Managing Foremen Proactively Through Incentivizing – Part 2: Monetary Incentives
Author: Adam DeLamielleure
Territory Manager from Michigan
In part one of this three part series, we explored the way that management styles can make or break your business. Once you’ve solidified your leadership techniques, establishing ways to retain your best employees will be incredibly important. In part two of this series, we will discuss monetary incentives.
The first and most obvious place to start when discussing monetary incentivizing is hourly wage or salary. It is most certainly the first form of incentive and it is the easiest way to attract talent. One way to think about it is in the same way you would think about square footage price when selling a hardscape project. This metric often serves as an easy way for clients (who may not be familiar with hardscaping) to differentiate between contractors. As a contractor you know, of course, that the value of your work is about far more than just the price. Charging less for your work will only help you gain clients until someone else undercuts you. Then, you have to rely on the quality of your work, as well. The same is true of how much you pay per hour. You’ll attract good people by paying competitive wages but someone else will eventually, and inevitably, offer higher wages than you. You have to retain your employees some other way.
This is where incentivizing comes in.
To use an incentive program to motivate, reward, and retain your employees, you have to sell them on it. It has to be easy to understand and it has to be well communicated. Again, we can compare this to selling a hardscape project. What happens if a potential client balks at your price? You offer up a counterpoint such as “we are not the cheapest but that’s because we offer___________, while our competitors don’t.” This is standard practice and as contractors, we expect to do this when meeting with potential clients. Similarly, you should do this with your employees. Sell them on your business and on the idea of working for you.
Like it or not, they are “buying” something from you. In exchange for their time and effort, they’re getting paid. It’s an exchange of goods and services, just like any other transaction. Because you cannot afford to constantly pay more than all of your competitors, you have to make a job with your company attractive in ways other than wages.
Before you decide how to communicate your incentive program, you have to decide what kinds of incentives you plan on using. Consider implementing one (or all) of the following options.
Project incentives are a wonderful way to monetarily incentivize work outside of paying high wages. Explain your project incentive program in simple terms: foremen will be paid “x” amount extra for completing their project in a predetermined amount of time. This kind of program encourages your employees to work efficiently and effectively and it’s simple to understand. If they meet their goal, they earn a reward.
If you choose to establish this system, be sure to keep the following things in mind:
Set realistic goals- In order for this program to work properly, you need to know how long things realistically take and what is reasonable to expect from your crew. Unrealistic expectations will quickly demoralize your best employees. Conversely, easy goals will cost you.
Don’t mistake efficiency for good work- A crew cannot be allowed to speed up their output at the cost of quality. Therefore, a system to ensure that your team is held accountable for callbacks should be enforced. This will be difficult if you are just starting out, as there is no benchmark for the first season. In this case, after a season, a foreman can be held accountable by applying some of the call back hours toward current projects, thus limiting the amount of bonuses possible on current work. This is one of the hardest aspects of project incentives. We all know there are things that cause callbacks that are out of even the best foreman’s control. Be clear. Be fair. But most importantly, have a plan.
The artist/foreman dilemma- A good foreman walks a thin line between being solely a productive foreman and being an artist. There are times when a job calls for slower, more detailed work. Other times, efficiency is of the utmost importance. An artist can take a bit more time to complete a job, focusing on the details, while a productive foreman may skip on some artistry when a job is running behind. You may need to make it clear to your foremen that you understand this internal struggle. Give him the permission to decide for himself which of the two options is appropriate, depending on the situation.
Material costs – One area that is often forgotten when looking at production incentives is the cost of material. In the hardscape world, cutting is an area that kills productively. It is easy to go fast if you are wasteful. If a foreman finishes within the allotted hours but uses 10% more product (and is doing this consistently), this needs to be addressed and considered when it comes time to pay out bonuses. Just be sure to make this clear to your team.
Once you start paying your foremen for production, they will want to have a great crew to help them earn those incentives. Let them assist in locating and recruiting talent for your company. Offer them an incentive for the great people they bring in. However, this shouldn’t be paid out immediately. This incentive has to be offset by some longevity period, say ninety days. In summary, if they find and recruit quality workers that really bolster your business, your foreman will be rewarded.
Many of our foremen are laid off in the winter and it is all too easy to loss contact with them. Some may even return to their home country in the winter. Offering an incentive for them to return in the spring is a great motivation for returning and could potentially offset their travel costs. Once again, I believe this needs to be paid over time to ensure they don’t return for a pay period and then leave again.
While production goals are useful for improving efficiencies, selling incentives can take your business to the next level. Frequently, foremen are in the ideal position to suggest and sell add-ons to clients. Make sure that your foremen are aware of this opportunity to upsell your clients and empower them to make these kinds of suggestions. One way to do this is to offer incentives for selling. As before, this kind of incentive program will need to be explained and outlined well.
Additionally, many foremen that come to your business from within the industry have relationships with vendors that can save you money. Those relationships can also be incentivized. Let your foremen know that if they can negotiate a discount with a vendor, they’ll be rewarded for saving your business money. Whether your foremen help your business by selling add-ons to your clients or by saving you money on products, providing them with selling incentives can serve as a true win-win for your foremen and your company.
Monetary incentives have been proven to work and more companies are using them to expand their business, improve their work force, and retain talented foremen. In order for them to have any success, however, monetary incentives should be consistent in their rules, challenging to achieve (though not impossible), and easily outlined. Using monetary incentives will make your company attractive in a tight labor market and will only serve to benefit your business in the long run.
In Part Three of this series we will discuss intangible ways to incentivize and encourage your employees. Stay tuned!