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Employee Profit-Sharing: A double edge sword?

RenoFocus attendees addressed the challenges of motivating their teams


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December 3, 2015 by John Bleasby

An unexpected highlight of Canadian Contractor’s RenoFocus earlier this week was the opportunity for contractors from across Canada to meet in a casual atmosphere between scheduled information sessions to openly discuss an incredible number of mutually shared issues and concerns. It was billed as ‘Free Time’, but it was the free-flow of ideas that excited everyone at the table.

Discussion point: How to motivate and reward staff?
Retaining a consistent team of skilled workers is one of the most important on-going challenges for any successful contractor. It takes time to integrate a new team member to your systems both in the field and in the office. The benefits of retaining motivated employees who are rewarded for initiative can be an enormous contributor to the bottom line. These key issues were freely discussed around the table by contractors from the East Coast, across Ontario, and the West. 

Thinking beyond the pay cheque
Many hourly workers focus on their take-home pay with little concern for their future or their role in the overall company effort. Employee benefits such as optional retirement savings plans and health/disability coverages are available from a number of carriers in Canada for the smallest of companies. Matching contributions give workers with family responsibilities some assurance of financial stability, and demonstrate the employers’ concern for their well-being. This can keep them on your team rather than drifting off either independently or to another company.

51RpgrI2joL._SX355_What about profit sharing?
Does it work? Is it fair to everyone? Should it apply to every employee? Does it open the company owner (and the books) to unnecessary scrutiny that can backfire? This is the challenge of any profit-sharing plan.

“Nice new BMW 7-Series in the parking lot, boss!”

Many around the table favoured all-encompassing company/family events like summer BBQ’s, and fishing trips. Others liked the idea of seasonal or occasional bonus cheques, maybe with a turkey or a bottle thrown in for good measure.

Plan concepts must be realistic in practice
One contractor described a profit-sharing plan (not his) based on a job-to-job efficiency measure. Criteria of about 40 points on each project had to be met, including time to completion and quality. If the objectives were met, that team would receive a bonus for their effort. The problem is: What happens if the job doesn’t meet all the criteria? Who’s at fault?  Is there a  claw-back on jobs that don’t meet the criteria? While good in concept, this system seemed filled with complications and potential headaches.

Nevertheless, everyone felt that profit-sharing, or at least profit-recognition, could be an important tool. The best plans would be those that foster joint responsibility across the entire company, for example between on-site teams, or between workers in the field and support staff in the office. Systems should develop a shared responsibility, a desire to offer help to teams with projects running behind schedule from those with labour to spare. These were the systems the discussion group felt were most effective, and that avoided opening the company books to any awkward critiques of corporate spending or investment.

Profit-sharing: Love it or leave it?
Is profit-sharing a tool you use in your business to motivate and retain your best people?

Be part of the conversation!
Tell us your views and share your experiences, either here in the comment section or in a confidential email to

jbleasby@canadiancontractor.ca


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4 Comments » for Employee Profit-Sharing: A double edge sword?
  1. Adam says:

    How does all this work with wsib? If I give my guys a bonus does WSIB get one to?

  2. Good Morning,

    I was one of the contractors who participated in this discussion. The Free Time provided at the RenoFocus conference was exciting indeed — being able to throw ideas around with, and get feedback from, other business owners proved invaluable. I left with a head full of new ideas.

    Regarding profit sharing: In the past I’ve worked for companies that have had profit sharing. There were good years with bonuses, and bad years with none. These good and bad years occurred regardless of how much effort I put forth. Some years I felt under-rewarded. Additionally, bonuses were based on company performance; average workers received the same as exceptional working workers. I don’t think I’ll ever implement profit sharing in my company, at least not in this traditional way.

    I’ve also worked for companies where performance-based bonuses were used. I liked this better as I felt I had more control, however depending on the size of the bonus, for smaller companies such as mine this can be difficult on cash-flow. Even if the company has a bad year, superstars exceeding performance expectations get rewarded. They key to this is to define attainable (but not easy) performance expectations for each staff member, and of course to plan to have a few extra dollars earmarked for this to bridge the bad years.

    I have heard that nobody will treat your business the same as you do, unless they have skin in the game. For a long time I thought this meant that, short of giving up partial company ownership to an employee (and thus sharing both extra money AND costs), I’d never find someone to fully depend on. But I’ve learned that qualitative rewards — great company culture, non-monetary perks, etc. — can sometimes go farther than a few extra bucks. This is where my company’s current focus is. And in the construction industry, this can also extend to sub-trades.

    – Desmond