Hi John,
Many years ago when we were redesigning our compensation program, we
put all of our ideas together, and then we brought in a high-priced
compensation consultant to “critique” our plan. She stared at our
plan for about 10 minutes (felt like 30), and then she looked up and
said,
“You’re a team-based company, right?”
“Right!” we answered enthusiastically, relieved that she was hooking
into something that was really important to us.
“Then why did you design a compensation program that rewards the
individual at the expense of the team?” she asked.
It was one of the most expensive questions I’ve ever paid for, and
probably the best money we ever spent. Ultimately, the plan we
ended up with (the one we still use) rewarded teams first, and
individuals second. But it’s pretty counter cultural in a society
that focuses intensively on competition at the expense of
collaboration.
At The Bell Group we give 30% of our pre-tax profits back to the
employees of the company – divided across all employees, whether
they have a professional role or are a high school student working
their first job in the warehouse. We spend a tremendous amount of
energy (time, training, communication) helping all our associates
stay focused on the fact that if the company does better, we all do
better. Speaking with a community such as Orchid, where nearly
everybody understands both the benefits and the enormous burden of
owning your own business, it’s probably hard to imagine that some
folks don’t appreciate that focusing on the bottom line is the road
to financial stability. Believe it or not, it takes a lot of
training.
We have both salary and commission-based pay throughout the
organization. Both salary increases and commission percentages go
to teams first, and individuals second. I won’t go into the
measurement tools the teams use to determine performance, but suffice
it to say that everyone is aware that the team has to hit their
performance goals in order to gain greater salary or commission pay.
Everyone in the organization understands that they would rather be a
high performing individual on a high performing team than a high
performing individual on a low performing team, because it is the
team’s performance that determines the percentage increase.
So let’s use a commission-earning team as an example: They set sales
and profitability goals at the beginning of the year as a team, with
input from leadership. Say, for example, achieving 80% of their goal
earns 2% commission, 90% of goal earns 3%, 100% of goal earns 4%, and
110% of goal earns 5%. Individual “shares” of the commission are
then distributed out of the percentage the team has earned. So yes,
a higher performer on the team will ultimately earn more than a lower
performer on the team. But would you rather earn 20% of 5%, or 20%
of 1%? That was a real key to increased commitment.
As for the problem of “turning off” customers who didn’t seem to
have potential, we have incorporated important customer measurements
into all of our metrics, in addition to sales and profitability.
Customer satisfaction measurements, customer lifetime value (which
takes into account how many encounters it may take to turn a prospect
into a customer, and then how long the relationship can be expected
to last if you nurture it), and other important customer measurements
are incorporated and trained to help our employees take a more
holistic view of the entire customer experience. Of course this
doesn’t provide a guarantee that discounting a customer will never
happen, but overall our customer satisfaction scores have improved as
we have continued down this path.
The first year we didn’t see the benefits, but by the 3rd year this
system was really making sense to people. Teams today work very
hard to assist one another with sales and service, to make sure they
share knowledge and training and back one another up. They are much
more likely to offer one another both constructive and congratulatory
feedback, and they appreciate the financial benefit of working
together for something bigger than one can accomplish alone.
This type of culture does have its share of risks. A great deal of
coaching and training is necessary to ensure that a low-performer is
not confronted with “mob rule,” but rather, is given the support and
training they need to improve. These skills aren’t taught in our
schools, nor, unfortunately, in many homes. So a commitment to
helping team members be mature and effective in relation to others is
essential.
I really believe in performance based pay in additional to paying a
competitive salary. I’ve learned over time that it takes a lot of
training and communication to help people understand where the
"reward" pay comes from – it’s not intuitive. Setting clear
measurements and goals, reflecting on performance related to those
goals at least weekly, and constantly reinforcing the power of
working together for a common goal are all part of the process. If
you don’t do these things, then the extra money on a paycheck once a
month, or once a quarter, or once a year won’t say very much to your
employees.
Finally, I am a really strong believer in giving profits back to
employees. It can be hard to fathom when profits seem tight – and
that’s true whether you’re a large corporation or a small retail
store. But when you hire the right people, and train them well, and
genuinely partner with them, they will bring more of themselves to
work every day – making work more rewarding for them and for you,
and making the entire business more profitable for everyone.
Sorry to be so long-winded. I hope this was useful for
you.
Sincerely,
Andrea Hill
CEO
The Bell Group
(parent company of Rio Grande, Neutec/USA, WestCast and Sonic Mill)