Profit Sharing or Bonuses?

Proper incentives can drive certain types of behavior in your cleaning business. This is rooted in
human nature. We want to see the fruits of our labor, and motivation happens, in part, by the
possibility of greater gain. For this reason, businesses have long relied on some sort of extra
compensation to motivate employees to perform. But what is the best compensation
structure? Should you share profits? Should you have a bonus structure? Should bonuses be
based on anything measurable?

For several years, I was an advocate of what we called “Branch Boards.” This was basically a
quarterly profit sharing system. We would establish a profit goal for the branch (revenue –
direct expenses – indirect expenses = net profit). For every dollar that was made above the
profit goal, the “branch” would get to keep 40%. The branch manager would get around half of
this money and the other managers would split the rest.

This was a good system, but it had one big drawback. Our team was so focused on profit, that
other important items were being neglected. When COVID happened, there was so much
money being made in disinfecting work, that branch managers naturally shifted their focus to
this area. When the disinfecting work dried up, we were left with wages that had gotten out of
control and customers who hadn’t been taken care of. Financial consequences followed.
In response, we devised a new bonus structure that was more balanced. While profit is
certainly one important metric to success, it is not the only one. For us, employee retention and
customer satisfaction ranked high as priorities, therefore, these metrics needed to be
incentivized along with profit. We developed a bonus system that has certain bonus amounts
for hitting each of the three goals (profit, employee retention, customer satisfaction). If you hit
the profit goal for the quarter, you receive the corresponding bonus. If you hit the retention
and customer satisfaction goals, the same applies. Three metrics with three different bonus
amounts.

This new structure has proved beneficial and created more consistency and stability in our
organization. So if you are wrestling with how to compensate manager, consider what you are
trying to achieve? What behaviors do you want to promote? What goals do you want to hit?
Start with the desired outcome, then work backwards to design a plan to achieve it.

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