At the end of each year, Schmidt Siding & Window Co. rewards its seven outside salespeople with 1% of their earnings “just for making it through the year,” says Dale Brenke, president of the Mankato, Minn., home improvement company. But Brenke notes that this cash, which usually totals between $700 to $800 per person, is not an incentive.
In fact, Brenke says his company doesn't believe in handing out bonuses based on how much business each sales rep closes. Management instead prefers what he calls “team morale building” — rewards tied to company goals. Over six- to eight-week periods, Schmidt Siding & Window will set sales targets that, at the lower end, reps can hit relatively easily. The reward? “We might take everyone out for breakfast,” Brenke says. If sales are higher, the reward might be a dinner two hours up the road in Minneapolis. “It's about recognition and achievement. And more about fun than money. Our staff is excited to work for us, so I don't think bonuses are needed.”
Different Strokes Many home improvement executives — especially at companies in which compensation is based on the profitability of the sale, i.e., par — would agree with Brenke in principle. Chris Cardillo, president of Castle Windows in Mount Laurel, N.J., argues that “the [bonus] program has to go beyond whoever turns in the most volume. Otherwise the same people will win all the time.” Castle eschews quarterly or annual cash bonuses in favor of smaller, non-cash rewards such as clothing, gas cards, or plaques, all of which are frequently given to its sales teams. “Long-term incentives oftentimes lose their impact,” Cardillo says.
On the other hand, just as many contractors dole out handsome bonuses based on sales volume and other measures. For instance, when any of its eight salespeople scores 80% or higher on customer-satisfaction surveys for a quarter, A Cut Above Siding & Windows in Portland, Ore., pays out 0.25% of the job's volume. That increases to 0.33% for a score of 90% or better and to 0.5% for a score of 100%.
On top of larger cash bonuses, companies often run sales contests to stimulate sales at certain times of the year or to promote new products. Winners receive everything from golf outings to vacation cruises. “Every bonus that's in place keeps reps wanting to sell more,” says J.D. Diskin, sales manager for Power Window & Siding in Brookhaven, Pa. His bonus program is extensive and generous by current industry standards. Power Window even rewards reps for daily sales goals.
Setting Targets Sales bonuses have been around for a long time, but they aren't all administered the same way. At one time, American Home Design in Nashville, Tenn., didn't pay individual monthly bonuses. Instead, the company had a program in which reps were rewarded for hitting quarterly and annual goals. Terry Anglin, the company's vice president of sales, says that didn't work too well. “When the sellers saw they weren't going to hit those goals, they stopped trying for that period.”
Some contractors wonder whether their bonus programs are too generous. But David Normandin, executive vice president with New Pro, in Woburn, Mass., thinks they have it backward. “Too many contractors are penny-wise and pound-foolish when they look for ways to cut their reps' compensation,” he says. “The more business I pay out on, the happier I am.” NewPro pays its 35 salespeople 1% additional commission when they reach $65,000 in monthly net business. At $75,000 the bonus goes to 2%, and at $85,000 and above, 3%. Other contractors with high-end bonus programs include Rembrandt Remodeling in Marietta, Ga., which pays an additional 2% commission each month when any of its 12 reps brings in $75,000 in net volume and at least one self-generated lead. “Basically, I'm setting targets,” says Sean Shelton, Rembrandt's general manager. He notes that two of his sellers will approach $200,000 in earnings this year.
Power Window & Siding, which expects to hit between $16 million and $17 million in revenue this year, is a big believer in the motivational value of bonuses on the productivity of its 27 salespeople, who Diskin says average $85,000 in annual earnings. Any salesperson selling two jobs in a day gets $100, and $200 if he sells three jobs. Each month the company pays out cash bonuses on “good” volume (sales the bank approves and that don't get canceled) that range from $450 for $55,000 in business to $2,500 for $200,000 in volume. Each quarter, Power pays an additional cash bonus based on dollar volume per lead issued. And its annual bonus ranges from $2,500 for $500,000 in volume to $15,000 for $1.5 million in volume.