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Saturday, June 02, 2007

An Inspiring Bonus Story

Would you believe that the California Government did something not right? They offered a bonus for early completion on repair of the collapsed bridge in Oakland. The result? Bridge repair complete in 17 days. It takes longer than that for pot holes to be filled around here. Here's the New York Times discussion:
But the company owned by C. C. Myers, a 6-foot-5 contractor who favors peacock cowboy boots, fixed the mangled freeway so fast that some residents have recalibrated their respect for the California Department of Transportation, which hired him.

The state estimated that repairs to the 165-foot-long ramp between Interstates 80 and 580 would take 50 days and cost $5.2 million. For every day short of the June 26 deadline, it promised a $200,000 bonus, not to exceed a total of $5 million. The highest bid came in at $6.4 million. Mr. Myers’s company, C. C. Myers Inc., won with the lowest bid — $867,075 — and completed the project in 17 days, winning the full $5 million.

“This ain’t no $800,000 project,” Mr. Myers said in an interview, adding that he hoped to realize a $2.5 million profit.

Boy, C. C. Myers is my new hero. Way to work smart. And see, HR, performance bonuses can really work! (Just think what I could accomplish with a $200,000 per day bonus for early completion.)


Patrick Williams said...

Hmmmmm... I'm just scratching my head here and wondering if any Board of Directors might think of a similar comp plan for the CEO of their company????? Sure seems to me that this could very well be the test case to prove that there should be a direct link between results and rewards! What a concept - and most alarmingly it took the Highway Jockeys in the People's Republic of California to pull it off - color me stumped!

Mike Doughty said...

These things always sound good, but you absolutely must have checks on these kinds of performance bonuses, or the law of unintended consequences, coupled with greed, comes into play. Here's an example: A company I once worked for was having a problem with excess inventories of raw materials, so a plan was devised to pay bonuses to plant managers who kept their monthly inventories (as measured on a specific day each month) within specified limits. One plant manager had a tanker (a huge ship) of raw material wait two days to off-load at his plant in order to stay below the goal and collect his bonus (he created a plausible reason). The demurrage that had to be paid FAR exceeded any savings from the entire inventory control program. This is just one example, and I'm sure that many people could cite many more.

In the case of the highway overpass, I sure hope the city had inspectors looking at the quality of the work, since people traveling on it in the future are at risk if the emphasis was on just speed and not good workmanship. Don't get me wrong, I think these pay for performance programs are great, but they have to be done carefully and monitored closely. They aren't easy to do correctly.

Just one man's opinion.

Evil HR Lady said...


I think that is a very valid point. Like you, I wonder about quality. But, from what the NYT said, no one who knows about this is questioning the quality of it.

Rewards need to be carefully structured to avoid the very problems you mentioned. The last thing you want is to reward the wrong behavior.

Like cost savings awards that don't take turnover cost into consideration. If you don't pay your people right, and you don't allow them necessary business expenses, sure you save money on those two lines, but if you are constantly recruiting because your current employees can't stand you--well, you don't deserve any awards.