Paying For Profit

Mike Finley · 02-09-2007, 12:43 AM

paying for profit....

Quote:

Paying employees hourly mean there is no incentive for employee A to work harder than employee B. No matter how hard either of them work, their pay is governed by how long they spend on the clock. This type of traditional pay system encourages mediocrity. There is a disconnect between the job that is being done and the pay they are receiving.

Employees behind an employers back say things like "Hey, buddy I'm sorry we are holding you up here... " the reply is "No problem, I'm paid by the hour."

Paying for profit means the company only pays a bonus when the company reaches a certain profit level. The workers at jobsite A and B are working for the companies goals and not their own, the degree of production is only dependent on the loyalty of each individual employee and has nothing to do with what they could achieve for themselves.

Two jobsites both $25,000 jobs. Job A is profitable, Job B is not profitable due to circumstances that have nothing to do with the workers. The men work hard at jobsite A, but there is no profit and there will be no reward. The men at jobsite B work at a relaxed pace, and there will be a reward because there is profit. The men from both jobsites talk about their work, the men from jobsite A tell stories of how they are working their tales off because management wants to get off the job as quickly as possible to reduce the bleeding. The men at jobsite B tell how they are working at a relaxed pace and are still going to get a $500 bonus.

With pay for profit if the bonus is not tied to the amount of work the employee accomplishes there is no incentive to work harder. Pay for profit makes little logical sense to a common worker.

Blackbird · 02-09-2007, 12:54 AM

When ever I can I pay piece work, sometimes the whole crew, sometimes just the lead man. This seems to keep things moving. Of course it also leads to a lot more whining when someone is in the way or materials are missing, but if there is a problem I want to know about it and fix it.

Glasshousebltr · 02-09-2007, 12:58 AM

Quote:

Originally Posted by Mike Finley

paying for profit....

Yeaper

copusbuilder · 02-09-2007, 08:02 AM

I feel it is next to impossible to keep someone motivated over a long period of time.
If a person is making twice the pay that is normal for that position over time they will become lethargic. I suspect it is human nature and something we can all be guilty of?
The grass is always greener on the other side.
That is why we have the right as employers to talk to them and explain the situation. If that doesn't work they get to try the unemployment line

DamionR · 02-09-2007, 08:41 AM

Pay per job is an EXCELLENT approach if you can make it work.

Here's how I've seen it set up....

The foreman gets X percent of the gross sale of the job. Out of that , he pays the laborers.

There are a couple reasons for this being affective:

1) It cuts down on the amount of laborers the foreman wants on the job - since it's coming out of his pocket.
2) No more slacking on the job
3) The smart foreman will incentivise his crew for getting the job done right and on time.
4) Service calls become the responsibility of the foreman.

Obviously, there are downfalls...

1) You'll need a grace period to figure out what a good percentage is for your crew.
2) You're assuming that each job you do has the same level of difficulty in getting completed.
3) You need a foreman with a bit of business sense.. or one that is teachable to this.

PressurePros · 02-09-2007, 09:33 AM

I'm not trying to be negative as I know some guys that implement this type of comepensation program versus set salary or pph but here is something that I see recurring and have experienced. When your crews know what the job pays, they get sour grapes. I made the mistake of letting my guys pick up checks from homeowners when a job was completed. Well of course when the homeonwer handed them the check unenclosed in an envelope they look at the amount paid. Regardless of my expenses, regardless of their pph they would get in the truck with each other and comment. "Damn, Ken just made $600 and we were only there for four hours." Of course they weigh that against the fact they each of them was paid $60 for that same period. That is where the resentments start. Words like workmen's comp, liability, marketing and taxes have no meaning to them. They used $30 in materials so in their minds I just pocketed $450 on their backs and now they have to drive to a second job so Ken can make another $450? Again, it doesn't matter if I paid double the industry wage and offered bonus incentives (which I do), its never enough.

This has cost me more than one employee to either disgruntled slacking (to the point I fire them) or for the smart ones they just open up shop down the street. I have vowed that no employee will ever again know what a jobs pays. Bonuses and incentives are performance based and static. Percentages only come into play on my end, not theirs.

ultimatetouch · 02-09-2007, 09:40 AM

Quote:

Originally Posted by PressurePros

I'm not trying to be negative as I know some guys that implement this type of comepensation program versus set salary or pph but here is something that I see recurring and have experienced. When your crews know what the job pays, they get sour grapes. I made the mistake of letting my guys pick up checks from homeowners when a job was completed. Well of course when the homeonwer handed them the check unenclosed in an envelope they look at the amount paid. Regardless of my expenses, regardless of their pph they would get in the truck with each other and comment. "Damn, Ken just made $600 and we were only there for four hours." Of course they weigh that against the fact they each of them was paid $60 for that same period. That is where the resentments start. Words like workmen's comp, liability, marketing and taxes have no meaning to them. They used $30 in materials so in their minds I just pocketed $450 on their backs and now they have to drive to a second job so Ken can make another $450? Again, it doesn't matter if I paid double the industry wage and offered bonus incentives (which I do), its never enough.

This has cost me more than one employee to either disgruntled slacking (to the point I fire them) or for the smart ones they just open up shop down the street. I have vowed that no employee will ever again know what a jobs pays. Bonuses and incentives are performance based and static. Percentages only come into play on my end, not theirs.

Keep them in the dark definitely.

ultimatetouch · 02-09-2007, 09:45 AM

Mike why do you hire employees just curious what the benifit is to that? I would think you make them subcontractors and cut them in on the action. I may hire one employee but the rest is going to get subbed out. I will probably hire someone to do office work soon.

thom · 02-09-2007, 09:48 AM

two days ago I had two tinners working/slacking on the job (employees of a sub). They stretched the job out an extra day (three instead of two for a metal rough-in) because (and they told me this) they didn't have another job to go to so Scott (the owner) would send them home and they would miss a days pay. Later they were talking about it being impossible to get "rich" with the standard line "it takes money to make money". I explained the fallacy of that statement.

I explained that if they became the hardest working, most productive men in the company, they would be the last to be laid off. If they dedicated themselves to learning how to do everything in the business and being the most productive, they would make themselves far more valuable to the boss who would give them a raise to make sure they stick around. If they didn't get the raise, they would be much more employable elsewhere and could and would earn more money.

Their response, after thinking about it for a minute, "I don't think I want to work that hard".

The point is, pay your good men better than the others. The crew should know they get paid better. Give them positions of responsibility. Talk to them about the performance of the others. Pay attention to them. That will build their already good attitude. The slackers will be disgruntled. They will never understand that the higher paid guys are deserving of the extra money. Over time the slackers will quit (or you will fire them) and that's good for the company and everyone involved. Slackers are poision. They are an emotional drain on the rest of the crew. They hold you back.

realpurty2 · 02-09-2007, 10:15 AM

We've been toying with an idea similar to this for a while now. On paper, it looks good.. we'll find out the reality in the next few months since we just started it as a trial on January 1st.

Service Calls or T&M work- Hourly Rate based on employee's classification. The wages are above going rate in this area.

Contract Work- Base hourly rate per class which is set well below their service call rate. (Ex. $25 hr Electrician drops to a $18hr rate) plus they receive a percentage of profit. How much they earn in addition to the hourly is based on the contract labor bid. If they go over or too slow to come in under the bid price, little or no bonus. If it's done early, and correctly, bigger bonus. They are given half of the bonus at the time of completion, the other half stays in an interest bearing account for 3 months. No call backs at the end of three months, the bonuses get distributed. If we do get a call back on the work, the cost to cover is deducted from the bonus account.

We're also subbing some of the work out to our employees, letting them have full control over that portion of a project, such as drywall or painting. It helps them have a little extra in their pocket and gives us piece of mind that the quality of work will still adhere to our standards.

copusbuilder · 02-09-2007, 10:37 AM

I tried every incentive plan I could muster in the past.

If the customer was happy on completion you would get a bonus. The guys would beg the customer to give a good review so they would get their bonus.

Percentages of the profit. Their idea of profit and mine would differ. Try docking them for a call back on a job they had been paid for

Monthly bonuses? If they don't increase each month then they are stagnating.

I feel you can pay them well and remind them often they are being paid well.

When my guys tried to mutiny one time I went out and bought a new van. Fitted it with tools and parked it in the drive. When they asked me why I bought a van I told them when I get sick of the shyte I may just put the tools on again. Scared the crap out of them. Got a good month of hassle free employees.

If you have crews installing siding, roofing, even some paint you can work things. Remodelling is a different kettle of fish.

copusbuilder · 02-09-2007, 10:40 AM

Quote:

Originally Posted by PressurePros

I'm not trying to be negative as I know some guys that implement this type of comepensation program versus set salary or pph but here is something that I see recurring and have experienced. When your crews know what the job pays, they get sour grapes. I made the mistake of letting my guys pick up checks from homeowners when a job was completed. Well of course when the homeonwer handed them the check unenclosed in an envelope they look at the amount paid. Regardless of my expenses, regardless of their pph they would get in the truck with each other and comment. "Damn, Ken just made $600 and we were only there for four hours." Of course they weigh that against the fact they each of them was paid $60 for that same period. That is where the resentments start. Words like workmen's comp, liability, marketing and taxes have no meaning to them. They used $30 in materials so in their minds I just pocketed $450 on their backs and now they have to drive to a second job so Ken can make another $450? Again, it doesn't matter if I paid double the industry wage and offered bonus incentives (which I do), its never enough.

This has cost me more than one employee to either disgruntled slacking (to the point I fire them) or for the smart ones they just open up shop down the street. I have vowed that no employee will ever again know what a jobs pays. Bonuses and incentives are performance based and static. Percentages only come into play on my end, not theirs.

Don't apoligize for perceived negativity! What you have stated is reality...the cold hard facts of hiring and running a business.

realpurty2 · 02-09-2007, 11:04 AM

Copus, I think you are very right. One thing no incentive plan figures in is the employee's ambition or desire to achieve. How well any of these ideas work depends on how much they want them.

It also depends on the reason a company starts to use them.. for the employee's benefit or for the overall good of the company. It sounds as if you were using it to motivate employees. In our case, it reduces expenses. We let the employees vote on it before we started trying it out and there was only one "no" vote, so it empowered the guys to feel like they had a direct say in their pay.

Maybe it's all in how it's presented to them?

DEAD MAN · 02-09-2007, 11:14 AM

Quote:

One thing no incentive plan figures in is the employee's ambition or desire to achieve. How well any of these ideas work depends on how much they want them.

That is the key!

Tom M · 02-09-2007, 12:22 PM

Quote:

Originally Posted by copusbuilder

Don't apoligize for perceived negativity! What you have stated is reality...the cold hard facts of hiring and running a business.

No one is ever compensated enough and no one ever cares enough unless it is their own deal. It will always be like this for a small company. The only way is to have a structured business that allows people to move up the ladder with pay and even then who does what is measured. You can have the most educated and most talented people running your work and will be paid far less than someone who can sell the work.

Boogga · 02-09-2007, 03:19 PM

Incentives are for workers who have no incentive to work for you! So what are they working for you then??!!

The only new incentive they should get from you is a new pair of work boots, so they can walk away. Forget wasting your time with these type of people. Spend you money on workers who want to be there. People on wages are slow and unproductive. Let them work on Contract, then you'll see them run!

copusbuilder · 02-09-2007, 05:05 PM

Quote:

Originally Posted by realpurty2

Copus, I think you are very right. One thing no incentive plan figures in is the employee's ambition or desire to achieve. How well any of these ideas work depends on how much they want them.

It also depends on the reason a company starts to use them.. for the employee's benefit or for the overall good of the company. It sounds as if you were using it to motivate employees. In our case, it reduces expenses. We let the employees vote on it before we started trying it out and there was only one "no" vote, so it empowered the guys to feel like they had a direct say in their pay.

Maybe it's all in how it's presented to them?

But you have only just begun

Talk to me in a few months

Hope it works for you. I think most any plan is designed to motivate in one way or another. You say saving cost...what does the employee see? If they do not get a bigger share the morale will drop like a ton of bricks. We all no what happens when we get on Rotten apple?
On that note gotta go see a kids basketball game.. Good points

copusbuilder · 02-09-2007, 05:07 PM

Quote:

Originally Posted by Boogga

Incentives are for workers who have no incentive to work for you! So what are they working for you then??!!

The only new incentive they should get from you is a new pair of work boots, so they can walk away. Forget wasting your time with these type of people. Spend you money on workers who want to be there. People on wages are slow and unproductive. Let them work on Contract, then you'll see them run!

I love this guy

He speaks construction

Mike Finley · 02-09-2007, 09:02 PM

Quote:

Originally Posted by ultimatetouch

Mike why do you hire employees just curious what the benifit is to that? I would think you make them subcontractors and cut them in on the action. I may hire one employee but the rest is going to get subbed out. I will probably hire someone to do office work soon.

Absolutely impossible to have a sub do what I want an employee to do. I don't care how good they are, I've yet to find a sub on the same level we are on, and the amount of control I need to achieve what I want to do would disqualify them as a sub.

Quote:

One thing no incentive plan figures in is the employee's ambition or desire to achieve. How well any of these ideas work depends on how much they want them.

Actually, you've got it all backwards and upside down, the given for anything to work is to hire correctly. Having guys who don't fit your plan isn't a problem with the plan, it a problem with the guy who hired the guys who don't fit your plan. Fire them , get their sickness out of your organization as fast as possible before they infect your good staff, then hire better.

**denick** · 02-09-2007, 09:07 PM

Gee Mike it sounds like you have done some reading?

02-09-2007, 12:54 AM	#2
Blackbird View Profile Blackbird Member Send Message Follow Blogs (0) Threads (55) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Member Trade: Remodeling and Custom Decks Join Date: Feb 2007 Posts: 55	Re: Paying For Profit When ever I can I pay piece work, sometimes the whole crew, sometimes just the lead man. This seems to keep things moving. Of course it also leads to a lot more whining when someone is in the way or materials are missing, but if there is a problem I want to know about it and fix it.

02-09-2007, 08:02 AM	#4
copusbuilder View Profile copusbuilder Pro Send Message Follow Blogs (0) Threads (1,358) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Builder/Remodeler- Master Electrician Join Date: Nov 2005 Location: Crockett Texas Posts: 1,358	Re: Paying For Profit I feel it is next to impossible to keep someone motivated over a long period of time. If a person is making twice the pay that is normal for that position over time they will become lethargic. I suspect it is human nature and something we can all be guilty of? The grass is always greener on the other side. That is why we have the right as employers to talk to them and explain the situation. If that doesn't work they get to try the unemployment line __________________ www.copusconstruction.com www.etexasrentals.com www.thelakevoice.com AkA Richard Cranium

02-09-2007, 08:41 AM	#5
DamionR View Profile DamionR Contractor Marketing Tips Send Message Follow Blogs (4) Threads (572) Photos (24) Reviews (0) Projects (0) Toolbox (0) View All Activity Contractor Marketing Tips Trade: Contractor Marketing Tips Join Date: Jan 2007 Location: Virginia Beach, VA Posts: 572	Re: Paying For Profit Pay per job is an EXCELLENT approach if you can make it work. Here's how I've seen it set up.... The foreman gets X percent of the gross sale of the job. Out of that , he pays the laborers. There are a couple reasons for this being affective: 1) It cuts down on the amount of laborers the foreman wants on the job - since it's coming out of his pocket. 2) No more slacking on the job 3) The smart foreman will incentivise his crew for getting the job done right and on time. 4) Service calls become the responsibility of the foreman. Obviously, there are downfalls... 1) You'll need a grace period to figure out what a good percentage is for your crew. 2) You're assuming that each job you do has the same level of difficulty in getting completed. 3) You need a foreman with a bit of business sense.. or one that is teachable to this.

02-09-2007, 09:33 AM	#6
PressurePros View Profile PressurePros Deck Cleaner Send Message Follow Blogs (0) Threads (984) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Deck Cleaner Trade: Deck Cleaning, Staining, Restoration Join Date: Jul 2006 Location: Havertown, PA Posts: 984	Re: Paying For Profit I'm not trying to be negative as I know some guys that implement this type of comepensation program versus set salary or pph but here is something that I see recurring and have experienced. When your crews know what the job pays, they get sour grapes. I made the mistake of letting my guys pick up checks from homeowners when a job was completed. Well of course when the homeonwer handed them the check unenclosed in an envelope they look at the amount paid. Regardless of my expenses, regardless of their pph they would get in the truck with each other and comment. "Damn, Ken just made $600 and we were only there for four hours." Of course they weigh that against the fact they each of them was paid $60 for that same period. That is where the resentments start. Words like workmen's comp, liability, marketing and taxes have no meaning to them. They used $30 in materials so in their minds I just pocketed $450 on their backs and now they have to drive to a second job so Ken can make another $450? Again, it doesn't matter if I paid double the industry wage and offered bonus incentives (which I do), its never enough. This has cost me more than one employee to either disgruntled slacking (to the point I fire them) or for the smart ones they just open up shop down the street. I have vowed that no employee will ever again know what a jobs pays. Bonuses and incentives are performance based and static. Percentages only come into play on my end, not theirs. __________________ Ken Fenner Pressure Washing PA Roof Cleaning Services PA

02-09-2007, 09:45 AM	#8
ultimatetouch View Profile ultimatetouch Ultimate touch Send Message Follow Blogs (0) Threads (776) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Ultimate touch Trade: General contractor, Remodeling Join Date: May 2006 Location: chicago Posts: 776	Re: Paying For Profit Mike why do you hire employees just curious what the benifit is to that? I would think you make them subcontractors and cut them in on the action. I may hire one employee but the rest is going to get subbed out. I will probably hire someone to do office work soon. __________________ Ultimatetouch Illinois Remodeling Company, Kitchen Remodeling Chicago, Room Additions Illinois

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02-09-2007, 09:48 AM	#9
thom View Profile thom Thom Send Message Follow Blogs (0) Threads (3,197) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Thom Trade: General Contractor/Homebuilder Join Date: Nov 2006 Location: Albuquerque NM Posts: 3,197	Re: Paying For Profit two days ago I had two tinners working/slacking on the job (employees of a sub). They stretched the job out an extra day (three instead of two for a metal rough-in) because (and they told me this) they didn't have another job to go to so Scott (the owner) would send them home and they would miss a days pay. Later they were talking about it being impossible to get "rich" with the standard line "it takes money to make money". I explained the fallacy of that statement. I explained that if they became the hardest working, most productive men in the company, they would be the last to be laid off. If they dedicated themselves to learning how to do everything in the business and being the most productive, they would make themselves far more valuable to the boss who would give them a raise to make sure they stick around. If they didn't get the raise, they would be much more employable elsewhere and could and would earn more money. Their response, after thinking about it for a minute, "I don't think I want to work that hard". The point is, pay your good men better than the others. The crew should know they get paid better. Give them positions of responsibility. Talk to them about the performance of the others. Pay attention to them. That will build their already good attitude. The slackers will be disgruntled. They will never understand that the higher paid guys are deserving of the extra money. Over time the slackers will quit (or you will fire them) and that's good for the company and everyone involved. Slackers are poision. They are an emotional drain on the rest of the crew. They hold you back. Last edited by thom; 02-09-2007 at 09:56 AM.

02-09-2007, 10:15 AM	#10
realpurty2 View Profile realpurty2 Business Operations Send Message Follow Blogs (0) Threads (936) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Business Operations Trade: General Contracting / Electrical Contracting Join Date: Aug 2005 Location: East Tennessee Posts: 936	Re: Paying For Profit We've been toying with an idea similar to this for a while now. On paper, it looks good.. we'll find out the reality in the next few months since we just started it as a trial on January 1st. Service Calls or T&M work- Hourly Rate based on employee's classification. The wages are above going rate in this area. Contract Work- Base hourly rate per class which is set well below their service call rate. (Ex. $25 hr Electrician drops to a $18hr rate) plus they receive a percentage of profit. How much they earn in addition to the hourly is based on the contract labor bid. If they go over or too slow to come in under the bid price, little or no bonus. If it's done early, and correctly, bigger bonus. They are given half of the bonus at the time of completion, the other half stays in an interest bearing account for 3 months. No call backs at the end of three months, the bonuses get distributed. If we do get a call back on the work, the cost to cover is deducted from the bonus account. We're also subbing some of the work out to our employees, letting them have full control over that portion of a project, such as drywall or painting. It helps them have a little extra in their pocket and gives us piece of mind that the quality of work will still adhere to our standards. __________________ Woman in a Man's World.

02-09-2007, 10:37 AM	#11
copusbuilder View Profile copusbuilder Pro Send Message Follow Blogs (0) Threads (1,358) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: Builder/Remodeler- Master Electrician Join Date: Nov 2005 Location: Crockett Texas Posts: 1,358	Re: Paying For Profit I tried every incentive plan I could muster in the past. If the customer was happy on completion you would get a bonus. The guys would beg the customer to give a good review so they would get their bonus. Percentages of the profit. Their idea of profit and mine would differ. Try docking them for a call back on a job they had been paid for Monthly bonuses? If they don't increase each month then they are stagnating. I feel you can pay them well and remind them often they are being paid well. When my guys tried to mutiny one time I went out and bought a new van. Fitted it with tools and parked it in the drive. When they asked me why I bought a van I told them when I get sick of the shyte I may just put the tools on again. Scared the crap out of them. Got a good month of hassle free employees. If you have crews installing siding, roofing, even some paint you can work things. Remodelling is a different kettle of fish. __________________ www.copusconstruction.com www.etexasrentals.com www.thelakevoice.com AkA Richard Cranium

02-09-2007, 11:04 AM	#13
realpurty2 View Profile realpurty2 Business Operations Send Message Follow Blogs (0) Threads (936) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Business Operations Trade: General Contracting / Electrical Contracting Join Date: Aug 2005 Location: East Tennessee Posts: 936	Re: Paying For Profit Copus, I think you are very right. One thing no incentive plan figures in is the employee's ambition or desire to achieve. How well any of these ideas work depends on how much they want them. It also depends on the reason a company starts to use them.. for the employee's benefit or for the overall good of the company. It sounds as if you were using it to motivate employees. In our case, it reduces expenses. We let the employees vote on it before we started trying it out and there was only one "no" vote, so it empowered the guys to feel like they had a direct say in their pay. Maybe it's all in how it's presented to them? __________________ Woman in a Man's World.

02-09-2007, 03:19 PM	#16
Boogga View Profile Boogga LC Australia Send Message Follow Blogs (0) Threads (439) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity LC Australia Trade: Building Join Date: Dec 2006 Location: Canberra Posts: 439	Re: Paying For Profit Incentives are for workers who have no incentive to work for you! So what are they working for you then??!! The only new incentive they should get from you is a new pair of work boots, so they can walk away. Forget wasting your time with these type of people. Spend you money on workers who want to be there. People on wages are slow and unproductive. Let them work on Contract, then you'll see them run! __________________ *"It's better to die on your feet than to live on your knees"*

02-09-2007, 09:07 PM	#20
denick View Profile denick Pro Send Message Follow Blogs (0) Threads (2,452) Photos (0) Reviews (0) Projects (0) Toolbox (0) View All Activity Pro Trade: excavating / concrete / masonry Join Date: Feb 2006 Location: NW, CT Posts: 2,452	Re: Paying For Profit Gee Mike it sounds like you have done some reading? __________________ Nick "Every day I remind myself that my inner and outer life are based on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received and am still receiving" Albert Einstein

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