Motivate With Money!

Words: George Hedley

I get asked about employee incentive and profit-sharing programs with every contractor I coach. 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 financial incentive will improve their bottom line. Others hope more money will make people work harder or faster. And other business owners feel they should give away some of their profit 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.

Which Type Of Bonus Works Best?
Incentive compensation, profit sharing, or bonuses can be broken down into two types:
Arbitrary compensation bonuses are gifts based on what the boss feels is the right amount to pay for good work, a 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.

Earned incentive compensation is based on a specific formula that rewards actual results based on tasks, accomplishments, or milestones you want to measure.

Arbitrary compensation does not encourage employees to do their jobs faster or better. Often it’s expected as a part of the overall employee compensation package because other companies do it or employees feel entitled to something at year-end. 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 after they get their year-end bonus check. While gifts might build a small amount of employee loyalty, they won’t have much effect on finishing jobs faster, ahead of budget, or improving your bottom-line profit.

Earned incentive compensation based on achieving specific targets and measurable results will produce positive bottom-line improvement from employees. If people know what’s expected, see regular weekly results, get feedback as to their ongoing performance, and are compensated for hitting their targets, they will hit them on a more regular basis. For example, salespeople who get paid on a sliding scale for increasing profit margins typically sell higher-priced contracts than those with the same commission percentage regardless of margins. Field tradesmen 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. Field crew foremen who know crew hour targets before they start work, are responsible for hitting total crew hours, receive weekly feedback, and are compensated for achieving or improving crew hours typically spend fewer crew hours than those who are told to try and do their best without any knowledge or feedback as to their results. And project managers who get a percentage of the gross or net profit on jobs they manage push their foremen and superintendents harder, and generally try harder to save more money and negotiate harder with 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, your company will make more money. For example, if you want an eight-month project finished 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 financial incentive, the target is a nice idea but of no benefit to the crew to finish early or work harder.

Years ago, our workers' compensation insurance rating was suffering due to field employee claims for careless job site injuries. We implemented a "Safety Bucks" program to motivate the crews to work closely together and watch out for unsafe workers or conditions. 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 field crews to make safety a priority and make sure there were no unsafe conditions on job sites. This program really worked as it kept everyone focused on the target. Plus, I always enjoyed giving out bags of bucks to my field 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 specific date
Customer referrals
Project punch-list or close-out completion
Improving your bid-hit ratio
Customer satisfaction
Project profit
Project completion and sign-off by customer
Change order profit
Estimating accuracy
New customers signed up
Average job size increase

Bonuses and incentives without targets are like playing football without end zones or scoreboards. By setting the exact results you want your employees to achieve and measuring 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 productivity to boost their bottom line. To get started, email GH@HardhatPresentations.com to get your free copy of the first chapter of George’s new book.
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About The Author
As a professional construction BIZCOACH and popular industry speaker, George Hedley helps contractors increase profits, grow, and get their companies to work! He is the best-selling author of "Get Your Construction Business To Grow & Profit!" available at his online bookstore at www.HardhatPresentations.com. E-mail GH@HardhatPresentations.com to sign up for his free e-newsletter, join a peer mastermind BIZGROUP, implement the BIZ-BUILDER BLUEPRINT, or get a discount for online courses at www.HardhatBizSchool.com.
George Hedley

HARDHAT Presentations

Phone: (800) 851-8553

Email: gh@hardhatpresentations.com

Website: www.hardhatpresentations.com

Motivate With Money!

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