Change Course to Avoid Economic Wipeout

Q:
I recently read your column, and I’d like to get your advice on the direction our very small underground construction company should take. All our projects have been water/sewer related structures and 90 percent public works. And you’re right-the low bidder gets the jobs. I have a background in advertising and marketing and have constantly brought up implementing much of what you said with no response (i.e., argument) from the owner-who is the “workaholic” type A personality (in the field and as an estimator). However, he is worn out, broke and the realities of bidding along with thirty plus bidders going for a $1 million job and making no profit is a very old story. So, he is open to my ideas now.

I have been doing the bookkeeping and office managing. I can see how much work, money, effort and very little return these public works projects typically brings. Any advice or an example of someone else who has repositioned his/her similar business would be greatly appreciated.
Elizabeth Martinez, Office Manager
M & J Underground Works

A:
It seems you have a lot to offer. First, are you at the right company that can use all of your talents and give you the opportunity to make a difference? Second, regarding the future of your company, your business owner is stuck doing what he knows how to do. Whether it makes money or not, he is in the “keep busy” mode. Now, the slow economy has him waking up-his business strategy is not working, never has and there is no hope for a long time to come if he keeps doing what he’s always done.

Your company situation is exactly the same as every other contractor who rode the wave of a good economy. As I say: “A rising tide lifts all boats, whether they are in ship-shape or not!” What type of other business can you go out and find or create? Perhaps you can look at industrial plant service and repair. Bidding against twenty or more bidders will only make you poor and eventually broke. Do something different now before your company runs out of money, because if that happens, you will have to find another job.

Q:
I reviewed your Q&A section in Construction Business Owner with great interest because of the nuts and bolts style of your answers. So, I thought I would run a few questions by you. My company is a supplier of materials to the road and bridge construction industry. We have been using a base plus commission structure for my sales team for some time now, and I have been acting as the sales manager. My workload now dictates that I hire a sales manager.

Lately, I have been working on developing a base plus variable compensation structure indexed against a monthly gross profit average for our sales team and the new sales manager. I am looking for outside ideas on how to structure such a program to provide incentives, drive sales and attract top performing sales people. I am also interested in ideas on how to structure a sales manager’s compensation package connected to the performance of the sales team and attract a top performing sales manager. Also, what is considered an industry standard for the compensation package for sales reps and sales managers? If you have a better idea than a base plus variable commission structure, I am all ears.
Tom Melinna, President
Chicago Industrial Sales

A:
Tom, first, I am not an expert on commission structures for sales reps and sales managers. I am sure you can find standards at industry associations that focus on manufacturing, sales and distribution of construction products. With a simple Google search for “sales rep commissions,” I found numerous programs and plans listed. I think you are too worried about the commission attracting and motivating good people. Your job is to build an environment where people want to produce. And if they don’t, you replace them with those who will. You must make people accountable, meet with them weekly, review their sales calls, keep them on task, monitor their progress and give them a reason to want to do the work. Hoping a commission will motivate people is an empty hope. Many business owners have a tough time making people accountable, and avoid tough conversations. A sales manager will need to be held accountable, too. Your success starts with your style and how you manage. Get tougher and watch your sales soar.

Construction Business Owner, June 2009