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Discussion Starter · #1 ·
Who gives production bonuses, and how are they structured?
We had a complicated, but fairly good and complete system a while ago that we went away from. I'm thinking about implementing a new one that is hopefully easier for our employees to understand and more difficult to cheat.

I need something that works for residential crews that might do 2-10 jobs per month, and also works for commercial crews that may be on the same job for 4 months. I also have to consider the fact that crew members move between crews mid-job on a regular basis.

The main thing is it has to increase productivity enough to pay for itself without hurting overall profitability.
 

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I worked for a residential contractor a bunch of years back that did this. As a foreman, I would try to get the job done within or under the allotted amount of man hours budgeted for. Every hour you came in under, would be a bonus of your hourly rate. It was definitely something to strive for, but found it to be a lot of extra paper work, and got winded when I thought the budget was unfeasible. I personally didn't like it. For some reason it also didn't pass the bonus on to the lower people on the ladder which isn't fair.
 

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Like many things, throwing money at it doesn't necessarily improve it. In the case of improving production, the risks of quick completions could compromise quality assurance and quality control in the interest of time and a juicy bonus. It also provokes resentment amongst the ranks because people can't keep their mouths shut.

I'm a proponent of performance appraisals that are documented and used to trend an employees contributions to the organization. For example, how they work with others, safety awareness, skill development, continued learning, communication, leadership, attendance, how they use technology, etc.

Opportunities to grow in an organization often provide a higher value than simply stuffing your pockets with a few bucks because you out sweated your compadres.
 

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Discussion Starter · #4 ·
I worked for a residential contractor a bunch of years back that did this. As a foreman, I would try to get the job done within or under the allotted amount of man hours budgeted for. Every hour you came in under, would be a bonus of your hourly rate. It was definitely something to strive for, but found it to be a lot of extra paper work, and got winded when I thought the budget was unfeasible. I personally didn't like it. For some reason it also didn't pass the bonus on to the lower people on the ladder which isn't fair.
Yeah...I've thought about something along the lines of this. Basing the bonuses on hours under budget instead of profit (as was our last program). I like that, and will probably go with some form of that. Our last program was set up as payout to foremen only also. Half of them spread the wealth to their crews, some gave half or a quarter, some kept it all. In the end, I'm not worried about how the crew gets motivated, all I care about is they maximize productivity. Not entirely true, obviously.... I guess I also care about employee retention, customer happiness (is tied to the bonus, if the customer isn't 100% happy the jobs didn't count towards their bonus)...but my point is that profitability is the purpose. Everyone doesn't have to love it - I just need the foremen to get the most out of their crew members. A foreman motivated by bonus is going to produce better results than a foreman who gets confused over whether his job is to drive profits or to buddy-buddy his crew. Outsweating his compadres is exactly what I'm trying to promote.
 

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Yeah...I've thought about something along the lines of this. Basing the bonuses on hours under budget instead of profit (as was our last program). I like that, and will probably go with some form of that. Our last program was set up as payout to foremen only also. Half of them spread the wealth to their crews, some gave half or a quarter, some kept it all. In the end, I'm not worried about how the crew gets motivated, all I care about is they maximize productivity. Not entirely true, obviously.... I guess I also care about employee retention, customer happiness (is tied to the bonus, if the customer isn't 100% happy the jobs didn't count towards their bonus)...but my point is that profitability is the purpose. Everyone doesn't have to love it - I just need the foremen to get the most out of their crew members. A foreman motivated by bonus is going to produce better results than a foreman who gets confused over whether his job is to drive profits or to buddy-buddy his crew. Outsweating his compadres is exactly what I'm trying to promote.
If productivity is the primary goal, workmanship will necessarily suffer. Reputations will eventually suffer.
Money will only motivate an individual (and a company) so far; Inspiration is better motivation.
 

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Discussion Starter · #6 ·
Like many things, throwing money at it doesn't necessarily improve it. In the case of improving production, the risks of quick completions could compromise quality assurance and quality control in the interest of time and a juicy bonus. It also provokes resentment amongst the ranks because people can't keep their mouths shut.

I'm a proponent of performance appraisals that are documented and used to trend an employees contributions to the organization. For example, how they work with others, safety awareness, skill development, continued learning, communication, leadership, attendance, how they use technology, etc.

Opportunities to grow in an organization often provide a higher value than simply stuffing your pockets with a few bucks because you out sweated your compadres.
I partially agree... money doesn't improve everything, but I have a lot of people pushing to bring back our bonus program, with the thought that employee morale will be improved when guys are being pushed hard if they're getting something more out of it. My argument that their best-in-area pay, healthcare, 401k, vacation time, and general positivity and good treatment from the company should be enough to keep attitudes decent - but clearly that doesn't do it. I have mgt personnel who won't get the production bonuses telling me that the bonuses could fix some of our problems.

We do (not with enough frequency) evaluations, and they are standardized and in-depth based on position...but employees think evaluations should always come with a raise (sometimes they do, sometimes they don't). We're not dealing with engineers or software sales reps, we're dealing with painters.... they have zero understanding of business and only see things from a kindergarten level, with no understanding of greater good, the need for company profit (in their minds we have a money machine), or other deeper purpose. Everything they think of and care about is 100% based on what they want for themselves and how things affect them. To complement that, 95% of them have ZERO ability for accurate self assessment or reflection. I've got a handful of people who are more advanced (and they eventually become management of one form or another), but the vast majority of painter level people have short memories when it comes to things to appreciate, and have a major focus on what they want with no understanding of why everyone doesn't see everything exactly the way they do.
 

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If productivity is the primary goal, workmanship will necessarily suffer. Reputations will eventually suffer.
Money will only motivate an individual (and a company) so far; Inspiration is better motivation.
Quality, Craftsmanship, and Reputation can and should be primary motivators.

But Im a capitalist, and I fully believe in Capitalism. And I believe in free markets. And I believe Quality work is the most highly sought. And I believe in paying quality craftsman a comfortable living wage to support their families and their lifestyles. And I believe production bonuses within company standards allow sufficient capital, and sufficient profit to reward those workers who can meet quality standards while being on time, and perhaps even under budget.

I do NOT believe profit is a dirty word. Profit is what allows us all to remain in business, and allows us and our employess to maintain a comfortable and sustainable living.
 

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It's no wonder the work force has become entitled when social media has turned them into whiners who believe they're so special. Couple that with the distraction of aesthetic competitiveness and the yearning to belong, and you can begin to see how the working class lost sight of the big picture.

There's no way they're going to sweat if they don't have to. Bonuses be damned.
 

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Pushing employees with the ultimate goal of 'productivity above all' will eventually lead to burnout among the ranks, and no amount of "profit sharing" will matter at that point. Employee retention will be hard to come by. If they are working 8+ hours a day with only production as the driving force, it will seem very shallow pursuit before too long.

If that is the driving force, they are not going to improve at their craft, they will be chasing the deadlines, and cutting corners. Seems inevitable. Pay them well up-front, give performance bonuses, healthcare and a 401k is great, but why make it all about production deadlines?
 

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I've found bonuses given out after employee evaluations tend to work a little better, at least from my own experience as a business owner and having up to 17 employees at one time, as well as working as a Project Manager for a company with 25-30 painters before starting my biz in 1998. Here's why:

-Giving out bonuses on jobs that get done early leaves no insulation or padding when jobs go sideways. Quarterly reviews, OTOH, do provide a much more comprehensive assessment.

-Employees will begin to resent those jobs where they worked their guts out; only to NOT come in under the allotted time. This leads to a decline in moral and descension in the ranks.

-Some jobs we acquire might be bid with such tight margins that we're only taking them on to keep employees busy, so having to dole out bonuses could put us in the red, but if you try to take that bonus potential away, even for one job, watch what happens!

-Let's say you have 2 crews, and one crew finished their job in 4 days, got Friday off, and let everyone know on the other crew how easy the job was...how they really didn't even have to work that hard, but they get a bonus and a Friday off. Meanwhile, crew #2 worked their asses off, but maybe didn't get under your projected allotted time, so they got no bonus. They spend all Friday bitching about how much this job sucks and how unfair it is.

-Tying into my last point, once it's out there, you can't take it back--at least not without some seriously pissed off people on your hands. They will expect a bonus potential on every single job. Remember that if/when you have to return to fix something one of your crews did...maybe rushed a little too quick...turned a blind eye...etc., all to get that bonus.

I've seen it on both sides of the fence and I truly believe it starts to foster an unhealthy mindset. Even quarterly bonuses aren't ideal though. IMHO, best to keep tabs on everyone, let them know what they need to accomplish to get to the next level, then reward them as soon as they do. To each their own though. If it works for you, great. I've just never seen it work.
 

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Discussion Starter · #12 ·
Pushing employees with the ultimate goal of 'productivity above all' will eventually lead to burnout among the ranks, and no amount of "profit sharing" will matter at that point. Employee retention will be hard to come by. If they are working 8+ hours a day with only production as the driving force, it will seem very shallow pursuit before too long.

If that is the driving force, they are not going to improve at their craft, they will be chasing the deadlines, and cutting corners. Seems inevitable. Pay them well up-front, give performance bonuses, healthcare and a 401k is great, but why make it all about production deadlines?
Because it's a business.
 

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Discussion Starter · #13 ·
-Giving out bonuses on jobs that get done early leaves no insulation or padding when jobs go sideways. Quarterly reviews, OTOH, do provide a much more comprehensive assessment.

-Employees will begin to resent those jobs where they worked their guts out; only to NOT come in under the allotted time. This leads to a decline in moral and descension in the ranks.

-Some jobs we acquire might be bid with such tight margins that we're only taking them on to keep employees busy, so having to dole out bonuses could put us in the red, but if you try to take that bonus potential away, even for one job, watch what happens!

-Let's say you have 2 crews, and one crew finished their job in 4 days, got Friday off, and let everyone know on the other crew how easy the job was...how they really didn't even have to work that hard, but they get a bonus and a Friday off. Meanwhile, crew #2 worked their asses off, but maybe didn't get under your projected allotted time, so they got no bonus. They spend all Friday bitching about how much this job sucks and how unfair it is.

-Tying into my last point, once it's out there, you can't take it back--at least not without some seriously pissed off people on your hands. They will expect a bonus potential on every single job. Remember that if/when you have to return to fix something one of your crews did...maybe rushed a little too quick...turned a blind eye...etc., all to get that bonus.

I've seen it on both sides of the fence and I truly believe it starts to foster an unhealthy mindset. Even quarterly bonuses aren't ideal though. IMHO, best to keep tabs on everyone, let them know what they need to accomplish to get to the next level, then reward them as soon as they do. To each their own though. If it works for you, great. I've just never seen it work.
You seem to understand this.... I agree with almost all of your points. It doesn't dissuade me from wanting to figure out a bonus plan... but you have all the right ideas when it comes to the drawbacks. We did take a bonus system away before -- largely for the reasons you're stating... Petty jealousy, unhappy employees when someone gets something they don't, tight margin jobs... those are all relevant issues I have to figure out. They were issues before and without the right plan will be again.
To your last paragraph... we do keep tabs, we track profitability, we communicate and evaluate... but the bottom line is we are always trying to improve our profitability, and in a market where we have nearly unlimited work and real difficulty hiring additional skilled help, we have to get more out of the people we have. If we can motivate our foremen to not let the 15 minute breaks turn into 25 minutes, and we can get people to not plan their finishing points around the end of day, but instead plan the end of the day around the appropriate finishing points... and if we can get people to work the extra 2 hours to close out a job instead of heading home at 3:30 and coming back the following day.... greater productivity can be accomplished.
I won't implement a plan until I'm thoroughly convinced Its a solid plan that accomplishes my goals with limited downside. It won't be easy...but the right plan is out there.
 

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We do (not with enough frequency) evaluations, and they are standardized and in-depth based on position...but employees think evaluations should always come with a raise (sometimes they do, sometimes they don't). We're not dealing with engineers or software sales reps, we're dealing with painters.... they have zero understanding of business and only see things from a kindergarten level, with no understanding of greater good, the need for company profit (in their minds we have a money machine), or other deeper purpose. Everything they think of and care about is 100% based on what they want for themselves and how things affect them. To complement that, 95% of them have ZERO ability for accurate self assessment or reflection. I've got a handful of people who are more advanced (and they eventually become management of one form or another), but the vast majority of painter level people have short memories when it comes to things to appreciate, and have a major focus on what they want with no understanding of why everyone doesn't see everything exactly the way they do.
Because it's a business.

Andrew Carnegie built a Steel Empire and was the richest man in the world at one time.
He knew it was all about people and how you treat them.
 

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If not allotted carefully, OT, prevailing wages, and cash bonuses can become a supplementary income for the recipient. Another recipe for disgruntled worker syndrome if it's not being doled out consistently.

On the other hand, frequently bidding jobs with tight margins in order to compete in a saturated market, always tends to put the pressure on the rank and file to meet un-realistic deadlines. And pitting the rank and file against each other to meet those deadlines, doesn't bode well with the more socially conscientious and socially sophisticated worker of today.
 

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The reward of social competitiveness is in the comfort equity rather than in the sweat equity. It's a brand new day, and it's reflected in that thirty two year old painter who spends twenty to thirty percent of the companies time on his...excuse me... (the grammatically improper) their personal phone.
 

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The reward of social competitiveness is in the comfort equity rather than in the sweat equity. It's a brand new day, and it's reflected in that thirty two year old painter who spends twenty to thirty percent of the companies time on his...excuse me... (the grammatically improper) their personal phone.
It is certainly a brand new day, brand new world.

The up-and-coming generation is different than those that came before. They have different priorities, that may not be in lock-step with past generational ideas. They have different priorities, that may come off as entitled to "late-model boomers" or "Gen X'ers". The Millenials are certainly are not afraid to switch jobs mid-stream if they don't feel they are getting out of it what they want to.

I don't fully understand the up-coming generation's values, but they can certainly be intelligent. They seem to have an entirely different set of values, and I'm not entirely sure I know what motivates them yet. As employees, at least the ones I have worked with, they seem to thrive both on clear direction and expectations, and at the same time want space for an independent approach to whatever the task is at hand.

The Gen X'ers I work with spend more time on their phones than the Millennials do (at least when at work).
 

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It's an interesting discussion, because motivation is key to any organization's success as well as the individual employee's success.

I was the oddball amongst my peers because I actually cared about the owners of the businesses I worked for. I never liked commiserating about the boss because I knew it was a lot more challenging for him than it was for me, or any of my co workers who were the source of a lot of the drama like borrowing money, calling in sick, asking for more money, etc. If anything, I tried to learn as much as I could about management. It helped me appreciate logistics and helped me develop my communication skills. cough.

So why don't I run my own business? For exactly the same reasons I've seen expressed at PT over and over again. Managing grown people sucks. Some people are accustommed to leadership roles by way of military training, sports, and other community activities. I'm not.
 

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Discussion Starter · #20 ·
I'm a GenX'er.... At one point we were the loser generation... we were the grunge generation... but now we're the bulk of the productive workforce. Hopefully the Millennials and Gen Z's will come into their own someday also. I haven't seen it yet for sure, but poverty will eventually begin to suck and maybe they'll decide to work. I agree the ease of quitting jobs today is just a different thing, but that's because we've gone through decades of easy times. If things get tough, things will change - but that's a whole different set of problems. For now, we have to hope things stay good economically and find a way to get people to work like they give a sh##.
 
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