Chronicle's Bonus/Commission Manager lets you design a powerful performance incentive plan that takes into account not only profitability but also completion, payment status, customer satisfaction, and job file management.
A good incentive program increases your company's profitability while also resulting in more satisfied employees. Here's how it does this:
An employee who receives only a salary or hourly pay doesn't have a huge incentive to work quickly or efficiently. Whether a particular step takes three hours or six really doesn't make a lot of difference. Extra breaks or pausing to chat during the day may make the day more pleasant, and they don't cost employees anything, since employees get paid the same either way.
A good incentive program pays employees extra for profitable, well-managed jobs, while give no bonus or reducing the bonus for poorly managed or unprofitable jobs. This gives employees reason to work efficiently. Your company benefits by having more consistently profitable jobs instead of jobs where profit's eaten up by labor costs that are too high. The company also benefits because, with employees working more efficiently, the same number of employees can do more jobs: this lets you produce more profit without increasing your overhead.
A good incentive program also results in happier employees. In addition to getting their base paycheck, each month they get something extra if they've worked well. Keeping the employees happy benefits the company as well: more satisfied employees means lower turnover. Hiring and training new employees is expensive, so keeping your employees happier in the long run saves you money.
Testing and Evaluating Your Incentive Program before you Implement It
Set up your bonus rules following the guidelines here, and have calculate bonuses with Chronicle for a month or two before you announce the program to employees. Compare the bonuses calculated with the actual profits on each job to see if the rules work for your business. Bonuses that are too high will keep your company from being profitable. If they're too low, they won't be a real incentive to employees. Adjust the rules if needed before you announce the new bonus program to employees. We've have sample percentages for to use as a guide. These figures have worked very successfully in particular businesses, but don't take them as gospel; they may not be exactly right for your business. Don't announce the program until you have tested it and are satisfied with the results.
Read this Document First
Setting up a successful bonus program requires a clear understanding of a variety of business conditions. Chronicle automatically applies business rules and makes your incentive program easy to manage once you set it up, but there are no shortcuts to setting up the right rules for your business. Different areas of the country have different labor rates, different volumes of work, different fixed operating costs, different competition, and so on. And different businesses have varying roles: in one business, the project manager is involved with sales; in another these roles are covered by different people. While the same general principles apply, there are differences from business to business; we recommend reading this whole set of instructions before you set up your bonus program
Essential Elements to Consider
While there are variations from business to business, these conditions almost always apply:
|Explanation||How Chronicle's Bonus Manager Handles This|
|Work completed||Until a job is completed (and has been complete for a number of days), you don't know how much additional labor will be, whether the customer will call with complaints or call you back for repairs, and so on. Work must be done before you can effectively evaluate whether a bonus is due.|
|Money collected||While some companies pay bonuses when a job is invoiced, we don't think this is good practice. Even if your employees did the job well, if the customer ends up refusing to pay you, you lost money on the job, so there's no profit to share. (You might make an exception to this for bonuses for sales people who are bonused based on the number of jobs they bring in.)||Completion status, whether the money is paid, and whether the job meets your rules for profitability/labor rates are all handled automatically by Chronicle's collections manager based on the rules that you set up.|
|Profitable||The job must meet or exceed gross profit or labor percentage requirements to be eligible for bonuses. Jobs with very low profit or very high labor rates may call for negative bonuses.|
|Well-managed||In addition to being profitable, to qualify for a bonus, a job should be well-managed. Activities should have been completed on time, documents should have been added on time, and so on.||In the bonus manager, Chronicle shows on-time status for the department, documents, and activities, and % of days that actually had events scheduled. The setup lets you define acceptable percentages. These things give a good indication of how the job was managed.|
|Good customer service||Doing a job cost effectively isn't so good if the customer was dissatisfied with your service and gives negative recommendations to others. On the other, a job that yielded a very happy customer may be worth some extra bonus.||Chronicle's bonus manager shows both job feedback and survey results that contain customer satisfaction information. (The bonus manager setup lets you identify which survey has customer satisfaction info.) Chronicle allows you to override the calculated bonus percentages based on this information.|
Other Potentially Important Factors and Recommendations
Not every business will use these features, but for some businesses these are also important.
|Explanation||How Chronicle's Bonus Manager Handles This|
|Distinction between work sources||Some work comes in without much effort; other work requires ongoing effort by your employees to bring the new work in. Especially for employees who are responsible for bringing new work in, you can offer higher percentages on work sources that require more effort to bring in as opposed to work that comes in without much effort on their part. (For example, companies that distinguish between program and non-program work often pay a higher bonus on non-program work because this requires more employee effort, and expanding this work expands the business.) In addition, some businesses have work from particular sources that tends to be less profitable. (Work from property management companies is often in this category.) If work is less profitable, you simply can't afford to pay high bonuses on that work.||The Effect of Job Source settings tab lets you determine whether job sources have an effect and which sources are grouped together for bonus purposes. If you indicate that job source can have and effect, then when you define bonus rules, you can indicate whether the rule applies to all sources or just to jobs from a particular source.|
|Different bonuses for different employees||Businesses sometimes give different employees different bonus rates based on agreement at point of hire, based on different base salaries, and so on.||The Employee Eligibility setup tab lets you indicate whether particular employees Use Custom Bonus Rules. If you set this to Yes for any employees, you can then create custom bonus rules for those employees.|
|Departmental bonuses||While occasionally companies bonus on the job as a whole, we recommend separate bonus rates for each department since different departments usually have different profit and labor rates. For example, the gross profit you expect on a construction job is quite different from what you expect on a water damage job.||You can set up bonus rules for the job as a whole or for individual departments depending on what you choose on the General Settings tab in the Setup. We strongly recommend departmental bonuses unless every department has identical profit and labor rates.|