Three years ago Jeff Knorr (back, center in photo) instituted a bonus systemfor three of his six employees who have a direct impact on projects. The president of JKC Inc., in Flagstaff, Ariz., says he had struggled with finding something that would motivate them. "I had worked for people who offered the carrot of a bonus, but then there was always some reason why the job did not make what it was supposed to make, and bonuses went from being a positive to a negative."

ONE BY ONE To avoid that at his company, Knorr decided to create a bonus system based on the results of individual jobs.

Three of the six employees at JKC Inc.?those who have financial andcustomer service responsibilities for projects?earn a bonus. Photo: courtesy Kerry-Lyn Love, JKC Inc. The bonus is given only to the company's design coordinator and two field superintendents. "We're a management company ? we subcontract about 95% of our work," Knorr says. "Our labor is limited to jobsite maintenance, cleanup, and light demolition."

If they meet certain requirements, the employees receive 1% of the job's total construction costs. "It's what I call the 'hard costs' of the project. It does not include our labor costs, profit, overhead, or taxes," he explains.

To determine whether the bonus will be granted, the job must satisfy three requirements: It must be completed on schedule, on budget, and the customer must be happy. "As long as those things are met, their bonus is guaranteed," Knorrsays.

One other item he also takes into account when determining the bonus is how often he had to get involved in the project. "Were the employees self-sufficient or did I have to put out fires? So it serves as a bit of an evaluation as well," Knorr says.

When Knorr first set up the program, the bonuses were paid twice a year. Now, the bonus is paid to the field superintendents after the punch list is completed, which provides motivation to finish the job. The design coordinator is paid quarterly. "When we are busier and things are stressful, [the bonus] is a silver lining to the extra chaos," Knorr says.

He advises remodelers who want to set up a bonus for employees to make sure that whatever system they choose is transparent. "The objectives must be clear, with no outlandish expectations from either side," he says.