Electrical Construction & Maintenance
February 1, 2006
Pg. C20 ISSN: 0013-4260
Inspiring Incentives
By Beck Finley
Staff Writer
70,000: That's the number
of skilled electrical workers
the United States will need
in the next 10 years, says a
recent release from the
National
Electrical
Contractors
Association
and
International
Brotherhood of Electrical
Workers
(NECA-IBEW).
This could be a direct
result
of
the
major
expenditures
in
construction the United
States is preparing to
undertake within the same
decade. A report by the
Associated
General
Contractors
(AGC)
of
America lists that at least
375,000 bridges will have
to be replaced as part of a
$360
billion
bill
for
roadwork, mass transit will
require $72 billion worth of
construction, the nation's
infrastructure will be in
need of $3.3 trillion in
construction and related
services, and one-in-three
schools will require some
type of work or renovation
totaling $60 billion.
All of these projects have
given
the
construction
industry
favorable
employment
projections
data, an 11.4 % steady
increase between 2004
and 2014, as reported by
the Bureau of Labor
Statistics.
So
what's
leaving
electrical
contracting firms in the
lurch in what may be one
of the most prosperous
decades
for
the
construction
industry?
Currently, the average age
of
most
experienced,
skilled electrical workers is
between 40 and 50. The
imminent retirement of
these baby boomers will
leave a huge gap in the
workforce that, at the going
rate of recruitment, won't
be made up for by younger
workers. Younger workers
just don't seem interested
in careers in construction.
So what's an electrical
contracting firm to do?
Bethesda,
Md.-based
ELECTRI International Inc.,
or ELECTRI Council, the
research and educational
program arm of NECA,
recently
published
a
strategy for retaining and
recruiting electrical field
labor
that
can
be
implemented immediately.
An incentive system, a
method by which firms can
compensate
employees
above and beyond their
current salary for improved
productivity, efficiency, and
safety, may be the answer.
The
"Field
Incentive
Systems
for
Electrical
Contractors" report offers
electrical contracting firms
a model for an incentive
system that they can tailor
to their specific needs.
Show them the money
Competition for skilled,
experienced field labor will
increase as the labor
supply
decreases.
Companies wanting to
ensure their projects will be
completed in a timely and
efficient manner may have
to look beyond the wage
scale offered by their union
agreements. "There's a
general feeling that the
workers are already well
paid,"
says
Russell
Walters, PhD., P.E., one
of the authors of the
report
and
assistant
professor in the Civil,
Construction
and
Environmental
Engineering program at
Iowa State University,
Ames, Iowa. "So when you
start talking about the idea
of paying more on top of
the union scale, you find a
lot of resistance."
While it may be true that a
job well done is its own
reward, there's something
to be said for raising the
bar with extra incentives.
Plainly stated, offering
incentives based on merit
should
attract
better
employees
and
also
encourage them to be
more productive in the
field. In order to compete in
the tightening labor market,
companies may need to
revisit
the
notion
of
profitability, especially as it
relates to field labor.
work.
Furthermore,
workers who are behind
will be more likely to seek
further training, even at
their own cost, if they know
they will be reimbursed
when
their
improved
performance results in
increased reward through
the incentive program.
Increased
worker
productivity means more
overall profit for the
company.
Many firms believe that the
more money you give to
the workers, the less you
have within the company and it's true that many
companies operate under
tight margins. However,
according to the report, by
connecting a portion of an
employee's yearly bonus to
the overall profitability of
the projects they work on,
field electricians will be
encouraged to work more
efficiently without additional
monitoring. "What I was
trying
to
convince
companies with the report
is that if you're increasing
productivity in the field, that
has a pretty large impact
on
profitability,"
says
Walters. "And there is still a
need
to
improve
productivity out there."
Avoiding a "Big Brother"
situation
When company profitability
is tied to individual project
profitability - something on
which field workers have a
direct effect - it will create a
team mentality among the
workers,
and
the
employees will either weed
out or assist those that
can't handle their share of
Any field incentive system
requires monitoring, but a
successful field incentive
system should be able to
integrate the monitoring
with
the
employee
evaluations they currently
use. There are three main
criteria
to
monitor:
profitability, timeliness of
job completion, and safety.
Most firms already track
these three areas with time
cards and safety records,
so converting them into the
incentive program's point
value system can be
relatively painless.
The report offers two
methods for determining
points for the first two
criteria. Although the third
factor is easier to track,
safety
must
not
be
considered
any
less
important than the others.
In the program, employees
are awarded points for
attending required safety
meetings, as well as those
who
attend
additional
safety
classes
not
associated
with
the
company.
In
addition,
employees
may
be
penalized for every losttime accident has in the
program year. "When you
start motivating people to
work faster, you've got to
keep safety in there
because you can work
faster at the expense of
safety," says Walters.
Above and beyond the
above-mentioned
three,
employees may also be
evaluated on specific job
tasks,
such
as
administrative
duties,
marketing skills, customer
feedback, attire, following
company
policies,
absenteeism, or any other
number of discretionary
categories.
In some cases, workers
may
resent
being
monitored. "Perhaps some
people, for bad reasons,
don't want to be monitored
because they're not the
most productive," Walters
says. "Even good workers
could take some offense to
being monitored, as if
maybe there is a lack of
trust in what they're doing."
That's
where
communication and an
understandable,
formal
plan come into play.
According to the report,
workers will soon realize
that it's in their own best
interest to work toward the
company's goals and to
trust the incentive program.
Earning trust
Once a company decides
to implement the field
incentives program, the
first step is to spend time
explaining the program to
the workers. It is crucial
that
each
employee
understands
how
the
points for incentives will be
tracked and how the
incentives are going to be
paid. Employees must be
assured that this is a
reward
system;
not
punishment. "If anything,
you should have an open
system," says Walters.
"There has to be a feeling
of justness to this and the
overall strategy."
According to Walters, there
are general rules for
incentives,
called
the
"Justice
Theory."
This
means if there's a feeling
that things are being done
in a just way, people will
accept what possibly could
be perceived as an unjust
payment.
Under
the
incentive program, some
workers will receive higher
compensation than others.
This is unusual under the
union
system
where
companies pay wages
according to an existing
pay scale. Therefore, more
experienced workers can
only be rewarded with nonmonetary perks or through
promotions,
such
as
moving into a foreman
position. But, according to
Walters, these rewards
may seem arbitrary and
cause
unproductive
competition
among
workers.
Walters warns companies
against
fostering
a
"Tournament Theory" type
of contest among workers.
Under that system, the first
place winner receives a
large prize, while the other
places are given minimal
compensation,
and
sometimes
are
even
dismissed altogether - think
of pathetic Jack Lemmon
as Shelley Levene as the
past-his-prime salesman in
the movie "Glengarry Glen
Ross" where First prize is a
Cadillac Eldorado, second
prize is a set of steak
knives, and third prize is
the pink slip. "Those types
of systems promote an
unhealthy
competition
because most people are
going to try to get the first
prize no matter what they
have to do to the others,
and that can involve
sabotage," says Walters.
"What I'm proposing is
something
where
everybody gets something.
The people who work
harder get more than the
people who don't. Maybe
the top 50% of performers
will get something out of an
incentive program to a
varying degree, but there's
no disincentive."
At the start of the program,
it's vital that every worker
should feel that it's possible
that
they
will
earn
something if they put forth
the effort. For the system
to work, employees must
both accept responsibility
for the company's goals as
well
as
make
a
commitment
to
the
incentive system. Buy-in by
both owner and employees
is vital to the success of
the strategy.
For your own copy of the
ELECTRI Council's report,
"Field Incentive Systems
for Electrical Contractors,"
visit the NECA Store,
which can be accessed
from NECA's Website at
http://www.necanet.org. In
addition,
NECA's
Management
Education
Institute offers a one-day
course
called
"Field
Incentive
Systems."
Enrollment is also available
through the NECA Web
site.
The Eight Basics
Compensation
of
* Serve all stakeholders
An incentive program must
strike a balance between
the
owner-stakeholders
(management) and the
employee-stakeholders
(field labor). The ownerstakeholders exchange a
portion of the profits to
achieve the company's
goals, while the employees
provide the labor to
achieve the company's
goals in exchange for
additional compensation. A
successful incentive plan
seeks
to
make
the
employee-stakeholders
accept responsibility for
accomplishing
the
company's
goals
by
including them in the
rewards.
* Keep it simple
If
the
program
is
straightforward and clear, it
will be possible to discuss
the plan with employeestakeholders and eliminate
the suspicion that there are
hidden agendas or unfair
provisions. Also, a plan
that can be attached to a
company's
existing
employee
evaluation
program will save on
administrative time and
costs.
* Start by identifying
compensation needs
A company must know
what problems it wishes to
solve in order to properly
institute an incentive plan.
To do this, first, identify a
clear and compelling need.
Second, the need and
solution posed by the
incentive plan must have a
clear connection, (i.e., the
incentive plan must solve
the problem). Third, the
value of the plan must be
greater than the cost,
including costs associated
with
administering
the
program. A value-to-cost
ratio of 4:1 is suggested
since cost estimates can
be vague.
*
Group
employees
properly
When deciding how to
allocate the profit to the
various
employeestakeholders, it is useful to
create a distribution of the
net profit to each group. A
company
may
choose
whether to use union
designations to determine
the
groups,
group
employees by years of
service (may work best if
trying to retain senior
personnel, for example), or
to treat all the same.
* Have a proper process
for
developing
compensation programs
Challenges and problems
unique
to
individual
companies will require a
customized
incentive
program. Many companies
use checklists as a method
for developing a program.
* Design program to reflect
company culture
The program must be
compatible
with
the
existing culture of the
company.
When
developing the incentive
program, it is helpful to
ask, "Is this program
similar to management
initiatives that have been
produced in the past, and
will
the
employeestakeholders accept this
style
or
amount
of
observation?"
* Install a formal program
The
program
should
include standards and
application rules that are
discussed
with
and
understood by both the
owner-stakeholders
and
the
employeestakeholders.
* Be skilled in the art of
managing change
If a problem has slipped
past the early tests and
what-if scenarios, it is
better to change the
program to ensure that it
will produce the desired
results rather than allow it
to continue working toward
the wrong goal. However,
communicating the change
to
the
employeestakeholders and keeping
them involved in the
process can alleviate fears
and confusion during the
fine-tuning
phase.