TG&E staff celebrate Halloween
In a recent SMPS Listserve thread, one member asked about the possibility of using commission to create incentives for sales in the AEC space. Most members (including myself) agree that commission-only models simply don’t work for long-cycle projects especially when many people are involved in winning and working on the jobs. See this earlier posting on the topic.
But Michael Wong, CPSM, LEED AP, Business Manager at Tom Green & Company Engineers, Inc. (TGCE), a mechanical, electrical, and plumbing engineering firm in Austin, TX, suggested this option:
“I think the best way to address this issue is that the whole firm comes up with a formula for incentive pay based on profitability of the company. That way, the company acts as a team for all project efforts. For example, in this situation, the marketing department is not just bringing volume, but also needs to pay attention to the type of projects that are brought in. This also gets great buy-in from the technical staff to assist with marketing efforts.”
I reached Mike by phone to learn more and discovered TGCE is a practitioner of Jack Stack’s “Open Book Management” philosophy. In this system, everyone in the business is made aware of – and participates in determining the company’s business direction. Employees see how individual and group efforts contribute to company profitability, and where waste hurts.
Tom Green
Mike said the profit sharing is a major part of the compensation structure at TGCE. This helps in retention – but he acknowledges, can make recruiting engineers and other staff a greater challenge, as new candidates usually have not been exposed to this method of management and must buy-in to the true team concept. And while being a true part of the team means being able to share in the spoils, it also means that all share in the risks of running a business. Therefore new candidates must not only be seeking a job, but also a place to develop their entrepreneurial spirit as well.
Of course, personal salary information is kept confidential, but employees certainly see the entire picture – from a big picture level to the ability to access information about projects throughout the organization. “We have a report that summarizes activity on every project on a monthly basis,” Mike says. “Basically everybody gets the summary. And project managers regularly get more detailed reports on their projects, and individual team members can request any information they are interested in reviewing.”
While everyone shares in the company’s success, there still is room for individual recognition and achievement. Incentive pay, for example, Mike says is about “half and half” — “half is for things like seniority and stuff like that and half is for recognizing individual efforts.” An example of the individual recognition is that each quarter, employees vote on a MVP – most valuable player. Bonuses and rewards are calculated on a “cash” basis, so the practice does not get caught in the trap of paying out money when it doesn’t have the matching revenue.
Open Book Management has many advantages, I think, for AEC practices seeking to balance the need for individual recognition and achievement with the understanding that the group is often more responsible for a business’s success than single stars. TGCE’s approach may be one worthy of consideration in your practice. For questions or comments, Mike may be reached via e-mail at mikew@tgce.com or phone at (512)345-7793.