James Yang

Less slippage. Happier clients. Lower overhead. Higher gross profit. Every remodeling company aspires to these general goals, but not every company distills them into a quantifiable number.

Three years ago, Sun Design, a design/build firm in Burke, Va., began setting employee bonus targets based on the notion of “the critical number.” “The idea is to find the one ‘key driver’ that is your weakest link, and yet drives your business,” says co-owner Craig Durosko. He and fellow owner Bob Gallagher didn’t know then that the program was coinciding with the beginning of the economic downturn, but, “ironically, there was probably never a better time to do it,” Durosko says. “It got the entire company rallied around a common goal.”

Huddles and Scorecards

That first year, given the economy, Sun Design didn’t hit its critical number. But performance improved and staff understood why they didn’t get bonuses. More importantly, because the company had already been practicing open-book management (OBM), employees were familiar with the company’s vital numbers and were comfortable using that knowledge to think and act, in their daily decisions, like owners.

“The cool thing is that [this approach] allows you ‘to drive’ in several ways,” Durosko explains. If the production staff reduces gross profit by just 1%, or office staff use fewer supplies, or design staff find better product prices, “it goes straight to the bottom line,” he says.

Key tenets of this remodeler’s bonus program:

  • All or none. Like many open-book practitioners, Sun Design gives bonuses to all employees or to none. “It’s all or nothing,” Durosko says. This reinforces the sense that everyone has a stake in the business and prevents the silo mentality that can undermine a group effort.
  • Huddles. To quickly review the financial “scorecard,” Sun Design’s management team has a weekly “huddle.” The entire company, in turn, huddles monthly. (Both terms are part of the OBM vocabulary.)
  • By the hour. Bonuses are paid quarterly, equitably, and in terms of hours. For instance, an eight-hour bonus means everyone receives the equivalent of eight hours of their pay.
  • Mini games. To keep involvement and spirits high, mini games let smaller teams work toward discrete drivers of the critical number. They can have several tiers, each with a small, fun payout. Example: Bring in a job under budget, get a box of paintballs. Bring in three consecutive jobs under budget, go play paintball.

Can OBM get depressing if the numbers are poor over a sustained period? Stay focused on your critical number, and your weakness will become your strength, Durosko says. “It’s almost more important to share when the numbers aren’t good. Fear of the unknown isn’t a good feeling.” Share the facts, and the team will strive to bring them in line with aspirations.
—Leah Thayer, senior editor, REMODELING.