Tool #10 – Motivate With Money!
George Hedley,
Posted
09/25/2012
I get asked about employee incentive and profit 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 financial 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
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.
Incentive compensation, profit sharing or bonuses can be broken
down into two types: earned or arbitrary. Earned incentive
compensation is based on a specific formula that rewards for actual
results based on tasks, accomplishments or milestones you want to
measure. Arbitrary compensation 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 after they get
their year-end bonus. But these types of bonuses usually won't make
the company any more bottom-line profit.
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 targets,
they will hit them. For example, sales people who get paid on a
sliding scale for increasing profit margins typically sell higher
price contracts than those with the same commission percentage
regardless of the estimated 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. And project managers who get a percentage of the profit 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 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. Our
workers' compensation insurance rating was suffering due to field
employee claims for jobsite 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 the job sites. This program really worked as it kept
everyone focused on the target. Plus, I always enjoy 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 date certain
• 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 or incentives without targets and scoreboards is like
playing a football game without end zones. By setting out the exact
results you want your employees to achieve and measuring 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
productivity 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 online bookstore. He works
with contractors to build profitable growing companies. To request
your free copy of "Profit 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.