Incentives

Employees aren't Partners

Many of my clients are recovering from the recession. They are running lean, and have restored their profitability, even if at lower revenues than prior to 2008. Those that had to reduce or freeze employee compensation are seeking ways to share their recovering success. When cuts were made, whether layoffs, wage reductions, curtailed working hours or just freezing costs, profitability was the universally quoted reason. "We are losing money" or "We have to maintain a safe operating margin" were...more

When is a Bonus not a Bonus?

"And yet, you don't think me ill-used, when I pay a day's wages for no work." That statement by Ebenezer Scrooge to Bob Cratchett in 1843 recognized the then relatively new custom of letting wage-earners have a day off for Christmas without docking their pay. One hundred and seventy years later, business owners aren't just expected to pay for a day of leisure. Now we have the tradition of the "holiday bonus," where employees are given additional money beyond their salaries at the end of each year...more

Raises and bonuses- sharing a recovery

Your business is starting to recover. You are again profitable. If you were smart and agile, you remained profitable or perhaps even increased margins during the downturn by being "lean and mean." One advantage of a financial recession is that employment trails the recovery. So while businesses rebuild their earnings, jobs remain scarce. Most small business owner don't see their employees as part of a statistical anomaly, though. If you froze increases in 2009, they haven't had raises in what seems...more

Performance Reviews- Best Practices

Performance reviews are a pain. In my nearly 40 years in business they have always generated the same complaints. Managers hate to do them. As a consequence, they are frequently over due. They provide the employee with little information on how to improve. They are written to match decisions that were already made, like a promotion, a big raise, or a small one. I was auditing one of our business owner peer groups (The Alternative Board®) when one of the members presented his issue. His family...more

Employee Incentives that Work

After four blogs on the long term motivations for running a business, perhaps it is time to return to some more practical advice. One of the most persistent issues for a business owner is trying to motivate employees with incentives.You install a perfectly good incentive plan. It gives the employee opportunity to make more money, or to enjoy a perquisite outside his or her normal compensation. You roll it out with appropriate fanfare. The feedback is positive. The workers are excited...more

Humbug!

It happened again last week. I heard a business owner say "I've decided to terminate Bob, but I'm going to wait until the first week in January to do it. I don't want to ruin someone's holidays."I go through this every year. Employers who, in order to make themselves feel better, put their employees in an even worse situation. If you are planning on firing someone, do it now! Here's why:Some 34% of all Christmas spending is done in the last week before the holiday, and that is mostly on credit cards...more

Whose fault is it?

In small business, we tend to give out titles with aplomb. You can be a manager. You're a director. You are a vice president. When there are few levels to differentiate between, it seems meaningless to attach a lot of weight to a title.Your receivables clerk comes to you and says "I think I could get more respect when I collect if I was the Accounting Manager." You agree. What harm is int it?After a couple of years he or she has a review. "I've been the Accounting Manager for three years. I feel...more

Accountability vs. Guilt

While discussing oil rig disaster in the Golf Of Mexico the other day a friend exclaimed "Someone needs to go to jail for this!"While I understand his anger about the massive economic and environmental damage involved, his comment illustrates the assumption we so often make about any problem. If it is big enough, then someone needs to be punished proportionately. That isn't always the case.Of course, we will have the "perp walk" in congress. I'm sure the executives of British Petroleum will be called...more

Stoplight 360

I recently saw a fast and easy way to rate your employees that makes the high performers and low performers stand out in a way that can't be ignored.It uses Stop light Methodology: a red-yellow-green marking system. The advantage of Stoplighting is that everyone gets it. It is ingrained into our way of thinking (or at least the thinking of everyone in America who drives- which is close enough.) It's the proverbial "no assembly required" scoring system.I saw this used in a topgrading process. A client...more

Sales Comp III: Hunters and Farmers

Sales people break down into two subgroups- hunters and farmers. The purists will argue that in fact, only hunters are sales people. I can buy that. The farmers are more likely to be called Customer Service Representatives or Account Managers. Both types, however, are frequently compensated by how much the customer buys.Hunters are what we usually think of as "Salesman" with a capital S. They are ADD, with the hyperactive focus that ADD folks have. (I know- I R one.) They track the...more

The Ghost of Ebenezer

Last week three of my clients implemented staff reductions. All three are financially healthy service companies, but they had far more capacity than they had work to fill it. In a service company, of course, capacity means people.Naturally there was considerable agonizing among the owners and managers about the timing of the move. While everyone involved in the decision process agreed with the numbers and the necessity, when the time came to name the names of people to be let go they balked. Some...more

Gifts are not incentives, and incentives shouldn't be gifts

I knew a couple who owned a company with about 20 employees who had what may be the worst incentive distribution plan I've ever seen.The company gave out large holiday bonuses every year at the company party, which was the last day before closing at Christmas. There was no documentation of how the amounts were decided, each employee received what the owners felt they "deserved."Worse than that, they gave out the bonuses by putting them in envelopes and hanging them from the company Christmas tree...more

Sales Comp II: Are You a Supplier or a Vendor?

The next question to consider when you are designing sales compensation is: "Are we a supplier or a vendor?"Without wasting time on the differences or similarities of the dictionary definitions, here are mine:A supplier provides goods or services (collectively "products" throughout these discussions) as purchased by the customer when they are needed. The products are available from other suppliers, and there is little difficulty for the customer to purchase them from another source or multiple sources...more

The Rhythm of the Sales Process

With so many of our clients trying to boost sales in a tough environment, we've been having lots of discussions about sales incentives. It's surprising to me how many business owners create incentives that don't fit their business, simply because a concept like "straight commission" or "straight salary" appeals to them.I've worked on sales incentives for years, and find that if they don't fit your business they are inevitably doomed to failure. By "fitting" the business I mean that the rhythm of...more

It's Not Adoption

I spent some time this week with a client who was implementing his first-ever layoff. He has been in business for over 17 years, and has become very close with many of his employees. Some were friends before they were hired. Others have become friends over the years of working together.When the term "layoff" is heard, 99% of the world thinks about the impact on the downsized employee. That's understandable, but I think about the other 1%, the entrepreneurs who feel like their employees are family...more