PROFIT BUILDING TIMELY TOOLS TO BOOST YOUR BOTTOM LINE!
Tool #10 – Motivate With Money! By George Hedley
I get asked about employee incentive and profi t sharing and programs at every convention I speak at. Construction business owners seem to be looking for the magic bullet that will motivate their people to work harder and produce more. Some hope that providing a fi nancial inventive will improve their bottom line. Others hope that more money will make people work harder or faster. And other business owners feel they should give away some of their profi t to earn employee loyalty and respect. Whatever your decision regarding incentive compensation, the results will vary based on how your program is designed, implemented and managed. Incentive compensation, profi t sharing or bo-
nuses can be broken down into two types: earned or arbitrary. Earned incentive compensation is based on a specifi c formula that rewards for actual results based on tasks, accomplishments or mile- stones you want to measure. Arbitrary compensa- tion bonuses are based on what the boss feels is the right amount to pay for good work, reward for a positive attitude, or a thank you for a job well done. It is often based on what the boss thinks is expected to keep employees happy.
Which type of bonus works best? I don’t think arbitrary compensation encourages employees to do their jobs faster or better. Often it is expected as a part of the overall employee compensation package because other companies do it or employees feel entitled to something at yearend. Arbitrary extra pay is no more than a gift of generosity from the employer as it is not earned or required. It’s a nice gesture and will keep some employees from looking for jobs elsewhere until af- ter they get their year-end bonus. But these types of bonuses usually won’t make the company any more bottom-line profi t. Extra compensation based on earned and
tracked measurable results will produce positive bottom-line results. If employees know what’s
expected and are compensated for hitting their tar- gets, they will hit them. For example, sales people who get paid on a sliding scale for increasing profi t margins typically sell higher price contracts than those with the same commission percentage regardless of the estimated margins. Field trades- men who are paid by the piece of work they install usually work faster than hourly workers who don’t have clear goals or production targets to shoot for. And project managers who get a percentage of the profi t on the jobs they manage, generally try harder to save more money and negotiate harder with their subcontractors and suppliers.
Motivation without measurement doesn’t work! When employees don’t know the exact results expected and don’t have a reason to achieve them, why should they want to go the extra mile? When the boss sets clear milestones for managers and employees to hit, the company will more money. For example, if you want an eight-month project fi nished in seven months, a generous bonus for the crew or superintendent will keep the team focused on achieving the goal and motivate them to hit the early completion target. Without a fi nancial incen- tive, the target is a nice idea but of no benefi t to the crew to fi nish early or work harder. Our workers' compensation insurance rating
was suffering due to fi eld employee claims for jobsite injuries. We implemented a ‘Safety Bucks’ program to motivate the crews to work closely to- gether and watch out for unsafe workers or condi- tions. Each worker received $1 per day if the entire crew had no accidents. If anyone on the crew had an accident, no one received the safety bucks for the entire project. We paid this cash bonus out quarterly. This measurable incentive system instantly focused everyone on all of our fi eld crews to make safety a priority and make sure there were no unsafe conditions on the job sites. This pro- gram really worked as it kept everyone focused on
the target. Plus, I always enjoy giving out bags of bucks to my fi eld crews for no accidents!
What can you measure to improve results? Examples of measurable clear targets can include: • Total man-hours to complete a job • Hours without an accident • Project milestones completed by a date certain • Customer referrals • Project punch-list or close-out completion • Improving your bid-hit ratio • Customer satisfaction • Project profi t • Project completion and sign-off by customer • Change order profi t • Estimating accuracy • New customers signed-up • Average job size increase Bonuses or incentives without targets and
scoreboards is like playing a football game with- out end zones. By setting out the exact results you want your employees to achieve and mea- suring the results, you can design an incentive compensation program that will reap rewards. And making the most money you can is fun if you make it a measurable priority. Too often managers get so busy they don’t have time to do the little things like setting and tracking produc- tivity to boost their bottom line.
George Hedley is a licensed professional business coach, popular professional speaker and author of “Get Your Business to Work!” available at his on- line bookstore. He works with contractors to build profi table growing companies. To request your free copy of “Profi t 101 For Contractors,” sign up for his free monthly e-newsletter, hire Hedley to speak, be part of his ongoing BIZCOACH program, or take a class at Hardhat BIZSCHOOL online university, visit www.hardhatpresentations.com or email gh@hardhatpresentations.com.