Michael Chandler (front center) offers a flexible profit-sharing plan to promote staff loyalty and profit consciousness.
Employee compensation may not seem an area especially ripe for innovation. But custom builder Michael Chandler's innovative profit-sharing program has had a profound—and positive—effect on his business. Simply put, Chandler splits every dollar he takes out of the company 60/40 with his employees. Chandler hatched the idea for the plan seven years ago. “I wanted to increase the amount of money I was paying them on an annual basis,” he says, “but I wanted to find a way to do it that wouldn't tie me in to that pay scale if the company took a turn for the worse.” Today the profit-sharing plan adds an average of $16,000 to key employees' annual income, and inspires a loyalty and dedication to the company that make Chandler look like a pretty smart guy.
The plan itself is the soul of simplicity. Chandler pays himself an hourly wage, taking a prudent share of profits out of the company on no particular schedule and depositing the employees' share in the profit-sharing account. That money is then available for distribution as Chandler sees fit. The major bonuses go out at Thanksgiving rather than at the traditional Christmas time (“It prevents them from overspending for Christmas presents,” Chandler says). But, at Chandler's discretion, the money is available for specific purposes—say continuing education or a family medical crisis—at any time. “Numerous times during the year I'm handing out $500 profit-sharing advances,” says Chandler, who also quietly awards what he calls “attaboys” for outstanding effort.
Depending on how the company has done that year, individual annual bonuses have ranged from $5,000 to more than $25,000. Because workers' comp and general liability are both keyed to payroll, Chandler benefits by shifting compensation to the bonus side. But a bigger benefit is the effect the program has had on employee attitude. The results are difficult to measure objectively, but Chandler is convinced that the bonus system has made his workers more responsible on the jobsite and more profit-oriented over all. “Having an open-book system and sharing your profits means you make more profits.”