Dispatch #62 - Design a Project Manager/Estimator Bonus Plan - Part 1
Project Manager/Estimators can make or break a construction firm’s performance. They’re highly skilled, quantitatively savvy professionals who want to be fairly rewarded for the value they add.
Owners, meanwhile, want to retain top-performing PM/Estimators, and part of their toolkit for doing so is a performance-based bonus plan. In such plans, desired results (performance) are defined and then used to calculate a bonus.
Example: if a PM/Estimator runs $3 million of business at 30% gross profit margin (GPM), she/he earns a $30K bonus.
When designing a plan for your company’s PM/Estimators, incent one, two or three (max) results you need from this position, such as:
Lead generation - new clients
Lean generation - new jobs from existing clients
Design - including value engineering
Cost estimating - take offs, units (hours, materials), costs
Sales - apply markup, set bid price, close the deal
Project management - deliver the job on time, on budget, per spec
Change orders - identify, capture/sell, maintain the relationship.
A PM/Estimator’s job description contains a number of responsibilities, but pick just a few for the bonus plan. This requires thoughtfulness, so I’ll pause here and suggest you read this short article by George Hedley in Metal Construction News as a next step toward developing a bonus plan for your PM/Estimators.
In Part 2 of this Dispatch, I’ll get into the numbers behind these bonus plans.
Need help with this or other financial matters faced by construction contractors? Let’s talk!
David Stern CFO makes every effort to provide useful and accurate information. This content, however, is not intended as a substitute for specific business-related financial advice. We disclaim all warranties and liabilities from its use.