There's no mystery about bonuses for associates at Allen Associates in Santa Barbara, Calif., which does an annual volume of $21 million in upscale remodeling and new construction.
The company's seven associates sell and run projects. The program for their quarterly payouts is clearly outlined in writing and is based on what the company calls “key accountabilities.” They are: Complete projects on time and on budget (30%); bring in work and close sales (20%); ensure customer satisfaction (20%); uphold quality standards (10%); promptly complete required paperwork (10%); initiate green-building projects (5%); and maintain a clean and safe jobsite (5%).
Each key accountability comes with a time frame indicating when it should be measured, and by whom. For instance, the most weighted accountability, completing projects on time and on budget, is measured in a biweekly review with the company's contract administrator and accounting administrator. Company executives measure accountability for bringing in work by a minimum annual volume of $1.5 million and a close ratio on leads of at least 40%.
The bonus schedule is clear: An associate meeting all the accountabilities and bringing in $1.5 million of work completed with a gross margin of 15% and a net margin of 6% will receive an annual bonus of $5,400. With a higher net margin on volume of $1.5 million, the bonus rises: A net margin of 9% brings in a $16,200 bonus; a net margin of 13% brings in $39,000.
Many associates bring in far more than $1.5 million, some bringing in up to $4 million. In that case, the annual bonus for a 6% net margin is $14,400, the bonus for 9% net margin is $43,200, and the bonus for 14% net margin is $104,000.
“It's up to them how they do,” says company president Dennis Allen. “Some associates double their salary.” If associates don't reach minimum standards, they “have a serious talk” with company executives, Allen says.
And though the overall numbers reflect annual performance, the bonuses are calculated and paid out quarterly. “It keeps it fresher for them,” Allen explains.
Kathy Price-Robinson is a freelancer who writes about remodeling. www.kathyprice.com.