The long-term financial success of any building company hinges in large part on customer satisfaction. Many employee bonus programs are starting to emphasize the importance of continually improving customer satisfaction ratings.
The importance of customer satisfaction can take on new meaning to employees when their pay is part of the equation. It becomes more than a concept in written declarations and mission statements. Bonuses that do not incorporate elements of customer satisfaction and are based solely on short-term profits can create mixed signals and counter a company's overall success strategy.
National Housing Quality (NHQ) Award-winning builders use a variety of methods to integrate customer satisfaction into their bonus systems:
- A 1998 NHQ Award winner, Neumann Homes of Naperville, ILL., has long incorporated an employee's customer satisfaction achievements along with net profits into their incentive program. The company has a profit sharing plan that offers up to 20 percent of an employee's income as a bonus when net profit ranges between six and 15 percent. The bonus is adjusted by a factor from zero to 1.4 when customer satisfaction ratings range from 80 to 98 percent. Each associate's bonus is then adjusted by zero to 120 percent based on achievement of personal goal objectives. Bonuses are paid quarterly.
- K. Hovnanian, a 1997 NHQ Award winner based in Red Bank, N.J., uses a slightly different but equally effective approach to bonuses. Overall performance of field associates is gauged based on several factors: customer satisfaction survey results (30%); build cycle time (20%); budget (20%); zero defect walkthrough (20%); and safety and teamwork (10%).
- "Employees need to care about more than the bottom line to be a high performance company," says Diane Rivera of Shea Homes San Diego, a 1996 NHQ Award winner. At Shea Homes, everyone shares a single bonus pool. The amount of the bonus pool is based on the company's performance as measured by key business drivers they feel are critical to the success of the company, including home buyer satisfaction, trade partner satisfaction, home quality, and operating profit. In 1997, employees were eligible for a bonus of 10 to 16 percent of their salary, depending on their job grade.
These companies use bonus awards to reinforce a clear and consistent message that aligns everyone in the organization toward customer satisfaction. They believe that by implementing this type of system, they will be rewarded with a significant bonus of their own long-term profits.