How Should a Building Company Structure Staff Bonuses?

Trevor Anderson didn't come up through the trades.

He studied finance at university, then spent years working for the government doing business intelligence and data measurement for a power utility.

Then he bought a duplex...

He and his business partner Derek Wu renovated one side and rented out the other. Friends who were house hunting started asking them to tag along and price up the work. Then those friends started asking whether they could just pay them to do it instead.

That's how Collaborative Construction started, and it's why the company has run on numbers from day one.

"When we started up our business, our construction side, that was a fundamental part of it, was making sure that it was data-driven," Trevor says. "The numbers don't lie, have good KPIs, and we can truly monitor our growth."

Which brings us to how Collaborative Construction sets its bonuses.

The company starts at the annual target and divides its way down...

"We actually work backwards and they align with our annual targets. So it's like, okay, this year we want to do $6.5 million. So what does that look like if we work backwards? What does each project manager need to do work-wise in a quarter in order to finish out the year that you're at six and a half million or more."

That single calculation is what separates a bonus scheme that drives the business from one that just costs money. Start with the revenue and net profit the company needs for the year, then divide it down into what each project manager has to complete each quarter for those annual numbers to arrive. The individual targets then stack up into the company target rather than sitting alongside it.

Collaborative Construction runs the scheme on two levels. Annual bonuses go to the whole team based on the company hitting its revenue target and its net profit target, with a larger combination bonus if the company hits both. On top of that, every person has quarterly bonuses tied to their own KPIs, chosen from the numbers every building company should already be tracking.

"They kind of get built on top of each other. It starts at the individual level, goes up, all the way up to if everybody's meeting their targets, then we're going to meet our annual targets because we're all meeting the numbers we need to meet."

Why Should Every Bonus Be Tiered?

Both the annual and the quarterly bonuses at Collaborative Construction are split into three tiers, which Trevor calls good, better and best.

The reason the entry tier isn't set at the job description matters more than the tiering itself.

"If they're just meeting what the expectations are, then to me, that's not even good. That's just like what's expected."

Good means going a bit beyond the standard, better means clearly outperforming it, and best is close to perfect, which on most of the measured metrics means hitting 100%.

If you pay a bonus for someone simply doing the job you hired them to do, you've turned part of their salary into a variable payment and changed nothing about how they work. Setting the floor above the expected standard is what turns the bonus into a reason to lift.

What Should You Bonus Construction Staff On?

Collaborative Construction bonuses its construction team on four things, all of them measured out of the company's project management software.

The first is time entry accuracy. The software geo-punches team members in and out, so they have to be at the site they say they're at, and the entries have to use the correct cost codes with nothing missing or backfilled after the fact. Accuracy is scored at 90%, 95% or 100%.

The second is daily logs, and the rule here is stricter than most companies would set.

"Every single activity that they work on, they have to have a daily log for it. So even if you're doing multiple things in a house during that day, you might have multiple daily logs."

Those logs earn their keep by feeding the weekly client updates, so the client can see what progressed on their project every day without having to ask.

The third is Google five-star reviews earned in the quarter, which puts a number against the client experience the team delivers. The fourth is safety, measured by whether the person picked up any safety infractions or breaches. Trevor treats that one as close to a freebie, and thinks it should be, because working safely is the outcome the company wants either way.

All four measure a behaviour the individual controls on their own, on the day, without depending on anybody else.

What Should You Bonus Project Managers On?

Project managers carry more of the financial outcome, so their bonuses are more project specific and still tiered good, better, best.

Their first metric is capacity, measured as completed revenue in the quarter. Their second is gross profit percentage on the projects they completed. There's a combination bonus if they hit both, so the numbers can't be traded off against each other by pushing volume through at a poor margin or protecting margin by slowing everything down. Capacity measured this way also forces the conversation about how many projects the company can genuinely run at once, which is the same discipline behind using construction slots to balance your workflow.

They're also measured on five-star reviews for their own projects, and on what the company calls a project performance percentage. That last one is a weighted average of several data points, including whether their schedules are current, whether their to-dos in the software are up to date, whether they're invoicing on time, and whether the money is being collected.

Collaborative Construction used to funnel everything invoicing-related through one long-serving employee, and when that person left the company chose not to replace them. Instead the work moved down to the project managers, who now own their own project budgets and reconcile them as they go rather than at completion.

"They now know their numbers way better. They know where they're at in their projects. It's allowed us to get a better handle on our gross profit, starting to raise our gross profit in our projects early on because we can make changes early on."

The payroll freed up by not replacing that role went into better bonuses and into offshore support for the data entry. Handing project managers real ownership of the project budget is what made the gross profit metric meaningful in the first place.

What Do You Do When a Metric Isn't in the Person's Control?

You change it, and Collaborative Construction is about to.

The gross profit percentage metric for project managers has a flaw that shows up whenever the estimate is wrong before the project even starts.

"If we're not estimating it correctly coming out of the gates, so if our salesperson or salespeople don't set them up for success, then they have this uphill battle. It's like, oh, if the gross profit coming out of it was only 20% based on the initial estimate, well, now to try to get them to 35% is nearly impossible. They have to pretty much work some magic on that project."

So the metric is being replaced with a variance percentage. Instead of measuring the project manager against a fixed gross profit target, the company will measure them against the estimate they were handed. If the estimate came in at 30%, the question becomes whether they finished above or below that, and by how much, with the tiers set on the size of the variance.

"So then it's a lot more under their control as opposed to what they're handed from the salespeople."

If you're not sure where your own number should sit, start with what a builder's margin should actually be.

How Do You Build a Bonus Structure for Your Own Company?

Collaborative Construction's exact metric list suits a renovation and addition business running project managers and construction crews in Regina, and yours will look different. But the design logic behind it still works.

Start with the annual number. Decide the revenue and net profit the company needs, then divide it down into quarterly targets by role until you can see exactly what each person has to deliver for you to hit that annual figure.

Choose your metrics from the problems you're actually having. Trevor sets bonuses on "ways that we've identified that maybe we're not meeting the mark or we need to focus more on that," which is a far better filter than measuring whatever the software happens to report. If your invoicing runs late, measure invoicing, and if your daily site records are thin, measure those instead.

Apply the control test to every metric on the list. If the person being measured can't move the number on their own, either replace the metric or reframe it as a variance against what they were given.

Set the tiers above expected performance, so the first payment recognises genuine outperformance rather than attendance.

Then work out who updates the numbers and how often. Collaborative Construction reviews KPI scorecards in a weekly management meeting, and the data entry itself now sits with an outsourced team working to SOPs recorded on video.

A bonus scheme nobody updates is a promise the company quietly breaks, which is why the reporting rhythm matters as much as the metrics. If your monthly financial reports aren't reliable yet, fix those before you attach bonuses to anything they produce.

And then expect to change it. The bonus structure at Collaborative Construction is on its way to a new gross profit metric next quarter because the current one punishes project managers for a decision made before they picked up the project. Reviewing the scheme every year against the new annual target is part of running it.

A bonus scheme built on the wrong metrics teaches your team to chase numbers that don't move your net profit, and you pay them for the privilege. Designing one properly starts with knowing the revenue and net profit your company has to hit this year, because every individual target is derived from those two figures. If you can't state both numbers with confidence right now, book a 15-minute chat with our team and we'll help you work them out before you attach money to anything.