by Noelle Tarabulski
Compensation done well can move your team at a higher rate of speed and accuracy. Done wrong it can cause you great grief and despair.
Embedded in all my engagements is the discussion of compensation. Sometimes I put into place the Builder Consulting Group why of thinking on the matter. To date, my results have been very good, the ultimate goal is that the owner ends up very confident that his company will run like clockwork if he takes a 10 day vacation. Typically, a fair and helpful goal for many an overworked and anxious builder. The team ends up smiling as well.
In recognition of a shortage of space and time I will give you some nuggets of knowledge to help you through your compensation decisions that are placed before you this time of year.
The most important rule of compensation is this, DO NO HARM. This means be careful what you reward, as what you reward will occur again and again. Second, the one trick pony financial win on a project, with a huge payout, should be shared, but with a caveat - if it is unique and you know hard to repeat, make large compensation payouts have an informational letter attached and be signed by the recipient.
The letter should say "This compensation is a unique and bountiful event for all involved, I understand that I should not make this part of an expectation or lifestyle change, as this is a onetime event that is hard to repeat." signed by the employee. Why? The reason is that many inexperienced people will handle such events poorly and end up in personal bankruptcy. "I have the stories to tell you."
With all of the downside discussion out of the way - I have developed various plans that work across the company and allow all employees to share the results.
As the sage of management, Peter Drucker says "Develop a compensation system that rewards the individual performance while balancing individual rewards with rewards that help maintain the continuity of the entire organization as a whole."
I am in complete agreement but want to add, use spontaneous and heartfelt compensation throughout the year to recognize and reward, jobs well done, leadership well placed, risk taken, extra effort exerted. Create a budget for such moments for you the leader to reward promptly and with gratitude the deserving person, by recognition and some cold hard spontaneous cash $$$. I love it when I wear my ski jacket for the first day of skiing and find a crisp $20 in my sun glass pocket. SWEET!!
If you have issues with compensation, it may be because you do not have good enough reporting systems and metrics in place to reward effectively - at the activity level, project level, function level and then overall company performance level. Please note: Get your &^&*^&^(* so you can). This means on my 1 to 10 scale you are at most a 4.99 company.
What I mean is I love to reward - at the execution of a zero punch list at a closing (that is honest and accurate), that the average cycle time for the company or super or both is spot on. That the PM ran the project within budget the life of the job, and that overall the company beat their current goal of 7.5% net. Thus all employees get a piece of the pie. Of course, some vesting of all that money earned should be in place so your team stays on board for a long time. (I can help with the concept as well.)
If it were easy, I would not be writing this. I have witnessed mostly compensation gone wrong. When you do it right. Well you can enjoy the beaches of the world, or the ski slopes (a little bias here).
The moral of this little chat, is this. Do not screw this up. It can really wreck your peace and harmony.
You know how to reach me. A short 2 day visit, could solve most of this challenge. Have a GREAT THANKSGIVING. We have a lot to be thankful for in housing in 2019. Enjoy a great meal and the love and fellowship of friends and family. Play a little football with the kids. :)
Home builders and developers are the backbone of this country. They work hard, take risks, and create more wealth for society than any other sector of the economy. If you are a home builder and concerned about your results - you can do better! If you want to find out more, call me at 303.525.4944 or email me at email@example.com and LinkedIn is a great place to find out more about my credentials, background, and references.
My first three questions when you call are usually:
1) How many units do you sell per year?
2) What is your average sale price range?
3) What is your projected net income for the current year?