January 2008: Straight Answers to Tough Questions

Q: 

Do you know of a “qualification/knowledge” test to use when evaluating a candidate applying for a project superintendent position?

Susan Willard 

ABC Construction Management, Inc.

A:

Sorry, I don’t, but I like to take them to a jobsite, walk around and ask them questions such as:  

• What would you do here?
• Can you do a punch list on this area?
• What safety issues do you see?
• What should happen next?
• What is the power on the plans?
• What is the minimum grade out of a handicap ramp?
• Is there enough clearance on the rebar?

Theses tough questions will separate the men from the boys.

Q:

I hope you can help me determine a good base for salaries and bonuses. We are a ten-year old company doing about $1.5 to 2 million in sales in the custom metal fabricating business. I have three employees in the front office and five to seven employees on the floor fabricating. How should I determine my salary as a business owner? Should it be a percentage of total sales or profit? How much should I pay my general manager who basically runs the business? What year-end bonus should my general manager receive? And what kind of bonus should my union sheet metal workers on the floor get as they already make top wages for our area?

Walt Rogers

PresidentMetal Construction Inc.  

A:

First, your salary as the owner should be based on what you are worth and no more. This includes your total package: hours, benefits, vacation, vehicles and perks. You stated your general manager runs the business. What do you do, and what would you pay someone to perform the work you do? If what you do is worth $40,000 per year, you should pay yourself $40,000, no more. As the owner, you receive the profits on top of the salary you earn as a worker/employee. Your general manager should be paid what he is worth. What would you pay someone for the work he performs for your business? If it is $100,000 per year, that should be his salary. There are no formulas for salaries—only the market conditions based on value of performance and results produced.

There are three kinds of bonuses: arbitrary gifts, extra compensation based on hitting certain targets (like sales commissions or productivity challenges) and profit sharing. You can give everyone an annual gift because you are a nice guy based on whatever you want to give out. You can set targets and goals for employees, and if they hit them, you can attach an extra cash reward for hitting the goals. Or you can attach bonuses to a percentage of the net profit your company makes. This requires you to show all profit-sharing participants your financials. Bonuses without a required performance level are nothing more than gifts and only deliver goodwill and frustration. Profit sharing tied to performance will get everyone in your company focused on hitting the targets you want to achieve: customers, productivity, profit, referrals, customer service, on-time delivery, safety, etc. Good luck.

Construction Business Owner, January 2008