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Salon & Spa Employee Paychecks vs. Buying a Car

December 21, 2015 | By Neil Ducoff | 1 Comment

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Consider the annual income of three salon/spa employees from entry-level to senior service provider. If the-entry-level employee is making $10 an hour and working 40 hours per week, the annual gross income will be $20,800. A mid level service provider at a rate of $20 an hour, working 40 hours per week, will earn $41,600. A master level service provider at $45 an hour, working 40 hours per week, will earn $93,600. (Tip income is not included.)

Now, let’s go shopping for a new car in the $20,800 price range. There is a wide selection of economy-priced cars on the market today. From an expectation point of view, you want a decent level of quality, performance, comfort and some nice features like Bluetooth phone connectivity. You know your expectations must be in line with your budget – but you also will not accept any car that doesn’t meet your minimum expectations. QUESTION: When paying an entry-level service provider $20,800, why would you accept anything less than your minimum expectations?

Let’s go shopping for a new car in the $41,600 price range. Again, there is a wide selection of fine cars to choose from. But in this price range, your expectations are much higher. You want leather seats, a smooth ride, comfort, quality touches like wood grain trim, a quality sound system, GPS navigation, rear camera, collision warning sensors, nice wheels with wide tires and some muscle under the hood. QUESTION: When paying an experienced service provider $41,600, why would you accept anything less than your minimum expectations?

Now we get to go shopping for a new luxury car in the $93,600 price range. The selection narrows at this price level … but your expectation is nothing but the very best in every feature and detail. You want serious performance and luxury. The interior must reflect fine handcrafted furniture. The technology throughout the vehicle must be cutting edge in every way. As a serious buyer, you want to be treated like nothing short of royalty. QUESTION: When paying a master level service provider $93,600, why would you accept anything less than your highest expectations?

This mental exercise is not meant to compare the value of an employee to that of a car. My intent is to emphasize how dramatically your value and performance expectations for an employee can degrade versus the same dollars invested in a car. Would you tolerate a car … at any price point … that wouldn’t run a couple of times a month? Of course not. Would you tolerate a car where some features worked some of the time? Of course not. Would you tolerate a car that refused to take you where you want to go? Absolutely not.

Here are my five No-Compromise Leadership insights on pay for performance:

  1. Focus on the BIG number: A commitment to pay a full-time service provider $20 an hour is a commitment to $41,600 in annual pay. That doesn’t include the company’s share of payroll taxes and benefits. The BIG number keeps the value of a compensation commitment in perspective. Commission totally clouds the BIG number … and puts the entire focus of compensation on a percentage rather than real dollars. And because commission pay focuses on the percentage and not dollars, it feeds the “I want more commission” by service providers, and “I want to pay less commission” on the owner’s side. As we all know, 40%, 50% or 60% of nothing is nothing. The annual income value will always best represent the commitment the company is making to an employee.
  2. Hire for fit and behavior … never the money: What’s more valuable to your salon/spa; Hiring a stylist or esthetician with a following or hiring the right thinking, behavior and talent that fits your culture? If you went for the following, the money from that following was more important than fit, culture, brand and teamwork. That following of clients is loyal to an individual – not your company or brand. And that individual and following can leave just as easy as they came. When you hire for money you’re always at a disadvantage and asking to be held hostage.
  3. Leadership creates payroll R.O.I.: Getting a return on your payroll investment in people IS the work of leadership. Leaders that engage, inspire, recognize, appreciate and show the pathway to growth and prosperity are the ones that realize the best R.O.I. on payroll dollars. Leaders that avoid, dabble in or ignore the work of leadership typically fight higher payroll costs, lower productivity and blah cultures. In a salon/spa service business, leaders must be present and engaged to maximize their payroll investment. There is no autopilot setting for leading people, building teams and creating dynamic cultures.
  4. Cars are manufactured … people are developed and coached: Cars come off the production line finished. They are what they are. People on the other hand, have the capacity to learn, grow and evolve. In the right conditions, people with ordinary skills can develop into extraordinary talents and contributors to salon/spa growth. Developing and coaching people is a prerequisite for company growth. When coaching stops … performance and growth immediately begins to erode. The message here is that when leaders stop caring about talent development … employees stop caring too. Performance, cash flow and payroll issues follow closely behind.
  5. Leaders compromise expectations: The consistent communication of performance and behavior expectations instills a level of individual and organizational clarity. Employees know and understand their performance expectations in relation to income growth. Expectation clarity is the right of every employee and the obligation of every leader that expects performance in return for compensation. Real problems occur when the salon/spa continues to pay an employee for a level of performance that no longer exists such as lower service/retail sales, decreasing client retention rates, absenteeism and other unacceptable behaviors. If you don’t like what you’re getting … why keep paying for it? Engage early. Coach thoroughly. Recognize when it’s hopeless and end the relationship.

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Please share your thoughts with me about today’s Monday Morning Wake-Up. Scroll below to comment.

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Categories: Compensation , Financial Literacy , Leadership , Monday Morning Wake-Up , No-Compromise Leadership , Profitability , Staff Retention

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