Formal plan: The most popular kind of bonus plan, which 70% of biotech companies use, is the formal plan, in which a company establishes a matrix to fund the plan at the beginning of the year, says John Radford, senior vice president of Radford Surveys and Consulting. This establishes criteria including: who participates in the plan, how company and individual performances are weighted, how much money goes into bonuses if all goals are met, and individual target goals.

At Amgen, this matrix includes financial performance, R&D, and operational effectiveness, says Chip Bell, vice president of Human Resources at Amgen. For example, this year the implementation of an enterprise-resource planning system worldwide is one of the company's operational effectiveness goals. Bell says the most heavily weighted include R&D (e.g., how quickly compounds are advanced through the pipeline) and financial performance (e.g., earnings-per-share growth and revenue growth). He adds that the two...

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