How to Create Great Incentivized Compensation Packages for Your Construction Employees

Welcome to The Contractor's Daughter, your go-to podcast for eliminating random acts of strategy and marketing in your highway construction business. Hello, friends. I'm your host, Jeani Ringkob. I'm a third-generation asphalt contractor and an absolute brand strategy and marketing geek.

Welcome to another episode of The Contractor's Daughter. I'm your host, Jeani Ringkob, and today we are talking about a topic that I'm getting asked about almost on a daily basis.

Actually, it's something that we incorporate into a lot of our strategic planning, especially when the focus of the current strategic plan is building a workforce strategy inside of that growth model, inside of a company.

Today we're talking about building better, crafting incentives and compensation packages in construction. We're going to talk about understanding the basics of this resource that I've recently found that I love, that we're layering into some of the frameworks we were already using inside of our company to help our clients, common mistakes, and challenges that we see.

We're also going to talk about some key components of successful packages. What do those specifically look like? We're actually going to get into the nitty-gritty of that. Then also, how do you tailor incentives for specific employee roles? Because we're going to talk about that early and then we're going to once again get a little bit granular on something that you can actually take action on.

And because you know I love implementation, we're going to talk about not only how do we implement these things into our businesses, but how do we consistently evaluate their impact, make sure they're working and make sure that we're getting feedback so we can optimize them for success, and make sure they're aligned with our overall strategic growth plan for the business, helping us capture more market share, and increase revenue, whatever those objectives are, we want to make sure that we're aligning them.

But before we get started, I wanted to let you know that today's episode is brought to you by our very own Workforce Strategy Health Assessment. This is a tool that you can go take in five minutes to help you take that high-level view, really give you great perspective outside of the trenches that you're in so you can really think through it on what is the current health of what you're applying to your workforce strategy.

Do you have a workforce strategy? If you have just some components, but it doesn't feel like an overarching strategy, it's going to help you figure out which areas do you need to be focusing on.

Where do you need to be focusing on eliminating bottlenecks? Where do you need to focus to help you boost productivity with your team and optimize the resources that you're deploying to recruit, retain, and to just build successful teams?

Your strategic workforce solution is just three easy steps away. Hop onto our website and take the Workforce Strategy Health Assessment. Then you're going to quickly get your insights back within just a few minutes, and we're also going to give you some additional follow-up resources and ideas that you can use to move forward from there, but you can actually take these insights and you can develop a tailored workforce strategy that aligns your business goals with the strategy that you're implementing for recruiting and retaining top talent.

You can take that assessment at storybuilt.marketing/workforce. We're also going to have that link in the show notes. We're going to have it right there for you. Let's dive into today's topic.

Crafting these incentives in the compensation packages that are going to grow your business. There is a really great resource that I want to mention before I forget because we're going to be layering some of his ideas into things.

If you're looking to go deeper into the subject, I would highly recommend the book, Mixed Signals by Uri Gneezy. I actually listened to him on another podcast and absolutely just loved it. Immediately went out and bought the book. It was a great addition to some of the frameworks. The analysis we were doing on job costing, employee satisfaction, data collection that we were already doing in our strategic planning for clients as well. It has been a great read and I highly recommend it.

Let's start getting into the meat of this topic though. What are some of the common mistakes and challenges that we're seeing in construction, particularly asphalt paving industries come up with? Here are a few of them, but first, before I talk about them, let's talk about the two biggest things on the highest level that you need to be thinking about.

Before we get into these mistakes, you need to be thinking about what are the overall strategic objectives of the company. If you do not have that well-defined, if you do not have a mission, objectives, and a plan for the next 12 months and one for the next three years and the five years after that and you don't actively pursue that,

this is going to be a harder challenge for you to tackle. Then also, are you really familiar with the personal motivations, challenges, and pain points of your current workforce in the workforce that you're trying to attract?

Those are the two things that we're really trying to bring together and align here and figure out how do we take the challenges of both of these and align those so everybody's winning, everybody's growing in the same direction.

If you don't have a strategic plan for your growth, you can't identify that, you can't ask anybody in your company what is the mission, what are the objectives of the company for the next 12 months, and they can immediately tell you that's probably where you need to start.

But first, let's talk about what are some of the common mistakes. Let's get into this. Using the same compensation approach for all the roles in your company. This is a common mistake because you may have objectives for your company, but not every role contributes to those objectives in the same role, and not every role has the same motivations and challenges.

They don't pull the same levers in order to actually move that needle for your business. It goes without saying that the same compensation will not work across the board. I know that some of you are sighing when you hear this, “Ugh, man, this is going to get complicated.”

We tend to want to just do it the same across the board because it creates a little bit more work inside of HR, inside of accounting, maybe inside of doing some of your analytics about job costing and really determining what success and revenue generation look like inside of your business.

But you don't have to necessarily go all the way down to every single role. You can even group it into departments inside of your company and have an incredible boost in the benefits you're getting from really customizing those at least to a certain level.

Here's another common mistake that we see. Lack of a regular feedback mechanism. When we talk about workforce strategy, this is one of the elements that you need to build into your business, you need to turn it into a process and you need to really have somebody inside your organization, owning this and doing it on a regular basis.

Do you have a way in which you're gathering feedback from your current workforce and/or even your potential workforce if you're fast growing and you know you're going to need to attract on a regular basis?

Do you know what are their challenges? What are their motivations? What are they looking for? What's impacting their expectations, and their ability to execute well? All of those kinds of things.

Do you have a way that you know you're actively collecting and assessing that information? We had a company we talked about periodically, we went in, and we were doing a growth strategy workforce, was a big piece of it because they knew they were going to be doubling and they were going to have to be adding a considerable amount more people in order to fulfill their obligations.

They were really looking at how do we strategically build our employer brand for attracting talent. Once we actually went in and started actually collecting information and building this feedback system and actually rolling it out for the first time inside of their company, what they realized is they were about to have a mass exodus and they didn't even know it.

They didn't know that they were about to have a retention crisis so it completely changed the approach and the strategy, but if they would have moved forward without knowing that and not gotten in front of that before they had actually taken on all the obligations of the growth opportunities in front of them, I don't even know if they would have been able to survive it.

It's important that you have this built into your business. Here's another common mistake. Do you have a structured process for performance reviews? This may seem related to that but it is different.

We have processes that we implement for how we run the meetings in our businesses. One of those should be, “When do you do performance reviews? Who does them? What questions are you asking and then are you taking that into consideration too as you're designing compensation and incentives for your team?”

Then the next is a misalignment of incentives with the company's mission and objectives. This is why I mentioned early on that the two key elements are, “Do you have a mission and objectives lined out? Are they well-defined and articulated in a way that every single person in the company knows what they are and how they really can influence those?”

Then you have to ask yourself for at least all of the major divisions of your company, if not even down into a lower level, are the incentives and the compensation that you're rolling out aligned or misaligned?

It is very common once we get to this evaluation piece for people to realize that they are actually motivating against the objectives of the company. What they're incentivizing for is actually moving them in the wrong direction and it's nobody's fault because there's poor communication and you're sending mixed signals. Remember the book I mentioned? I think it's a great title.

We need to also make sure that we understand one of the unique challenges in our industry are the construction-specific challenges. Seasonal work and really diverse skill requirements within the company make this challenge of creating compensation and incentive packages harder than it is for other organizations.

That's just something that we have to deal with and it's part of the reason why you might have to get a little bit more granular and creative in your compensation. Let's move on and let's talk about what are some key components of successful packages.

This list is by no means definitive. It is not the end all be all. I think one of the best things we can do in this area is be creative and think outside the box. Sometimes the things that cost us the least inside of our organizations can actually give us the most benefit on the backside.

But we're going to talk about some of these because I want to give you some ideas to be thinking about. Not all of these work for every role. We'll get into that a little bit more later.

But here are some ideas, bonuses for on-time, under-budget, or safe project completion. What are the things that you want to motivate for based on the company mission, its values, and the things you really stand for and are non-negotiable inside of your business? It could be customer service, it could be quality of deliverable, it could be speed, it could be a payment. What is the mode or differentiation around your business that maybe you need to be incentivizing for?

That may impact if you design bonuses to be on time, under budget, safe, or other areas that could be a measurable metric for success.

Here is another idea, profit sharing to encourage efficiency and to encourage strategic thinking. At those levels where you want, we don't need an A player in every single role, as a matter of fact, most companies actually can't thrive that way, but in those roles where it's super essential, are you willing to consider something like profit sharing to really encourage people to be strategic thinkers inside of your organization?

Then here's another one, overtime pay for extra hours during tight deadlines. How are we communicating that and sharing the value of that? We know because we're constantly setting up feedback inside of companies that for a lot of employees at certain levels inside of our organizations, this is really critical.

They love overtime pay. They want and are willing to work these hard intense hours and then be able to rest and relax or pull back and have downtime. But how do we design it? How do we communicate it, and know that that's probably not true across the board for your entire company?

Retention bonuses to reduce turnover. How do you maybe delay certain bonuses to kind of keep people on board? That's another great idea. Then project completion incentives for efficiency and excellence. This can be something that when it's in the control of our employees can be a great tool to pull or a lever to pull.

Let's talk about a few more examples that are non-monetary. Because like I said earlier, we should challenge ourselves to get creative here, not everything is monetary. So, don't forget the complicated health benefits, well-being, accident coverage, life insurance coverage, and anything like that that you have.

One of the things I see in companies is we all assume we have them, it's just something that goes without saying. But are you communicating that to people and are you showing them, we actually had a company where we actually built a pie chart to make sure that at least once, your people understood how much of their compensation that represented just to help them understand the value of it.

Something like that and how you communicate that can be very important. Another item that can be non-monetary, even if you are investing a little bit, that isn't straight up monetary, is professional development opportunities, and training certifications.

So many people want this. When we do our research for even statewide workforce campaigns and strategies, one of the things we see is that people want to know how they're going to develop, and how they're going to get to the next level.

I have rarely done any interviews or surveys or we don't see a high propensity for people at every level of an organization to want to know how they're going to develop, and they always appreciate when we can actually implement, identify, and implement effective training and/or certifications to help them do that. It's super valuable inside of our organizations. It takes time, but it's something that we can implement, turn into processes, and probably use over and over again for our start company.

Recognition programs to boost morale. Think of simple ways that you can acknowledge the work that people do. In our industry, we go hard when we go. It is hard sometimes to stop and figure out how we recognize people when they're doing a great job when they hit something, and how do we do it in a way that it doesn't just feel good to them, but those around them get to see it, experience it, and get motivated by it as well.

Flexible work arrangements for work-life balance. This is something that the industry's been talking about a lot. We get this, ranks really high on all of our research, I just need time to take care of personal matters, to go to the doctor, to go to my son's baseball game, to go take care of my ailing mother, whatever that is.

It can get hard when we're in these environments and we're out in the field. But I've seen lots of companies create really creative and flexible work schedules, partnerships, and cross-training from different teams to allow employees to do that.

I'm always surprised at how much employees will actually self-manage this or manage it on a team level within sight of their units. This is something also is highly valued and something people will actually talk about and it will help them recruit for your company when you create things like this.

Also, wellness programs, gym membership, and stress management workshops, all of these things can be seen as really great benefits. I've seen people even do language training for family members that they want to maybe learn better English or different stuff like that.

All of these things are out of the box, not necessarily monetary incentives that we can think about. Another thing that I want to encourage as we look back at some of these examples, no matter what you're doing, I want to stress the importance of transparency and fairness in your compensation structures.

It may not be that we're painting across the whole company with the same brush because it doesn't make sense but we need to understand that in this day and age, we can't afford to not be transparent and as fair as possible.

Don't run into that snack when you're creating some of these ideas inside of your organization. It's a great litmus test to say, “How are we going to communicate it? How are we going to document it?” and be transparent about what this is inside of the company.

Let's get a little bit more granular about the different roles or at least categories that we likely see inside of our companies and how do we possibly tailor incentives or what types of incentives might they really benefit from the most?

If we think about field workers, laborers, and equipment operators in our businesses, these are skilled-based pay increases, for new skills or certifications. I mentioned to you, we see a high rate of people wanting to know, they come in as a laborer but they want to know, “How am I going to get to equipment operator? How am I going to get to a supervisor?”

So how do you show them and incentivize them and actually use transparency to document the pay increases that they could receive at these different levels? And what skills do they need to work on and how do they develop those skills?

This can be a great incentive or compensation program that you can design for the field workers. For some of us, it's relevant if they need tool or equipment allowances or personal gear, maybe we supply more of that. I feel like most of the companies in Orange Street do this, but sometimes I'm surprised and this can be a really simple one as well.

Team performance bonuses for safety and productivity are incredible here. Nobody's ever going to tell you in the research or when you get that feedback that they're getting paid too much or they're getting paid enough. It's just never going to happen. But I would say that if you really are doing this research and you're looking at this, you're always going to see, or more often than not, the reason people really stay is because of the teams they work with.

Another way to elevate those teams, tighten those teams, and make them even stronger, is to come up with team performance bonuses. Like I said earlier, do you want to focus on safety? Do you want to focus on productivity, completing by deadlines? All of those things can be great ways to do throughout the season giving small bonuses, as well to really keep teams motivated and really encourage them to be strong, and even this can tie directly into a recruiting referral system inside of your business.

Let's look at the project manager level. Project completion bonuses can be really great here. But also make sure that you're looking at what are the key objectives of completing a project and directly tie them to that.

Another thing that can be really great here is professional development funds for continuous learning. Maybe you set aside a pool of money and give them some options about how they could go and continue their education, what courses they could take online, and certifications that they could get so that maybe they can start elevating their career inside of your organization in a certain direction based on their career path desires.

Then flexible work hours. Once again, this is really great. It helps them manage irregular project phases when things come up, allowing them to make decisions about flexible work hours, allowing them to work with maybe other managers to be able to do some of the things that we talked about earlier that we're seeing a lot of companies have success with. How do we create that flexibility?

When you get more into that administrative staff, it's a little bit different. Performance-based annual bonuses really can be tied to not just efficiency but accuracy. This is where we're looking at the numbers. We're looking at revenue. We're trying to be efficient with payroll. All of these types of things come into your estimating how efficient and accurate are you with your estimations?

We could do performance-based bonuses based on that. Then also mapping out those career pathways once again. How are you going to grow in the company? How are we going to help you get there?

We mentioned earlier, “Do you have regular performance reviews?” This is one of the best times to be talking about that. What are your aspirations for your career and how do we help you build an advancement pathway to get there that also keeps you within our company and helps us benefit from the investment we're putting into you?

Then also, this day and age we're seeing more and more opportunities to do work-from-home options, to reduce commuting stress, help people actually get a little bit better work-life balance when that's possible, and sometimes in the administration, that is really possible, it just takes some thought about how you're going to keep your team connected at the same time.

Now that we have some really great ideas and we're looking at implementation, how do we do it? How do we do it in a way that we're evaluating, is this working? We talked about early one of the biggest pitfalls, is maybe we're misaligned. Maybe what we think we're incentivizing for is actually incentivizing it in a completely wrong way that isn't aligned with the mission or the objectives of your company.

How do we do this? I'm going to give you some ideas to start generating some ideas and really think about how are you going to measure effectiveness and success. Employee turnover rate is a great way to gauge satisfaction with compensation. If you have it kind of dialed in what your current turnover rate is, set a goal, and really start trying to track that.

Employee engagement surveys for feedback on morale and benefits are another great way. You can work this into that feedback process that we talked about that it's really essential to have anyway, part of this can really be going to an EPS or an EES, which is Employee Engagement Survey.

What is that score for you? Absenteeism rates are another great way to really understand are people really connected to their team? Are they committed to the company? Are they motivated? Are they likely really good culture fits?

You're going to see absenteeism rates drop if you're really hiring the right people inside of your company. Then productivity metrics for the impact of incentives on the work outcomes. One of the things we talk about—and we won't get into it here because it's a whole other topic—is onboarding systems. Onboarding systems are one of the best ways to increase retention and move and accelerate productivity inside of our companies.

Doing productivity metrics can be really important. If you're implementing an onboarding process, it's probably something that you're going to want to consider as a metric for that as well.

Then retention of high performers. This is going to help you determine the appeal of your reward structures. Are they working and are they attracting the right people? Do you know and have you identified who are the high performers inside of your company and are you retaining them? Are you measuring that compared to, you may not have metrics that you have to compare this to but now is a really great time before you get too far into implementation to see if you can pull some of those numbers together so you have something to compare it to.

Then employee advancement, this is something that's really easy but we [don’t necessarily] do enough. But it's also something that once you start measuring employee advancement, it's incredible content for your employer brand.

Talk about and celebrate these advancements and it's going to give you a gauge as to how effective the development incentives are that we talked about throughout this process and it's a great piece of content. It's a great way for you to also take what you’re doing, take the implementation of everything that you’ve been doing, and actually take it all the way to the beginning of the cycle when you're talking about recruiting and building employee brand and having a strong pool of great fit candidates coming in.

This is a great way to go full circle with this stuff. In conclusion, I want to just review. We talked a little bit about just the basics, including common mistakes and the challenges that we see inside the industry.

We also talked about a couple of key components of successful packages, just to get you thinking about not just monetary incentives, but also non-monetary incentives. But then also, how do we go a level deeper and tailor incentives for the different types of employee roles you may have inside of your organization? Everything isn't going to work at every level.

We have to think about it a little bit differently. Then implementing and evaluating the impact. If you're not going to measure as you implement and you're not going to optimize that implementation, you're really missing out on a lot of the benefits that you're taking here.

Once again, listen to this, and generate some ideas. But the next step is to go take the Workforce Strategy Health Assessment tool that we created for you. You can find that at storybuilt.marketing/workforce. Take the assessment in a few minutes. Really figure out what part of the workforce puzzle is the area where you probably need to be focusing on first.

I'm always available to talk this out with you to help you generate some more ideas or figure out the ideas we talked about here today, what are some of the ones that might work best for your company or what are the really creative ones we could come up with that are going to really move the needle and get your company strategically moving forward, capturing more market, building more revenue? Whatever those strategic plans are for you, your workforce strategy is a key player in that and compensation is something that we all need to be thinking about and putting more thought into.

I hope you enjoy today's episode. Make sure that you subscribe, make sure that you leave a review, but more than anything, make sure that you take the assessment and you actually take action on this today.

What are one to two things that you could sit down with your team and decide as it's related to compensation and creating incentives inside of our organization, how are we going to take time to address this inside of our organization and optimize it to get the most out of it?

All right, take care, and until next time, make sure that you are thinking about how you're going to take steps in your business toward building a more strategic business.

Thank you so much for joining us for this episode of The Contractor's Daughter. If you liked what you heard, be sure to subscribe and review. But most of all, share this with all of your friends, partners, and customers in the highway construction business. Thank you for building the infrastructure that we all rely on.