I Don’t Know What Your Project Manager Should Be Making: Why Construction Companies Must Tie Compensation to Performance—Not Flawed Market Surveys
TJ Kastning
Introduction: The Compensation Question We Can’t Answer Without Context
One of the most common questions we hear from construction executives, general contractors, and hiring managers is:
👉 “What should we pay our project managers and superintendents?”
It’s a fair question—but without understanding the specifics of your business, we simply cannot give an answer that would be accurate, strategic, or useful.
✔️ What’s your contract model—lump sum, cost-plus, unit pricing?
✔️ What are your profit margins and cash flow realities?
✔️ Do you have reliable, high-performing teams, or are you covering for weak players?
✔️ How do you measure leadership effectiveness and project outcomes?
Without factoring in these critical business details, any salary recommendation is just a guess—and blindly following market salary surveys is even worse.
If your company wants to stay competitive, maintain profitability, and retain top talent, you must stop chasing unreliable salary benchmarks and start tying compensation directly to performance.
The Danger of Relying on Market Compensation Surveys
Many construction firms assume that external salary surveys provide a solid, data-backed foundation for setting pay. In reality, these surveys are deeply flawed and can lead to significant hiring and retention issues.
🚩 They Don’t Account for Total Compensation
- Most surveys only report base salaries, failing to include:
✔️ Bonuses, profit-sharing, and incentive pay
✔️ 401(k) matching, healthcare benefits, and other perks
✔️ Tools, trucks, technology allowances, and project-based incentives
🚩 They Don’t Reflect Role-Specific Nuances
- A project manager overseeing $2M commercial jobs has a completely different role than one managing $50M infrastructure projects.
- Market surveys cannot capture these differences—leading to misleading “average” salary recommendations.
🚩 They Are Always Lagging—Sometimes Severely
- By the time salary data is collected, analyzed, and published, it’s often 6-18 months old—which is a major problem in a volatile labor market.
- Inflation, talent shortages, and industry disruptions move faster than compensation reports can track.
🚩 They Don’t Account for Individual Strengths & Weaknesses
- A superintendent with strong leadership and client relationship skills is more valuable than one who just keeps things moving.
- A project manager who keeps jobs under budget, reduces waste, and streamlines subcontractor performance deserves more than one who simply follows the schedule.
- Market surveys don’t differentiate between high-performers and low-performers—but your compensation model should.
When companies rely too heavily on external salary data, they fall behind the market, lose alignment with employees, and weaken their financial strategy.
How Market Pay Surveys Lead to High Turnover and Retention Problems
When salaries are arbitrarily set based on survey data, employees feel undervalued and leave for better-paying opportunities.
🚩 The Problem:
- A company might assume that paying at or above “market rate” ensures retention.
- In reality, employees are more likely to stay where they see a direct path for growth—which market surveys don’t provide.
✅ The Solution:
- Employees should be able to increase their earnings through higher performance.
- Companies should build clear compensation pathways—so employees know how to earn more without switching companies.
How Relying on Survey Data Encourages Mediocrity
🚩 The Problem:
- When salaries are set based on industry averages, employees don’t feel incentivized to outperform their peers.
- The company ends up rewarding mediocrity instead of high performance.
✅ The Solution:
- A performance-based compensation model motivates employees to exceed expectations because their pay is directly tied to their impact.
- Instead of just paying what competitors pay, companies should reward employees who drive financial and operational success.
Pay Must Be Based on Profitability, Bill Rates, and Financial Viability
Pay in construction should always be tied to project financials—not vague, unverifiable survey data.
🚩 The Problem: Many companies set pay scales without considering their contract billing rates and profitability targets.
✅ The Solution: Compensation should be structured based on:
✔️ Profitability Metrics – What’s the expected gross margin per project?
✔️ Billable Rates – How much revenue does each employee generate?
✔️ Accountability Matrix – Are pay rates aligned with financial performance and business goals?
If compensation isn’t aligned with profitability, companies risk:
❌ Overpaying employees while underbidding projects—creating financial strain.
❌ Underpaying top talent, causing them to leave for better-paying companies.
❌ Losing alignment with financial viability, especially in inflation-driven labor markets.
Why Project Managers and Superintendents Must Have a Direct Impact on Profitability
- A project manager who keeps projects on schedule, prevents budget overruns, and increases efficiency should be compensated more than one who just maintains status quo.
- A superintendent who drives field productivity, enhances safety, and minimizes rework creates real financial value—and their pay should reflect that.
🚩 The Problem:
- When salaries are based on market surveys, high-performing leaders don’t get paid what they’re truly worth.
- This results in losing top performers to competitors who offer better incentives.
✅ The Solution:
✔️ Use profit-sharing, performance bonuses, and tiered compensation models.
✔️ Reward employees for delivering measurable results, not just showing up.
✔️ Align pay increases with business growth, not arbitrary timelines.
How to Build a Compensation Model That Aligns Pay with Performance
To create a high-performing, financially sustainable compensation model, construction companies should:
✔️ Tie pay to measurable project performance metrics.
✔️ Create financial incentives based on billable rates and profitability.
✔️ Use an accountability matrix to align compensation with real business outcomes.
✔️ Make raises and bonuses dependent on value creation—not tenure.
Instead of relying on outdated market averages, companies should reward the people who make the business stronger.
Final Thoughts: Why Performance-Based Pay Is the Future of Construction Compensation
If your company is still basing pay on outdated market surveys, you’re:
⚠️ Underpaying your best people and overpaying poor performers
⚠️ Constantly playing catch-up instead of leading the market
⚠️ Losing alignment with your financial viability and project goals
✅ When you connect compensation to performance, everyone wins.
✅ Employees get excited about making more—because they know exactly how to earn it.
✅ Companies build stronger teams, drive better results, and avoid costly hiring mistakes.
Need Help Structuring a Compensation Model That Works?
If you want to develop a compensation strategy that attracts top talent, aligns with profitability, and drives real performance, Ambassador Group can help.
📅 Schedule a call here → Ambassador Group Exploratory Call
Let’s build a compensation structure that actually makes sense. 🚀
