After having tried many incentive programs over the years, Bob Fleming, president of Classic Remodeling & Construction, Charleston, S.C., says his company's new program “is the first one that is designed to address problem areas and distribute the bonus money fairly.”
Fleming created a program that rewards individual and team performances and extends the opportunity to earn bonus dollars. He knows that his break-even gross profit is 27%. If a job hits 27%, there is no bonus. If it hits 28%, then 1% of the gross profit dollars are set aside into a bonus pool. At 29%, it's 2%; at 30% it's 3%; etc., up to 37% when 10% of the GP dollars are set aside for bonuses. This is the maximum. “Basically, the better you do, the more you earn,” Fleming says.
Once the bonus has been put into the pool, it's split between the employees who controlled the job and the rest of the company's staff. Here's how it works: 25% goes to the project craftsman; 15% to the project manager; 10% to the design associate; the remaining 50% is split equally among the company's 34 employees. This way, if one person happens to have some real dog jobs or the jobs are so large that they may only complete two or three during the course of a year, they'll still get bonuses on a regular basis.
Customers Weigh In Fleming also ties customer satisfaction into the bonus structure. “We use an independent customer survey company to find out what our customers think,” he says. “If we determine that the customer gave the project manager an A, then they receive 100% of their bonus. The bonus decreases as the grade goes down. This puts a focus on the customer, which is critical.”
Bonuses are paid at the end of the month for jobs completed that month. “Our production meetings now have a new sense of urgency as everyone is focusing on how we can close more jobs by the deadline,” Fleming says. Project managers waste little time running to pick up materials or waiting for subs to show. Their schedules are tighter and jobs are more organized because they try hard to get jobs finished.
“Everyone's really thinking about the critical numbers,” Fleming says. “And we're finding that we can slide in a few more $30,000 or $40,000 jobs in between the big ones, which drives up volume.”
—Victoria Downing is president of Remodelers Advantage, Laurel, Md. 301.490.5620.