.
In fact – only a few industries, like the Financial Services Industry, pay a bonus at all and the bonus pot is based on the overall performance of the company and linked to individual performance targets. Individual targets are not broken down on a deal by deal basis and savings targets are often set at commodity level (like “Software” or “IT as a whole”) with up to 25 buyers contributing. In the last few years bonuses have ranged between 2% and 25% of annual salary (not value add) and have often been paid out in shares or payments have been spread over multiple years.
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