Performance Pay Works
It was the summer of 1982 and I was between my sophomore and junior year of college in Duluth, Minn. Times were tough during the recession, especially up in northern Minnesota, and I needed a summer job. I got lucky and landed a job as a window cleaner for a small company. They had one manager and six of us window cleaners - three lead guys and three seasonal hires like me.
Summer in Duluth is short. Some years if you blink you will miss it. Most of the building managers in town want their windows cleaned in the summer. It is really the only practical time in Duluth.
So despite the recession, this company had a backlog of work to get done. And they had to get it done during the days when it was not raining. Production was paramount.
I remember my base rate was $3.85 per hour and I got an extra 50 cents per hour for “high time,” which was extra pay when we did work on scaffolding or a 40-foot ladder. So my maximum pay was around $4.35 per hour.
Now the lead guys got about $2-$3 more per hour with the same “high time” bump of 50 cents. So their maximum pay was around $6-$9 per hour. It’s not much looking at it now, but in a small town in the depths of a recession, it was not a bad job.
So it is summer and now we go to work. Push, push, push was the manager’s mantra. In the morning we would all meet in a large utility closet of a local hospital (seriously), get our gear together, get our assignments and then off we would go. We had three crews of two guys each running around town cleaning windows - with the manager filling in for guys who drank too much the night before and called in sick.
The manager, a well-meaning guy, ran the window-cleaning division of a larger cleaning company. His boss was always breathing down his neck to get the work done faster and cheaper. He was under pressure. He was trying. He was pleading with us to work faster.
Now let me tell you about the lead guys, the guys he was trying to motivate. One was a lifelong window cleaner. He was productive for about three hours in an eight-hour day. The rest of the time was lunch, cigarette and coffee breaks. He was a piece of work and really fun to be paired up with.
The next lead guy was a laid-off brakeman/switchman from the railroad. In former years this guy was making $40,000-plus a year - big money at the time. He figured he would get back with the railroad at some point. When it rained and we couldn’t work, we would go to the bar and spend the day shooting pool and drinking Pabst. He was real cool.
The final guy - I forget his name - was recently out of jail for some alcohol-related offense or another. He couldn’t drive, so when we were paired with him, the seasonal employees took the wheel of the window-cleaning truck.
None of the lead guys were what you would call self-motivated, at least when it came to cleaning windows. None of them particularly liked the company or their job. What they were good at was setting up a job safely. As an example, they knew how to prepare scaffolding for a multiple-story cleaning. They were needed because not just anyone in town could do this kind of work. They knew it.
Being a helper, I took my direction from them. They took a one-hour coffee break. I took a one-hour coffee break. After all, I was a helper and I liked coffee.
Busted By The Man UpstairsThe laid-off railroad worker and I were the crew handling a job cleaning every outside window of an eight-story hospital. On a high-rise job, you use scaffolding and you clean every window in a line starting at the top floor, then descend and clean the window directly below. When you finish, you move the scaffolding and roof supports over to the next line of windows and repeat the procedure. The first day on this job was a beautiful day - 70 degrees and sunny. We took our time as usual.
The next morning when arriving at work we were greeted with a written warning. Our manager was furious! It seemed the manager and his boss had camped out in the building across the street and watched us the entire day. They did a time study on us! They figured out how much we worked in an eight-hour day. It was about three hours. They showed us, to the minute, what screw-ups we were. They even clocked the time it took for us to enter the building on the ground floor - after completing a row of windows - and appear on the roof to move the scaffolding supports. I remember it was a 25-minute average. We were totally busted.
Our manager said his boss insisted we both get fired. But get this: The manager said we were his two best guys. Unbelievable!
An Incentive To Work HarderThey did not fire us. Instead we got a raise. After beating on us to move faster each day to no avail, and coming to the realization that their two best guys were still unbelievably slow and unmotivated, they decided to give us some motivation. They constructed a performance pay plan. The faster we worked, the more we would make per hour.
They showed us what we would make per hour on the hospital job. I think the scale went up to $14 per hour, which reflected the fastest time possible in their minds. We were flying the first day on the new pay plan. I mean we were a machine. We beat the best time they thought we could do it in. It was like that for us and the other two crews for the rest of the summer.
Cutting to the end of the summer, I averaged more than $15 per hour while on performance pay, big money in Duluth in the early ’80s for a college kid. My pay more than tripled and they spent less on payroll for me as a percentage of sales than if they would have kept my pay at $3.85 per hour.
What they feared was they would not get all the work done in time. As a result of the pay plan change for us and the other crews, we got all the work done well before Labor Day. I quit my job 10 days early and went fishing in Montana for two weeks. I made more money and paid for a cool vacation before school started.
What Have I Learned About Performance Pay Plans?There were some important lessons in this summer job that I have found to be true for performance pay in the plumbing and HVAC industries.
1. Without performance pay, constant management oversight is required and is more expensive. Like our industry, when field employees are on the job working, they are out of sight. We were left during the day to self-motivate and regulate our performance. It could not have been clearer to us that we should have been working faster - we just didn’t. We didn’t hate our boss; we kind of liked the guy. There was no real reason we didn’t work hard other than there was no good reason to, at least in our minds. It sounds terrible as I write this, but it was true.
It would have been possible to get us to work faster if the manager had looked at us every day from across the street but, just like in our industry, that was not practical.
If you really want to make sure hourly employees are fully productive without performance incentives, you better be prepared to monitor them on a near constant basis. Put a pencil to what that costs and see what is really cheaper - heavy management oversight or performance pay.
2. Make the benefit of the performance pay plan immediately apparent. Before incentive pay, we got paid the same whether we cleaned one window an hour or a hundred. There was nothing in it for us to move faster.
What the window-cleaning company did for us was let us know each day what we could make if we performed at a certain level. That motivated us.
So many performance plans are hazy and confusing. “If your monthly revenue is this, minus parts costs at this efficiency excluding shop hours, you will get this per hour except on callbacks…blah, blah, blah, blah.” If the hourly employee does not know at the end of the work day what his hard work created for himself in the form of take-home pay, it is not a performance pay plan. It needs to be rewritten or thrown away. It may actually be a de-motivator and viewed as a joke by employees. This rule is very, very important.
3. Skilled employees need performance pay more than anyone else. Remember when I said the lead guys at the window company knew they were not immediately replaceable. Even in a lousy economy, in a city with one of the highest unemployment rates in the country, everyone knew they could not get fired unless they performed some heinous act. Showing up for work and just going through the motions was not going to get them clipped.
It is a similar situation with licensed and skilled employees in our industry. They know they are in a similar situation, which means you have to appeal to more than just their sense of an honest paycheck for an honest day’s work.
4. Try performance pay before trying new employees. I have to tell you, I did not think the lead guys at this window company were capable of speed based on the first two months I was on the job. But I was wrong. Given the proper financial motivation, they were like window-cleaning greyhounds. They were totally different people.
5. If performance pay plans have failed in the past, don’t give up. Many companies have tried various forms of performance pay and either lost people or ended up paying more for the same level of production. It happens. But don’t give up on the idea and go back to just paying a standard hourly rate and yelling at people to work harder. Keep working at your performance pay plan until you get it right.
A common attribute of highly profitable companies in our industry is some form of performance pay for almost all positions in the company. If you are looking to improve performance and cut down on the yelling, get going and create a performance plan and remember the points above. If you need a tip or two, please call or e-mail me. I will be happy to assist.