I've always wanted to come up with some sort of bonus system but have never seen one that I though would fit our company well. Some seem to have overly complex formulas and others seem to emphasize speed of production over quality, which can encourage sloppy work that can come back to haunt you.
I think the basic goal of any bonus system is to get the employees to think like an owner. I know that I'm always searching for ideas to improve the quality, safety, marketing, efficency etc. I think (hope?) we'd all agree that having 4 or 5 heads on these matters is better than one. If you could get them in the habit of thinking in these terms, I believe quality, efficency and safety would improve by basic osmosis.
So what about a simple system that provides, say, three separate $50-$100 bonuses (gift certificates?) per month for the best ideas submitted in any of those areas (quality, efficency, safety, markeiting..). Also, maybe a grand prize of $250 per quarter.. or whatever.
It's not so much that anyone will get rich on these but it will show that we value their brains, as well as, their backs. And if we all preach "working smarter," why not have a system that directly encourages that.
I've always read that it's important to reward the behavior you want to see in your employees. Not knocking your idea here, but the incentive is new ideas. Guaranteed you'll have 100 new ideas every month; but without implementation you'll just have a heap of papers with ideas on them, and you'll be spending time running down whether these are good ideas or not. More work for you, no improvement in productivity, safety, etc.
I'm not sure, but I don't think a "simple" incentive plan exists. You've got to cover too many bases for it to be a simple process. As you mentioned, if you reward one behavior (fast work), you have to closely monitor all the possible negative side effects of a focus on that behavior (quality).
Hopefully you are monitoring both (quality and production time) whether or not you use them for bonus calculations. If you are not I'd say you either do substandard work, are losing money on jobs or both. I have been listening to Jack Welch's book Winning on my ipod. He is a big proponent of spending a lot of your time on developing your team. He recommends the HR person is as important as the CFO (financials). I've heard this same argument quite a bit from many different (green industry) sources and am starting to become a believer. I used to look at HR functions as just a big PITA but am going to devote more time to it this year and see what happens.
I took a Compass training, by the way, and that is one way of partnering with your employees. I think it has some great stuff in it but is overly complex and time consuming. Their is no one size fits all, magic bullet. So my suggestion is look around, implement something and try to continually improve or scrap it and start over. As with all else, their is no finish line.
Michael Gerber is an advocate of having a game and playing it. I don't think there is anything wrong with having a program to promote improvements and rewards for ideas. But I might ask, shoudln't the reward be the improvement? Shouldn't the person want to be involved and vested in the outcome of the organization? I think having a culture where people contribute to the problem solving without having to dangle an obvious carrot would be ideal. But this isn't always the case or this easy.
Ideally, if an incentive is given for an improvement I would think it should be measured and you can then quantify how one idea is better than another. Mabye a reward is given every quarter or six months. To understand, measure and improve processes is the foundation of lean management.
I think doing an incentive program as a way to introduce a concept might work. "Guys, after 30 days I'm going to reward the best idea for improvement that we can implement and put into practice. The winning idea is one that would provide a solution for improving a current process, or solve a problem we've been having. If we can improve efficiency and reduce frustrations regularly, not just once, our company as a whole will benefit. So while I'm going to give out this reward at the end of the month, I am going to continue to reward ideas when they are really good and have major impacts. But the little ideas count too. I may decide at the end of the year that someone's six little ideas just as deserving of reward as is the big one. Little ones are easy to implement and provide an accumulating positive effect. No idea is too small to consider. So let's have a friendly competition and reward creativity for improvement"
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Lawn Lad, Inc.
Cleveland, Ohio www.lawnlad.com
Stone, I agree employees could initially be overly enthusiastic about "brainstorming" (instead of working). But I'd have to give them a little more credit and trust they understand moderation in all things. And I wasn't really planning on creating miles of spreadsheets and hours of research on financial comparative analysis of ideas. I've been doing this 20 years, I hope I know a good idea when I hear one.
For instance, when redoing the trailers recently a new employee suggested a better way to do the wiring and attach the ramps to avoid previous problems. Now, I've used that trailer hundreds of times (as have others) and no one thought of that. So we cut out the olds ramp supports and he welded the new ones and we rewired. Simple ideas but very helpful. No cost analysis needed. It seems most good new, ideas are very simple. And they're often staring us right in the face.
Like many of you, I always give new employees the speech about "how we like new ideas and want to know what you're thinking..." I just thought something like this might make it seem like more than hollow words.
...and Prapoza, of course it's wise to "monitor" job quality but I believe we all know there are "shortcuts" that can speed a job up that, the consequences of, might not show up for one or two years, especially in hardscaping. Long after the bonus check cleared. It just seems hard to create a "production" bonus that isn't an incentive to cut corners.
I think that many of us who are the owners of a business take for granted the rewards we get for our "mental exertion" through the compliments of customers, fellow businessman, family etc. But, in our industry, we forget that employees are usually just given pats on the back for the efforts of their "physical exertion." This may help explain why many workers seem to turn off their brains when they're at work. They may feel they're not getting paid to think. Seems like a waste.
Imagine the pride of an employee that takes his wife out to dinner using a $50 gift certificate given to him by an employer because, "The boss liked my ideas."
Last edited by johnkeegan : 03-18-2007 at 02:15 PM.
One other thought, and it takes me back to a bonus system that I discussed here. salesmen compensation
I also attached the draft word document that explains it. I'm still working my way through it, but plan on implementing it to some degree this year now that we will have better dashboard numbers and reporting to use to base our rewards on.
The concept being that incentive programs that are short term can be manipulated and played for the wrong reasons. An incentive or reward system that rewards long term, comprehensive company achievement is possibly more valuable than short term thinking. Giving out a $25.00 gift certifcate to the movies is a good short term thank you for a job well done. Having a competition to see which maintenance crew can get out of the shop the soonest each morning for a month, or which crew got the least call back, most compliments, had the highest realization rate, etc. for a period of time might then be rewarded. The game should change and not always be there and should not become an expected part of compensation, otherwise it's not a bonus.
A long term program should be impartial, objective and based upon reaching and exceeding production goals. Rewards should be based on what the people can control. I suppose if the accounting were tight enough and dialed down, this approach could be applied not only to the company, but to the division level (maintenance, installation, etc.) but even the crew level. Perhaps a smaller incentive would be applied at crew level for managing gross margin, where as other overhead costs get factored in at more of a company level.
I welcome any feedback on the 'proposed' bonus plan that I've been working on. I'm looking for problems, holes, issues that may be raised with this type of program. I'd also wonder what other types of behavior I could positively influence that I might have missed. Yes, this program will take some commitment to adminster, but I don't believe it to be onerous or distracting, so I'm willing to commit to it. Since I believe in the principal of rewarding based on merit and performance, I need a system, and I think this one might do it. But if I can iron any wrinkles out in advance, I'll certainly try.
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Lawn Lad, Inc.
Cleveland, Ohio www.lawnlad.com
The reason for implementing the system I mentioned is really more to help encourage a culture of creative thinking (or just plain "thinking" in general, for those uncomfortable with the word "creative.") If employees are mentally engaged in what they are doing, I believe it will help both the productivity and quality of their work and their general happiness, as well.
If someone with an MBA wants to create a system to attempt to quantify the exact monetary benefit to the bottom line of having such a system...they can do that. I admit it's not my forte.
If I can sense that employees are more mentally intuned to what is going on, I'm confident that it will reap positive results... including to the bottom line.
Originally posted by johnkeegan I've always wanted to come up with some sort of bonus system but have never seen one that I though would fit our company well.
I guess I'll be the Devil's Advocate here, because not only do I think you won't find a simple bonus system - I don't believe in bonus rewards at all.
If I've done a good job of hiring the right type of person with the right work ethic then I don't think a bonus system is required. I feel that paying a decent wage and providing an agreeable working environment should be sufficient for the right type of person to perform at their best. I can train skills but not work ethic, and I don't think someone with a poor work attitude will change regardless of whether a bonus system exists or not.
If someone turns out to be a slacker I consider it my fault for hiring them in the first place and for shackling my hardworking employees with such a person. It's my job to find the right people and give them the proper training and tools to complete the job. I can motivate to a degree, but intrinsically motivated people are the type I look for.
If you guys can get a bonus system to work for you then more power to you. But my feeling is that it'll be the hardworking employees making those targets, and they likely make them now already just by virtue of their natural work ethic.
Originally posted by Lawn Lad
I welcome any feedback on the 'proposed' bonus plan that I've been working on.
I guess the thing that popped out to me was, can your employees understand it? Not to say they're unintelligent but I know a lot of U.S. companies use immigrant labour and I wonder if your system might be too complex for the rank-and-file to comprehend.
Other than that, I might suggest that something more tangible than "GOM" might be easier for the aforementioned rank-and-file employee to target. I read somewhere about a company that had (if I remember correctly) a pizza and beer day once per month and I think the slowest crew out the yard for the month paid for the other crews' lunch. Something like that anyway.
Quote:
Originally posted by Lawn Lad Since I believe in the principal of rewarding based on merit and performance, I need a system...
I think the culture in a company begins with the owner and senior management. By hiring people that are interested in participating in a culture where their ideas and suggestions are encouraged and considered is one of the first steps. If the owner is only interested in their own opinion then people won't bother expressing their ideas once they see that they'll be shut down. The owner might be interested, but without senior managers who also embrace the concept, the ideas may never reach the owner depending on how open the communication is in the company. If access to the owner is restricted through managers it will also discourage creative input.
I think employees will be encouraged to participate in the process if they see that their ideas are seriously considered and implemented. Talking about it and reinforcing the concept through action is going to set the tone.
One potential problem I see with encouraging employee input can be getting past a hurdle of understanding. Depending on the forum for input (one on one, group discussions, etc.), the open invitation can yield complaining as opposed to presenting solutions to problems. If the employees get past the complaining part of it and offer solutions to problems it can be productive. If there is a small minority of those that have negative attitudes it can seem as if they are steering the culture.
I think it takes a blind optimist to power through the potential problems. As Nick DiBendetto (N & D Landscape, Boston, MA)shared in his talk to the Ohio Landscaper's Assoc last week, applying the 80/20 rule says that negativity/problems come from 20% or fewer of your employees. Don't focus on them and what they bring to the table (or don't bring), and focus on the 80% that do bring ideas. Encourage success, be optimistic and keeping powering through it. Either the 20% will be converted or will eventually quit or be driven out by those that won't tolerate the negativity or lack of contribution. I suppose Jack Welch did this pretty well by getting rid of the bottom 10% of performers each year.
Creating a culture where creativity for problem solving is celebrated will take time and continual development. If you haven't read Jim Collin's Good to Great, it may provide some insights to these questions as well. (or get the audio CD which is abridged - but still eight hours long, but well worth it).
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Lawn Lad, Inc.
Cleveland, Ohio www.lawnlad.com
If I've done a good job of hiring the right type of person with the right work ethic then I don't think a bonus system is required. I feel that paying a decent wage and providing an agreeable working environment should be sufficient for the right type of person to perform at their best.
Work ethic is very important, but how you compensate them is equally important. I believe that salary alone is not enough. Why is that highly motivated executives get profit sharing and stock options? Is it because if they work harder they are rewarded to a greater degree? It's not just about working harder, but also execution. How do you encourage someone to be more effective in their work, not just show up, work hard and get sweaty to make it look like they're working hard?
Paying an incentive to perform better rewards those that execute, not just those that show up to work. It also satisfies those employees who respond positively to being rewarded/recognized for their hard work. There is nothing more demotivating to some than getting compensated the same as someone else who doesn't work as hard as you. A paycheck to many is a vote or verification of their worth in the marketplace.
For me, the reason to implement a bonus system, such as the option I've suggested here, is that once employees cap out at a pay rate how else can you reward them for their work? You can't afford to pay them more unless the company makes more. This puts their ability to earn more directly in their hands. If they don't make more, it's not because you didn't provide them the opportunity, they just didn't execute. Granted this is a simplified explanation. But when you have people that have been working for you for long enough that you can't just continue to give them another $.50 or $1.00 raise per hour because they're already high relative to the market - what else can you do for them?
I also think having a bonus system like this provides an opportunity to talk more about what makes a business successful, which in turn encourages conversation and more input from employees. I've shared only the write up of how the program would work, I've not included the other training materials that bring the collective level of comprehension to where it would need to be to get a plan like this to work. As a company we've talked about financials and how a business makes a profit. A bonus plan makes the opportunity to share in the rewards tangible, otherwise we're completely depending on their altruistic motivations. And last time I checked none of my employees are monks and made a vow to poverty.
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Lawn Lad, Inc.
Cleveland, Ohio www.lawnlad.com
If you're looking to reward ideas that increase productivity or save the company money, make the rewards small, frequent and accessible. If you make the rewards large and the process intimidating, you risk paralizing the whole thing and people are actually less willing to risk making a suggestion that they think may not be 'worthy enough' to get the 'big reward.' People like to be acknowledged, complimented and appreciated. The tangible reward is still important but may actually be secondary to the approval and satisfaction derived from the owner bestowing an appropriate emotional reward.
A bonus system to reward greater production and profitability that is accomplished by the workers is a different thing entirely. I agree that providing a way to maximize earnings is important and helps keep down the temptation for hourly employees to ride the overtime clock at your expense.
I guess the thing that popped out to me was, can your employees understand it? Not to say they're unintelligent but I know a lot of U.S. companies use immigrant labour and I wonder if your system might be too complex for the rank-and-file to comprehend.
I do worry about this. I don't want it to be overly complicated. This system might only work for foreman, supervisors and the such, time will tell. I still think we can share the rewards, and if they don't understand, that will be a shame. But if they're interested in understanding why it is that they got a bonus and how they can earn it again, they'll start asking questions and looking for ways to repeat it.
But, I also think a system like this has to be supplemented with the pizza, gift certificates, oil changes, comp time, etc. to meet more immediate needs to recognize a job well done.
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Lawn Lad, Inc.
Cleveland, Ohio www.lawnlad.com
Personaly......I am in a seasonal business.......Do my best to get the same guys coming back year after year.........that is all that matters..........consistency.
I am with Cut-n-trim....pay decent, treat them well enough, pleasant as possible working environment..........Some men are thinkers........some aren't.
I let me guys run on their own pretty much........Maintenance crew tells me what's going on half the time........I have a couple free thinkers.......I don't have to reward them.
Here is my company phylosophy........My business is not running just for me.........it is there for the men that work for me........Without the business..........they would be working some where else.........that some where else may not be as pleasant.
I get guys begging me for a job every year...........my guys see that.
Also I am not afraid to tell someone to stay home the next day cause of something stupid or a real bad attitude, or been late in the morning after telling them they have to be on time......I will also hire and fire as I please..............for what ever is best for the company..........What is best for the company is best for me and the men working for me.
Bonuses...........when things are going well........I buy them breakfast or lunch time to time.
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