Commisioned Shop Foreman

[woodgod]

I am considering moving my lead man into more of a managment position in order to allow myself more time out of the shop. I would like to give him a small base salary with a bonus based on production. Does anyone have expriance with this? What would be a fair range for base? Bonus?
By the way we are a small 5 man custom cabinet shop

[dingwall]

I've been looking into this as well. I'm not there yet, but a good place to start is knowing your break even volume and where your comfort zone profit wise is. From there any production increases are gravy assuming labor doesn't increase as well. After overhead, materials and labor are paid for, it doesn't take much of an increase to see a very positive impact on the bottom line.

[jhicks]

Not sure this would work exactly the way you want but consider output/production revenue as a base platform.
Say you need an employee productivity level in revenue of $10,000.00/ month. That should be pretty close to reality I believe.
Asuming this level of productivity gets you where you need to be with a bit of safety, use it as your base.
So you can now determine what the new foremans achieveable goals are. Lets say you think the productivity could realistically be $12,000.00 per man/ per 4 week month without over time.
Incentivise the foreman or the entire group for that matter based on achieving or exceeding $12,000.00/ man/4 week month and give him or them a percentage of revenue or profit completed out the door, less rejects, OT, and returns/rebuilds.

Simple for all to understand and become actively motivated as an integral part of the business success and share in the rewards.
Then you can go fishing more often.

Good luck :-) and get ready to start tracking numbers because once you unleash it, everyone will want to see and discuss the numbers. And thats a good thing in the right environment.

Also make sure the new"foreman" has proper legal guidance on employee management, interviewing etc plus good management or supervisory skills. if not send him to classes. Its easy to assume the best or most experienced worker will make a great leader or trainer but not always the case.
Also make sure you clearly define his responsibilities and authority in writing with regular reviews. a wrong move or decision could cost the company dearly.
But when done well, its a great step for all.

[Brady Watson]

"...and get ready to start tracking numbers because once you unleash it, everyone will want to see and discuss the numbers." You betcha, Jerry!!!


When your operation gets large enough to bring on a production manager, you'll need to start using the proper manufacturing terminology and have lots of 'production meetings':

Fudge factor - A quotient used to make production numbers look better to management.
WIP - Work in progress - Reference to it typically used to make numbers look better by mentioning that the report, of course, doesn't include what we have in WIP.
3rd shift - scapegoat/bane of 1st shift's existence
"Low hanging fruit" - Typical phrase used in meetings by over-paid consultants that you brought in to remedy low production numbers. Often used to convey a 'quick fix' that attempts to justify the consultant's existence/salary. (yes I have witnessed this 1st hand)

I realize this is a little off topic, but I just can't resist posting my all-time favorite production cartoon:


23441.jpg

[jhicks]

Understood and agree Brady. Thats why its a job to manage even though some think its just some folks at a desk making strange decisions.
Adding a foreman or any key employee to the mix is a critical move that will no doubt take a year or 3 to properly train, motivate, and integrate as the "Bosses Right Arm"
Gaining employee respect, becoming a team builder, and effective leader doesn't happen by accident.
No one can really replace the guy who started the place until he is gone. All one can hope for is an apprentice with similar style, skill, motivation, and dedication to carry on in the founders footsteps.
Easy to say, hard to do, and can lead to tremendous success or catastrophic failure.
One puts it all on the line when turning over the reins so be careful and be a good mentor if you expect it to work.
It will be a while before you can "be away more often" and trust all is in good hands

[woodgod]

I Appriciate your input. The reason for my needing to be out of the shop more is two fold, additional sales, as I have tried to hire a salesman to no avail,and my first grandson who just happens to share my name! Its times like this I wish I had paid attention in school!

[terryd]

James, Having spent two decades+ as production management in many firms plus having worked as a Lean Manufacturing consultant I would leave the production responsibilities to you and advise you to persevere in finding that "elusive" sales representative. Production Managers (me included) never seem to be content with the salary structure since the sales volume that justifies his salary increase make him/her feel overworked and under appreciated. Sales Reps understand (via isolation from production) as you do that the more you sell the more you make. Production based people have a hard time with the inevidable workload increase that comes with them being successful at achieving production targets. Not a critisim of production people (me) but a truism non the lest.

TerryD

[jhicks]

I think Terry raises very good points on this one.
Maybe there is someone in the shop that would make a good salesperson? Maybe not but the money is printed in the shop so turning that over to someone is something to consider very carefully.
Hiring the right sales rep is also taking a chance with your reputation so working closely with a new sales person for several months before turning him loose completely is recommended.
You'll learn a lot about their skills, style, and be able to train them at the same time to present the best of your company.
Who said it was easy out there?
Good luck