Fast Tracking Solutions Blog

Put your money where your profit is in Compensation……

Recently, there has been a lot of press about football player’s compensation. Specifically, many of the new contracts written for superstar quarter backs have had press showing over $100 million to several hundred million dollar packages. What the press doesn’t tell you is the compensation is made up of a relatively smaller fixed salary with a huge variable incentive plan. Our industry could learn a thing or two regarding this sports model of compensation.

Each of us are struggling to maintain the absolute best and brightest people at a time where we have had years of financial challenges. Most have seen a tremendous percentage of employees laid off in order to survive this economic recession. We are asking our white collar employees to do almost twice the work for in some cases one half the total compensation they received prior to 2006.Why couldn’t the above sports model work in our industry?

It’s a long standing Human Resource philosophy that if you pay an incentive, you must make it large enough to actually get the person to consciously alter their behavior because of the opportunity to earn additional income of consequence. Pay t o little of an incentive, and you can expect insignificant change and performance improvement.

Most professional sports franchises pay $1.50 in incentive for every $1.00 in salary. So a player negotiating a $250 million dollar contract is actually receiving $100 million in salary and the balance is paid only if the performance of the team meets the expectation of the owner. Makes sense right?

So why can’t we transcribe this sports compensation model to home building? I believe that given good metrics and a healthy frequency of incentive payout when earned, that most of our management personnel would gladly embrace an upside compensation incentive for a lower fixed salary. The key is setting goals that are realistic and obtainable and involving the affected employees in the formulation of the new strategy.

A head of construction making $125,000 a year under this scenario, would receive a base pay of $75,000 and have a variable incentive opportunity of $107,500, totaling a annual compensation potential of $182,500.If the metrics are defined and measured well enough, it should give you as the employer an opportunity to pay incentive dollars on a more frequent basis and thus alleviate cash flow concerns for the employee.

I know that many of you are thinking I am smoking something and that realistically this change could never happen in your organization without a mass exodus, but I suggest that to avoid mediocre performance we need to look at every “break from the pack strategy” there is out there. We all are scared to shake it up and make changes. Were concerned that will affect our ability to sell that next home.

My suggestion is we can’t afford not to evaluate alternatives to ultimately strengthen our balance sheets.

How to choose a Consultant….

From 1979 to 2001 I worked in high level positions within corporate America. I was always surprised over the number of consultants that called offering their advice, solutions and their roadmap to success. So in 2001, when I decided to broaden my scope nationally and offer my consulting services. I was always very conscience of my approach. Initially, I actually had CEO’s tell me that they felt I was more interested in the sale than I could ever be about their success. This was a certain wake up call. Clearly as a consultant you are always driving for monthly revenue, sometimes this fogs your motivation and the client suffers…

I quickly realized that I needed to really evaluate my personal drivers in doing this business and after a long personal reflection , I believed that I would be more satisfied at the end of my career comparing how I actually helped our industry versus counting my fortunes. I must admit, it was not an easy decision to reach.

Today’s consultants in our industry are far less in numbers than back in the 2005. Many couldn’t survive during this economic downturn or elected to remove themselves totally from the industry.

Admittedly, I believe an outside perspective if always helpful for a company and their leaders. Here is what I recommend you look for before engaging a consultant;

  1. Interview the consultant about what drives them to do the work. Determine what really motivates them. Why aren’t they working in corporate America?
  2. Are they about providing solutions or facilitating solutions for an organizational buy in for the initiative?
  3. Build enough relationship with the consultant to feel comfortable that you will trust this person. It’s critical you are able to be vulnerable and open with the consultant and to be hesitate, will only damper the results achieved.
  4. Agree on outcomes and milestones. Surprisingly, many consultant do not have a defined result defined for them. The employer basically talks generalities and the consultant feels their way through the project.
  5. Agree upfront to work with a consultant as a partner. The consultant will give you every ounce of discretionary energy if they perceive you embrace them as an extension of your staff.
  6. Be fair in establishing a compensation/fee for services. Although many consultants in this economy won’t deal directly with you with a reduced fee offer because of the lack of opportunities, going to a dollar level that gets the consultant to agree to the role but barely compensates them for the results produced will usually create a less than passionate work performance from the consultant.

Candiates will Lie, now what?

I recently conducted several searches in both residential and commercial businesses in multiple states. The positions ranged from superintendents to heads of Pre-Construction and Construction roles.

I started with each candidate by spending an average of 1.5 hours on the phone discussing experiences, backgrounds, personalities, likes and dislikes and strengths and developmental areas……No rocket science stuff, just give me the facts….

After talking to a huge group of potential candidates, I narrowed down the pool to a critical few. These people represented themselves as the best and brightest of the bunch and clearly articulated to me via the phone, information that matched the client’s criteria for a successful hire.

The next step was to arrange a face to face interview at a local hotel. All candidates passing the initial screening were notified of a time and place and asked to bring information or photos regarding their work. Each candidate was aware of a back ground check and a reference check that would be completed before a hire was made. I then scheduled 2 days back to back in different locations in order to see all viable candidates.

When the interviews began at the Hotel the following took place;

-          Candidates were 20 to 25 years older than they represented themselves on their resume.

-          50% of all candidates were no longer employed although their resume indicated otherwise.

-          33% of the candidates admitted to given me a lower compensation than they actually earned

-          Several candidates called and stated prior to the face to face interview that in thinking about the background check that would ultimately surface, they wanted to come clean about items that would appear.

-          Several candidates arrived at the interview saying they had no documentation/photos as previously stated regarding their prior work.

Clearly, our economy and the state of our industry has forced many people seeking employment to manipulate their personal data for any kind of advantage. I continue to be concerned that applicants today in Home Building know that they are 1 in 100 applying for each role and the bar has been set so high that lying in some cases is the only way to find yourself as a bona fide contender.

So the morale of this story is,” buyer beware”. Never take a resume at face value and always look to validate everything about a candidate that is critical for your business. We have all expected exaggerations to be part of the landscape in this tough economy, but I for one never expected the level of flat out lying to be that broad based. Be diligent my friends.