Does Your Bonus Plan Contribute to Profitable Growth?

By Julia Baillie

Navigate frequently comes across the concept of integrators using profit sharing and project-based bonuses to drive growth.

On this episode of the Navigator, Brad Demspey, CEO of Solutions360 joins Brad Malone to discuss how integrators can successfuly implement financial incentives that help grow the business.

A lot of integrators use the word profit sharing, but what they really mean is contributions to a 401k, or the equivalent retirement plan in your country. Aside from that, there are project-based bonuses, which are often tied to gross profit.

What are some ramifications when bonuses are based on gross profit?

Navigate works with several integrations companies and we often hear, “Well, I give my project managers a percentage of the gross at the beginning, or at the actual at the end.”

But when you talk to those project managers, they often say, “Well, the way for me to make money is to increase the gross profit, so I’ll just end the project early.” In other words, the project gets thrown over to service for clean up. But now you are destroying the service department, which is bad for the company.

When Navigate looks at a metric, we like to look for the unintended consequences, because you always get what you measure. We see many integrators are incorrectly measuring the one thing they are after and forcing the wrong behaviors.

“I find a huge conversation with integrators is we have all these metrics, but we’re keeping score in different games,” says Malone. “And we want to be playing the same game, with the same metrics, that are visible, that are transparent, and we all have skin in the game. Because I find that a tech will just work an hour of overtime if they want a ‘bonus’ if they want ‘more money’, and yet that was counter to making profit.”

What should be the desired outcome of your bonus plan?

The goal of any bonus plan should be to incentivize the project manager and everyone on the operations team to manage their projects to the quality standard, profitably. And the way to do that more profitably is to get rid of the waste, and the drama, and the call-backs. In other words, the team follows the documented process, and it’s amazing what happens when you do that.

Who should be a part of the bonus plan?

Navigate believes it should be more than just project managers. It ought to include technicians, procurement, warehouse, and anybody who is making that project profitable.

Also on the podcast:

What are the two things that you must do to have a successful bonus program?
What is the one thing that you should never do, that will always cause problems?

Listen to the podcast for all this and more!