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Compensation Fixation

During my 25-year stint as a framing/drywall estimator, I have experienced the rather mixed blessing of being welcomed in the front doors of no less than 10 well-established and reputable commercial firms. I cite my somewhat dubious distinction only to underscore the theme of this writing, that being the principal attraction that each of these esteemed organizations held for me. Most had the apparent advantage of longstanding success and positive relationships with the most prominent general contractors in the area, and therefore the attendant expectation of individual success. Other outfits offered an attractive working environment, others offered generous perks. Then, of course, there was always the tacit hint of potential bonuses. But as mercenary as it may sound, after all these other tempting bennies were factored in, the hands-down final deal maker would always be the bottom line—compensation. And when I say compensation, I’m not just referring to amount, but also the method of distribution.

Clearly, the term “amount” applies only to the gross dollar value that appears on the check stub at the end of the week, devoid of any extraneous benefits. But already we’ve strayed into the outskirts of distribution territory, because I’ve worked for a few outfits that think payday comes every other week—or even once a month! Thus the well-worn adage: Too much month at the end of the money. But, returning back to the subtopic of amount, I will restate the obvious: No measure of non-pecuniary benefits comes near to outweighing the amount of salary offered by a prospective employer. Having discussed the issue with a great number of fellow bidmeisters, I feel confident that I speak for the great consensus of quantifiers when I say that the bottom line is the final arbiter. But again, it’s difficult to nail down what the bottom line actually comes to without getting into the distribution aspect.

I sense that I need to support that last line with some specifics. One example lies with the range of amounts offered to prospective estimators by similarly situated firms. A cursory glance at recruitment ads indicates that proposed salaries can vary from a low $60,000 annually to offers of twice that amount. Degree of experience, expertise and responsibility present a simple explanation for this radical difference. One outfit may need someone only for basic takeoffs while another seeks a senior estimator. But more to the point, a number of firms offer a low salary tempered with the lure of lucrative “bonuses” to supplement the base pay. Such considerations come in the form of profit-sharing, discretionary and formulaic (performance-based) incentives.

Most bonus programs are comprised of a combination of discretionary and performance-based factors. These benefits are contingent on personal sales and company profitability and are customarily distributed as mid-year and/or year-end enhancements. The amount and frequency of such benefits are subject to the discretion of the company officers, and performance can often be hindered by factors beyond the control of the estimator. Simply put, perceived performance fluctuates, sometimes drastically, and as such bonuses cannot be depended on as bottom-line compensation.

But this brings us to a thorny subtopic, that of a strictly formulaic “bonus.” Some firms, in an effort to fix costs and solidify return on investment, offer prospective estimators a percentage of sales to supplement a meager salary proposal. This rather questionable arrangement can better be described as a commission rather than a bonus—a commission based strictly on sales, regardless of profitability. While this provides a potential boost to the backlog for the firm’s owner, it also leaves him vulnerable to substantial loss—and to corruption on the part of his estimator.

How so? Consider a year in the life of a hypothetical bidmeister who has accepted this dubious arrangement. He has assented to a lower-than-average base pay but has been promised 1.25% of awarded personal sales. He has run the calculations and knows that if he lands a targeted 30% of an anticipated $10 million annual bid volume, it will add $37,500 to his meager base pay, thus boosting his compensation to an above-average level. In this scenario, everybody seems to be happy.

But suppose those aforementioned circumstances beyond his control intervene. Sales are depressed and the formula is not working for him. He is quite naturally incentivized to make sales at any cost. Whether subliminally or intentionally, he begins to turn a blind eye to details he would normally include. In a worst-case scenario, he might actually produce a couple of blowouts to fatten his bottom line. Believe me, it happens.

Clearly the take-away here is to focus on the base salary when considering compensation, and to avoid depending on pie in the sky “bonus” arrangements as part of proposed income. Such dependency inevitably leads to disappointment, one way or another.

A photo of Vince Bailey.
Vince Bailey is an estimator/project manager in the Phoenix area.

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