Tried a bonus on gross profit, but doesn't work because job hours are grossly miscalculated (over-estimated) in order to make PM look good.
This has a direct effect on sales team and on winning projects, because hour estimation is always high.
Looking for ways to make this better - more appealing. If the sales team wins, operations should win as well.....
Thoughts?
Define targets to hit for job completion? Finished within hours, like a range. To avoid your problem right now. Consistently coming in very under hours, I think is a problem. Some one is over estimating too much, possibly to pad their bonus like you say.
If a job is quoted at 100 hours, and comes in completed at 90, bonus time! Job quoted at 100 hours, finished in 70? No bonus, there's a problem. Why so many extra hours?
Does the PM's hours get put in the quote? If yes, are they broken out, Installation Hours, PM hours. Are installs coming in right on the money and PM hours low? Or vise versa.
Do they get paid out at the end of every job, or is it all tallied up at the end of the year? Could try doing bonus based on the year instead. Factor in job wins and job losses, as well as how many hours under or over.
I'm mostly spit balling here, I never received bonus when I was acting PM, but it was discussed that if I ever went full time, I may get a bonus (in lieu of a raise, hah). But I can't imagine I would intentionally add extra hours to make sure I get a sweet bonus, but I know some people are like that.
My first question is what is your bonus plan for the whole company? I struggled with how transparent my P&L can be with employees and how to bonus for years. I did find that having one bucket that all bonus money went to (not commissions etc for sales) was the most effective for being a productive team.
I would suggest you bonus every employee however weight it according to performance. I would also recommend you have quarterly all hands meetings. Show the bonus bucket total and show how profit was increased and where efficiency/bonus $$ suffered.
This is all predicated on employee training in free market economics. If you do not have a base of solid free market economic ideas then any mention of bonuses will cause problems between employees. If you can display what opportunity costs are, how increased profits creates wealth and is good for everyone then you can have a healthy bonus program.
Gary Wolfram has great Economics 101 videos. He grabs people's attention with real world examples. Here is a good video.
https://youtu.be/C93K8xDGIHo
Good luck and I commend you for having a bonus program.
Ask questions and get answers to your physical security questions from IPVM team members and fellow subscribers.
