Raising the Stakes Most contractors have tweaked their respective bonus programs over the years, usually to adjust them to the rising cost of projects and to minimize what might be called “bonus creep.”
“Six years ago, a salesperson doing $600,000 a year in sales was a superstar. Now, he’s just doing his job if he does $1 million,” says Greg Sliger, general manager for Prince William Home Improvement, in Woodbridge, Va. Three years ago, when his company’s average ticket was $8,600, its monthly bonus program for each seller started at $50,000. “But we realized this wasn’t a bonus anymore; it was part of their pay plan. It was too easy to achieve,” Sliger recalls. Now Prince William’s average ticket is $12,300, and its monthly bonus kicks in at $75,000, for which a salesperson gets an extra 1% commission (and which increases by 0.25% for every $25,000 in additional volume).
Accent Window in Westminster, Colo., recently raised the minimum volume for its monthly bonus from $40,000 to $60,000 and simplified the payout so that, at $60,000, a seller receives $1,000. This increases to $2,000 for $80,000 in sales and bumps up to $5,000 for $100,000 in volume. Every $20,000 in volume after that earns the seller another $1,000 bonus. Mike Celmer, Accent’s sales manager, says that about 30% of the company’s 16 sales reps are closing $100,000 in business each month. But sometimes companies get ahead of themselves in how they structure their bonus plans. Until last year, American Home Design’s salespeople had to close at least $1 million in sales to qualify for its luxury cruise. Not enough sellers were hitting that mark, so American lowered the threshold to $850,000, which Anglin says he believes “will bring more of the guys into the program.”
Issues of Tenure The primary question home improvement executives ask themselves is whether bonuses serve their intended purpose. Most contractors would say yes, if that purpose is to keep salespeople excited throughout the year. Whether bonuses help keep sellers loyal to their companies, though, is another matter.
Take Reliant Window (formerly Century One Builders) in Phoenix, which offers a benefits package that includes a company-matched 401(k) and a bonus plan that pays out $200 when sellers hit $20,000 in monthly sales and pays $1,570 on $72,000 in volume. The tenure of Reliant’s outside salesforce has gone down in recent years, according to company owner Larry Eiteljorg. “People are always looking for something better,” he says. However, if a salesperson leaves the company and then comes back, he has to go to the back of the line to qualify for Reliant’s “Diamond” commission program, which goes as high as 22% (based on the price a seller can get for a project).
Weather Tight, a Franklin, Wis.–based contractor, addresses the tenure issue by limiting how often its sellers receive bonuses. Twice a year the company pays 20% of earned commissions when sellers hit at least $30,000 per month and visit the customer’s jobsite on a regular basis. Todd Schulz, Weather Tight’s vice president, calls this his “golden handcuffs” because it forces sellers to stick around long enough to hit their quotas. The company also pays its top salesperson for the year a $2,500 bonus.
Esprit de Corps Like many home improvement companies, Weather Tight also conducts monthly sales contests that offer rewards such as dinners, golf outings, or tickets to baseball games. Often in these contests, sellers are grouped into teams in an effort to forge a spirit of camaraderie. Castle Windows lets its sales managers “draft” salespeople onto teams that compete for bonuses and gas cards. In the fall, New Pro breaks its salesforce into what Normandin calls “NFL-like conferences” and rewards the winners with points for sales: $10,000 in volume might be a touchdown, for example. The team with the most points gets a $2,000 bonus or tickets to a New England Patriots football game.
Rembrandt has had “a lot of success” with team bonuses, general manager Shelton says. The company chooses a “captain” from each of its three divisions, and each captain picks a team that competes based on monthly sales volumes. Every member of the winning team gets $500, and the captain receives $1,000. Side bets are encouraged, and they can get pretty personal — for example, the losing captain washing the winner’s car wearing a bikini, or the losing sales manager splitting his monthly commission check with the winner.
At American Home Design, Anglin says “we try to make our bonuses more about fun and less about money.” But his company isn’t above putting pressure on salespeople. Each quarter the company sends a bonus check to its sellers’ wives, based on how much business their husbands closed. Those checks typically range from $25 to $250 for sales between $25,000 and $250,000. “It puts the wives in the game, and that’s a big thing from a motivational standpoint,” Anglin says.
That’s probably doubly true when companies offer vacations as bonuses, which is also a common practice. Milan, Ill.–based Premium Home Products recently ran a contest called “Heat of the Summer,” which rewarded sellers who booked $100,000 in business during any of the summer months with a trip to Las Vegas. On December 9, salespeople who generated $1 million for Prince William Home Improvement in 2006 will sail to the Caribbean. Reliant’s salespeople can earn cushier berths on a cruise ship based on the business they write: A salesperson who closes $185,000 in business during an 11-week period earns a cabin room; $250,000 earns a concierge room.
Self-Gens Are Different Bonuses work as motivational tools for many companies, except when it comes to self-generating leads. Accent Windows stopped offering bonuses for self-generated leads because, Celmer explains, reps took advantage of the program by including customers who walked into Accent’s showroom on their own.
Other contractors, though, keep looking for ways to make the idea work. American Home Design issues fuel cards valued at between $100 and $300 for self-generated leads that produce sales between $10,000 and $30,000. A Cut Above pays sellers an extra 2% commission on self-gens and referrals. But Dorsing, the company’s sales manager, admits this isn’t working as well as he’d hoped, which is why A Cut Above — which spends anywhere from $350 to $600 per lead — plans to require that sellers bring in at least four referrals or self-generated leads per month.
Rembrandt pays its sales team an additional 7% commission on self-gens, which account for between 15% and 20% of the company’s leads. Shelton wants Rembrandt’s self-generated leads to make up between 30% and 40% of the total, which he says would be a barometer for how “career-minded” his sellers are. Shelton points out that his salespeople can make between $75,000 and $125,000 solely on the leads that the company gives them. Bringing in business on their own can raise their earnings to around $200,000.
Weather Tight increases the sales amount on which commissions are paid by 50% when a lead is self-generated. (For example, if a self-generated lead produces a $10,000 sale, the company pays commission on $15,000.) But self-gens account for just 5% of Weather Tight’s total sales, which is why Schulz wants to implement a bonus program that would pay sellers a higher bonus if they bring in 20% of the annual business they write. “We want them to become lead-generating maniacs,” he says. —John Caulfield is a freelance writer and editor based in New Jersey.