Customer Satisfaction Bonuses - Right or Wrong?

October 8, 2012

Performance bonuses have been around the homebuilding industry for a long time.  Salespeople earn commissions and bonuses based upon their sales productivity, and Superintendents earn bonuses for their Quality, Budget and Schedule performance.  For the most part, customer satisfaction bonuses were left out of the equation…until that is…a particular marketing company decided to venture into the home building industry with their version of “Customer Satisfaction” awards.  Regardless of the accuracy or merits of that award program, it proved to be a performance bonus game changer as many large national builders sought to “encourage” higher levels of customer satisfaction by way of the payroll.  It wasn’t long thereafter that the effectiveness of these “pay for satisfaction” bonuses came into question.  Clearly, some home building companies’ satisfaction ratings began to improve, but were these improvements due to the financial incentive, or that customer satisfaction was now consistently being measured and therefore began to conform?  I adamantly believe it was the latter.

 To determine if a customer satisfaction bonus program is right for your company you should ask this simple question, “Are our company culture and processes designed to generate a transactional event or a customer relationship?”  The answer to this question is important, as it will identify if your customer satisfaction bonus program is in alignment with the desired outcome.  Let me explain.  Let’s say your company touts a great home building experience and a meaningful customer relationship, but the company pays Salespeople and Superintendents a bonus for achieving “all 5s” on a customer score card. This seems a bit disingenuous, don’t you think?  Maybe a more congruent approach would be to have the Salespeople and Superintendents that achieved “all 5s” be recognized and celebrated as "Customer Care Champions."  These Customer Care Champions, and their spouses/partners, could be invited to a special “Presidents Award” dinner/evening to celebrate their success.  The potency of this recognition, enhancing relationships with management, and sharing this experience with a family member/friend cannot be understated.  Many studies show that recognition and celebration are much more effective than a W-2 bump.  Do you see where I am coming from here?  If your company culture seeks a customer relationship then a relational bonus is “walking the talk.”

Remember there is no “right” answer regarding customer satisfaction bonus pay, because all home building companies are different.  A company with a transactional customer culture could be perfectly in step with a transaction/financial performance bonus; whereas, a company that values customer relationships should explore more relational based strategies.  While planning your strategy, remember that line employees are strongly self-motivated to have happy customers and work as a team to accomplish this, because, frankly it is easier, less stressful and more gratifying.  Tapping into that employee desire, recognizing it and celebrating their success is often all the bonus that is necessary.

In closing let me share some wisdom from a successful market niche builder in the northwest.  Kevin Estes, of Estes Builders, once told me, “Bonuses are tricky business, as they almost always achieve the goal numbers they seek, but fail the spirit of the original objective.” Estes Builders, does not pay customer satisfaction bonuses.   Also keep in mind that a substantial customer satisfaction bonus can actually work in reverse, as it may encourage employees to do things to influence the ratings at the expense of the true customer satisfaction objective.  A non-industry example is the phone call we often receive from the car dealership asking, “Is there any reason why you wouldn’t give us all 5s on your upcoming survey?” a rather disingenuous/transactional minded question, for sure.

The week’s management meeting question, “Are our performance bonus programs in sync with our culture AND the intended objective?" 

Charlie Scott has more than 30 years of first-hand home building experience, much of it in senior management positions with an award-winning, nationally recognized Midwest builder. Currently, he's director of Woodland, O’Brien & Scott for Constellation Homebuilder Systems. Scott helps North American home builders grow their own customer-centric cultures, pursue operational excellence, and increase referral sales. Write him at


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PB-Customer Satisfaction