How A Leading Remodeler Incentivizes Team Members

As a design-build remodeling team, it’s always been important to find ways to measure our success on projects and recognize the individuals who create that success in a fair, balanced, and motivating way. Over the years, while the project measures have been consistent, we’ve tuned the way we recognize and incentivize the project team members in a way that aligns with their contributions and where they have impact on results.

There is no perfect approach. How much or how little you implement individual incentives depends so much on your company structure and culture. For our firm, every team member from sales to design to project management to craftsperson impacts the project performance to varying degrees. We’ve tried to make sure our metrics and incentives reflect that reality.

It’s been a journey to find this right balance over our 20 years in business. But we’re proud of our solid gross profit vs. our estimated numbers and our outstanding customer satisfaction. As an example, in 2024, our overall job cost variance was 1.9% under budget on $5M of direct job cost. Our client GuildQuality Satisfaction rate was 98% and consistently has been over the years. The key is setting and measuring critical performance metrics, setting the right incentives for team members, and holding constructive job reviews.

Compensation Structure

Our project developers (sales) have the most aggressive incentive structure as they work on commission. They are compensated monthly on the overall project dollar volume and the gross profit performance as projects sign into contract and complete. Our project managers work with a fixed base salary and receive a bonus incentive on a quarterly basis for final GP performance for the projects completed.

On the next page are key performance measures we use and how the team members are recognized.

Gross Profit

For overall gross profit on individual projects, we provide financial incentives to our project developers (who perform the sales and estimating function) and also to project managers who primarily manage the projects during the build phase. 

Teamwork between these two roles is critical to meet the financial goals of the project as they, working together, have the greatest impact on project estimating, pricing, and quality. This “give and take” works well to keep pricing reasonable and competitive without compromising construction and finish quality. To facilitate this, we do the following three things:

1. Assign a project manager at the beginning of the project to weigh in on the design approach and devise the construction strategy working with the project designer and project developer.

2. Give the project manager the authority to weigh in on the choice of trade partners, construction materials, and labor challenges before pricing is finalized for the client.

3. Provide both the project developer (sales) and project managers the authority to initiate change orders and addendums to the project, which may result from existing or hidden construction issues, material changes, or project scope increases or reductions.

Job Cost Category Variance

While the variance of individual direct job cost categories is a key metric for our design, pre-construction, and production managers, we also incentivize our individual project designers and craftspeople using a team bonus approach paid out quarterly. These team bonus structures work well as both project designers and field craftspeople are not only assigned to multiple projects but most often work in teams on the same projects.

Designers are bonused to meet the design budget set for the individual job. They provide a revised forecast during the development phase if additional design time is needed that will be recovered in the final pricing of the project. They also help estimate the design involvement needed during project construction, which can vary by project and/or client.

Our field craftspeople have the most impact on actual labor cost vs. estimated based on their productivity and completing work in a quality fashion without re-work. They earn a team bonus if they beat the estimated labor budgets for all projects completed in the quarter.

Client Satisfaction

Hitting the right financial targets is just part of the success equation. Delighting clients is critical in a business that is so dependent on referrals and repeat clients. For this reason, we use GuildQuality’s survey service to get an in-depth perspective from our clients on every aspect of 20 their experience with us. This helps us understand where we are strong and where we need improvement.

All members of the project team receive a small cash reward for every review they generate as a team. The amount is less important than the reminder for them to ask our clients to complete the reviews.

Project Reviews

After every job is complete, final invoices are paid, and reviews have been solicited from our clients, our finance team sets up job reviews with the designer, project manager, and project developer for 30 minutes via Zoom. They include the general manager, design manager, and production manager.

Our expectation is that the individuals have reviewed the financial performance, determined if we missed our estimated numbers, and if so, why. They also review the clients’ feedback. The group discusses any systemic issues existing in our processes and/or any one-time problems that impacted this project.

It has taken time for team members to see these discussions as productive and positive and not as “inquisitions” where individuals are called out for any mistakes. We’ve set the tone that it is important to be prepared, open, and honest about where we can improve versus fearing the admission of a mistake.

Awareness and learning about how we can improve is critical. Honesty about a one-time oversight is applauded.

Other Metrics 

Other important metrics we’re tracking include schedule adherence vs. slippage, factoring out client-driven change orders, delays, or hidden conditions.

We’ve also started measuring change order cost variance as a percentage of original contract price. Our aim here is to provide honest and accurate data to help set potential clients’ expectations and differentiate how we perform with real data.

In summary, developing a balanced set of key project success measures is not only critical for the business but for team members who must (1) understand them, (2) recognize their importance, and (3) be accountable for their part in achieving them. 

Finding the right way to recognize and incentivize your project team that aligns with your culture and structure takes time and often requires adjustment along the way.