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Inspiring Incentives

Inspiring Incentives

70,000: That's the number of skilled electrical workers the United States will need in the next 10 years, says a recent release from the National Electrical Contractors Association and International Brotherhood of Electrical Workers (NECA-IBEW). This could be a direct result of the major expenditures in construction the United States is preparing to undertake within the same decade. A report by the

70,000: That's the number of skilled electrical workers the United States will need in the next 10 years, says a recent release from the National Electrical Contractors Association and International Brotherhood of Electrical Workers (NECA-IBEW). This could be a direct result of the major expenditures in construction the United States is preparing to undertake within the same decade. A report by the Associated General Contractors (AGC) of America lists that at least 375,000 bridges will have to be replaced as part of a $360 billion bill for roadwork, mass transit will require $72 billion worth of construction, the nation's infrastructure will be in need of $3.3 trillion in construction and related services, and one-in-three schools will require some type of work or renovation totaling $60 billion.

All of these projects have given the construction industry favorable employment projections data, an 11.4 % steady increase between 2004 and 2014, as reported by the Bureau of Labor Statistics. So what's leaving electrical contracting firms in the lurch in what may be one of the most prosperous decades for the construction industry? Currently, the average age of most experienced, skilled electrical workers is between 40 and 50. The imminent retirement of these baby boomers will leave a huge gap in the workforce that, at the going rate of recruitment, won't be made up for by younger workers. Younger workers just don't seem interested in careers in construction. So what's an electrical contracting firm to do? Bethesda, Md.-based ELECTRI International Inc., or ELECTRI Council, the research and educational program arm of NECA, recently published a strategy for retaining and recruiting electrical field labor that can be implemented immediately.

An incentive system, a method by which firms can compensate employees above and beyond their current salary for improved productivity, efficiency, and safety, may be the answer. The “Field Incentive Systems for Electrical Contractors” report offers electrical contracting firms a model for an incentive system that they can tailor to their specific needs.

Show them the money. Competition for skilled, experienced field labor will increase as the labor supply decreases. Companies wanting to ensure their projects will be completed in a timely and efficient manner may have to look beyond the wage scale offered by their union agreements. “There's a general feeling that the workers are already well paid,” says Russell Walters, PhD., P.E., one of the authors of the report and assistant professor in the Civil, Construction and Environmental Engineering program at Iowa State University, Ames, Iowa. “So when you start talking about the idea of paying more on top of the union scale, you find a lot of resistance.”

While it may be true that a job well done is its own reward, there's something to be said for raising the bar with extra incentives. Plainly stated, offering incentives based on merit should attract better employees and also encourage them to be more productive in the field. In order to compete in the tightening labor market, companies may need to revisit the notion of profitability, especially as it relates to field labor.

Many firms believe that the more money you give to the workers, the less you have within the company — and it's true that many companies operate under tight margins. However, according to the report, by connecting a portion of an employee's yearly bonus to the overall profitability of the projects they work on, field electricians will be encouraged to work more efficiently without additional monitoring. “What I was trying to convince companies with the report is that if you're increasing productivity in the field, that has a pretty large impact on profitability,” says Walters. “And there is still a need to improve productivity out there.”

When company profitability is tied to individual project profitability — something on which field workers have a direct effect — it will create a team mentality among the workers, and the employees will either weed out or assist those that can't handle their share of work. Furthermore, workers who are behind will be more likely to seek further training, even at their own cost, if they know they will be reimbursed when their improved performance results in increased reward through the incentive program. Increased worker productivity means more overall profit for the company.

Avoiding a “Big Brother” situation. Any field incentive system requires monitoring, but a successful field incentive system should be able to integrate the monitoring with the employee evaluations they currently use. There are three main criteria to monitor: profitability, timeliness of job completion, and safety. Most firms already track these three areas with time cards and safety records, so converting them into the incentive program's point value system can be relatively painless.

The report offers two methods for determining points for the first two criteria. Although the third factor is easier to track, safety must not be considered any less important than the others. In the program, employees are awarded points for attending required safety meetings, as well as those who attend additional safety classes not associated with the company. In addition, employees may be penalized for every lost-time accident has in the program year. “When you start motivating people to work faster, you've got to keep safety in there because you can work faster at the expense of safety,” says Walters.

Above and beyond the above-mentioned three, employees may also be evaluated on specific job tasks, such as administrative duties, marketing skills, customer feedback, attire, following company policies, absenteeism, or any other number of discretionary categories.

In some cases, workers may resent being monitored. “Perhaps some people, for bad reasons, don't want to be monitored because they're not the most productive,” Walters says. “Even good workers could take some offense to being monitored, as if maybe there is a lack of trust in what they're doing.”

That's where communication and an understandable, formal plan come into play. According to the report, workers will soon realize that it's in their own best interest to work toward the company's goals and to trust the incentive program.

Earning trust. Once a company decides to implement the field incentives program, the first step is to spend time explaining the program to the workers. It is crucial that each employee understands how the points for incentives will be tracked and how the incentives are going to be paid. Employees must be assured that this is a reward system; not punishment. “If anything, you should have an open system,” says Walters. “There has to be a feeling of justness to this and the overall strategy.”

According to Walters, there are general rules for incentives, called the “Justice Theory.” This means if there's a feeling that things are being done in a just way, people will accept what possibly could be perceived as an unjust payment. Under the incentive program, some workers will receive higher compensation than others. This is unusual under the union system where companies pay wages according to an existing pay scale. Therefore, more experienced workers can only be rewarded with non-monetary perks or through promotions, such as moving into a foreman position. But, according to Walters, these rewards may seem arbitrary and cause unproductive competition among workers.

Walters warns companies against fostering a “Tournament Theory” type of contest among workers. Under that system, the first place winner receives a large prize, while the other places are given minimal compensation, and sometimes are even dismissed altogether — think of pathetic Jack Lemmon as Shelley Levene as the past-his-prime salesman in the movie “Glengarry Glen Ross” where First prize is a Cadillac Eldorado, second prize is a set of steak knives, and third prize is the pink slip. “Those types of systems promote an unhealthy competition because most people are going to try to get the first prize no matter what they have to do to the others, and that can involve sabotage,” says Walters. “What I'm proposing is something where everybody gets something. The people who work harder get more than the people who don't. Maybe the top 50% of performers will get something out of an incentive program to a varying degree, but there's no disincentive.”

At the start of the program, it's vital that every worker should feel that it's possible that they will earn something if they put forth the effort. For the system to work, employees must both accept responsibility for the company's goals as well as make a commitment to the incentive system. Buy-in by both owner and employees is vital to the success of the strategy.

For your own copy of the ELECTRI Council's report, “Field Incentive Systems for Electrical Contractors,” visit the NECA Store, which can be accessed from NECA's Website at In addition, NECA's Management Education Institute offers a one-day course called “Field Incentive Systems.” Enrollment is also available through the NECA Web site.

Sidebar: The Eight Basics of Compensation

  1. Serve all stakeholders

    An incentive program must strike a balance between the owner-stakeholders (management) and the employee-stakeholders (field labor). The owner-stakeholders exchange a portion of the profits to achieve the company's goals, while the employees provide the labor to achieve the company's goals in exchange for additional compensation. A successful incentive plan seeks to make the employee-stakeholders accept responsibility for accomplishing the company's goals by including them in the rewards.

  2. Keep it simple

    If the program is straightforward and clear, it will be possible to discuss the plan with employee-stakeholders and eliminate the suspicion that there are hidden agendas or unfair provisions. Also, a plan that can be attached to a company's existing employee evaluation program will save on administrative time and costs.

  3. Start by identifying compensation needs

    A company must know what problems it wishes to solve in order to properly institute an incentive plan. To do this, first, identify a clear and compelling need. Second, the need and solution posed by the incentive plan must have a clear connection, (i.e., the incentive plan must solve the problem). Third, the value of the plan must be greater than the cost, including costs associated with administering the program. A value-to-cost ratio of 4:1 is suggested since cost estimates can be vague.

  4. Group employees properly

    When deciding how to allocate the profit to the various employee-stakeholders, it is useful to create a distribution of the net profit to each group. A company may choose whether to use union designations to determine the groups, group employees by years of service (may work best if trying to retain senior personnel, for example), or to treat all the same.

  5. Have a proper process for developing compensation programs

    Challenges and problems unique to individual companies will require a customized incentive program. Many companies use checklists as a method for developing a program.

  6. Design program to reflect company culture

    The program must be compatible with the existing culture of the company. When developing the incentive program, it is helpful to ask, “Is this program similar to management initiatives that have been produced in the past, and will the employee-stakeholders accept this style or amount of observation?”

  7. Install a formal program

    The program should include standards and application rules that are discussed with and understood by both the owner-stakeholders and the employee-stakeholders.

  8. Be skilled in the art of managing change

    If a problem has slipped past the early tests and what-if scenarios, it is better to change the program to ensure that it will produce the desired results rather than allow it to continue working toward the wrong goal. However, communicating the change to the employee-stakeholders and keeping them involved in the process can alleviate fears and confusion during the fine-tuning phase.

TAGS: Construction
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