The secret to the success of design firms: motivated, productive people doing high-quality work in sectors that are growing. Yet, whenever times get tough, the first things to get cut are often the incentives that keep good employees going.
According to ZweigWhite’s "2012 Incentive Compensation Survey," median incentive compensation spending by A/E/P and environmental firms as a percentage of total payroll has seen a steady decline since 2006, going from a median of 10.3 percent to 2012’s reported figure of 5 percent. Fewer than half of firms (39 percent) predict an increase in incentive compensation spending in 2012, a 10 percent rise from 2011.
The survey found a very clear correlation between profit, growth and the desire/ability to reward employees. Incentive compensation as a percentage of net service revenue was highest in fast-growth companies, at 10.5 percent, the survey said. Stable firms reported a median of 2.5 percent and firms experiencing a decline reported only 1.9 percent. Very high profit firms spent a median of 15.8 percent of net service revenue on incentive compensation, high profit firms spent 7.5 percent, average profit firms spent 2.9 percent, and low profit/loss firms spent a meager 1.5 percent.
With so many different types of incentive compensation plans to choose from, the survey asked firm leaders which plans they have found to be the most successful. While cash and monetary rewards are generally the most common types of incentive compensation, they’re not necessarily the best or only option.
Firms report in the survey that their most successful incentive compensation plans are performance bonuses (55 percent) and profit sharing (23 percent).
Alternative forms of incentive compensation were found by 12 percent of firms to be more motivating to employees than cash or monetary awards – time off, appreciation, recognition and company outings are some of the most common motivators.
Paul Greenhagen, CEO at Westwood Professional Services in Eden Prairie, Minn., a multidiscipline firm, has put forth considerable effort to build a company culture that values employees and keeps them motivated.
"Like other successful firms, we’ve made it through some challenging economies. But what I think makes us distinguishable is the innate desire of each of our employees to be the best they can be," Greenhagen says. "We could not be as successful as we are without the people we have hired. We make it a point to hire and retain people who understand the
importance of supporting each other’s roles, genuinely enjoy their work, and are willing to share their good fortune."
"Our project managers and teams are really passionate about providing great service to our clients. It is important that we feed that passion, so we focus on enabling them with the resources, processes and tools to focus on the things they do best," Greenhagen says. "We want our employees to be happy. When they are happy, our company and clients benefit, as well as the employee. We spend a lot of time together, so another big part of our culture is to find ways to smile and have some fun."
Greenhagen also believes that giving employees the right tools is an important part of keeping everyone going.
"The past year has been full of positive change," he says. "We’ve turned our focus onto aligning our internal operations with our overall business strategies so that we can further enable our people to respond to clients faster and most effectively. We are working on refining our processes and putting tools and technologies in place which will allow us to do our jobs better."
Since the firm has expanded across the country and in all of their markets, internal collaboration has also become a bigger issue and is a top priority for Westwood. "We want to stay as one team as we grow, so our top initiatives include process improvement and enhanced communications. To be the best company, we understand that we need to focus on supporting the passion of our people to be their best and satisfied in their work," Greenhagen says.
Ted Rowe, president of MTE Consultants Inc. in Kitchener, Ontario, a civil engineering, structural engineering, land surveying, environmental science and toxicology firm, says, "While MTE has not been immune to the economic downturn, we have managed to continue to grow our gross revenue over the past three years. This is in large part due to the commitment of our staff to a high level of customer service."
To keep staff going, and the firm growing, MTE has focused on a variety of development and education programs. "In 2012, MTE has been focusing on advancing our leadership development programs, along with our ongoing commitment to staff training and development. We feel that as we grow our people, we grow as a firm," Rowe says.
The "2012 Incentive Compensation Survey" is available for $445 at http://zweiggroup.com/surveys
Christina M. Zweig is a contributing editor. She can be contacted at email@example.com.