< SEE ALL POSTS
What if the accepted way is flawed?
June 15, 2015 | By Neil Ducoff | No Comments
There is a way things are done. Industries have their way of doing things. Businesses have a way of doing things. People have a way of doing things. This “way” is the accepted way. Deviate from the accepted “way “and you risk being labeled a renegade, troublemaker or just a plain old nutcase. But what if the tried and true “way” lost its potency? What if the “way” is flawed? What if there was a “different” way that was more effective, efficient, productive, stimulating, motivating, exciting and revolutionary? What if this different way was the breakthrough you’ve been hoping and searching for? And what if your response to this breakthrough way was, “This isn’t the way things are done.”? Poof … you watched opportunity pass you by.
In business, traditional ways of doing things are merely proven and accepted habits. When time, circumstance and new thinking merge, those habits are challenged. The flaws are revealed. A different way … a better way … emerges. The early adaptors are the pioneers. They question what is and challenge status quo. They figure it out. They make it work. Eventually, other leaders take notice. People take notice. Buyers take notice. Yet, competitors and naysayers label the new way a fad. They don’t “believe” in it. Well, fire wasn’t a fad. The internal combustion engine wasn’t a fad. The Apple I computer wasn’t a fad … nor was the iPod, iPhone or iPad. Total Quality Management wasn’t a fad. Open-Book Management wasn’t a fad.
And guess what? Team-Based Pay wasn’t a fad either. It is a compensation business model that has stood the test of time. The Team-Based Pay (TBP) pioneers have been using it for decades. Today, Strategies is doing more TBP conversions in businesses of all shapes and sizes then ever before – because it works. Because the TBP business model creates growth opportunity for the business and its employees that the old way, the accepted way … the “commission way” … simply cannot. TBP is certainly not the only way. It’s just a different way that appeals to owners and leaders that want to create something different and more dynamic for their companies, employees … and customers.
Here are some No-Compromise Leadership thoughts on the TBP business model:
- Commission’s fatal flaw: It has been proven time and time again that commission motivates the few … not the many. Not everyone is hungry for the dollar or motivated by money. Not everyone is blessed with the sales gene, in fact, most are not. Nowhere else is this more true than in the salon/spa industry where “selling” retail for a commission is more bust than boom. Creative and skilled service providers are passionate about their work and the products they use, but when it comes to “selling” those products to earn a commission, most simply opt out because commission gives them the choice. Commission is simply not the motivator it’s cracked up to be. The motivation that drives productivity, engagement and performance in a company is driven by its systems, leadership … and its culture. Salons and spas on TBP typically generate retail sales of 18% – 25%+ of total revenues … with NO retail commission.
- Commission’s other fatal flaw: I’ve been teaching and preaching this for decades … commission is an “I/me/mine” pay method that creates an “I/me/mine” business culture. My client. My time. My sale. My price. And when client loyalty is to the “I/me/mine” individual and not to your company or its brand … your company is an accident waiting to happen. Teamwork can only go so far in a commission environment. True teamwork demands an inclusive culture free of individual barriers. Geese fly in formation because the formation is “team based.” If geese were on commission, it would be a drag race. Got that mental picture?
- Reward overall performance/contribution: Commission is pay based on a percentage of an individual’s sales. No matter how those sales are generated, employees get their commission. TBP allows a company to reward each individual’s overall performance and contribution to the company and the team. It rewards the right attitude … not the wrong attitude. It rewards high client retention … not low client retention. It rewards retail recommendations and sales … not ignoring retail sales. It rewards consistency … not inconsistency. It rewards attendance and being on time … not absenteeism and lateness. If what gets rewarded gets repeated … then reward all the factors and behaviors that define a great employee … not just sales.
- It’s about controlling the company’s payroll %: Business owners need to control their payroll expense percentage and you can’t control a commission-based payroll. As the cost of business rises, straight and sliding scale commission IS NOT sustainable long term. Sales up. Payroll up. Raise prices. Payroll goes up. On TBP, service payroll is a controllable expense. Sales up. Payroll is fixed. Payroll % drops. Payroll increases are determined by cash flow. NOTE: If your service payroll percent exceeds 35% of Total Revenues (Service + Retail = Total Revenues) … your payroll is out of control. Implementing product/service charges is a bandaid that won’t fix a payroll that is sucking the financial life out of your company. You need a short- and long-term solution … TBP is a proven solution.
- It’s about driving your Overall Productivity Rate: As an owner, you obsess over white space on the appointment book. What if everyone obsessed? QUESTION: How quickly would white space fill if it was a team responsibility? QUESTION: How much better could you pay service providers if your company consistently enjoyed high productivity rates? Got it?
- It’s about Career Paths: The commission-based career path sounds like, “Grow your book. Raise your prices. Double book. Your income stalls when hours are filled.” The TBP career path sounds like, “An individual can receive pay increases based on continued excellent overall performance. As long as service payroll % is within the Strategies benchmark of 30% – 35% of total revenue (Service+Retail), top performing employees can be rewarded for continued excellent performance.” And then there is Team Bonus.
Implementing change is about creating opportunity for everyone that contributes to growing your company … and change rocks the boat. If your business isn’t changing, adapting and moving forward, why should employees hang around a company that isn’t going anywhere? If you’re hesitant or afraid to rock your boat, your company is becoming irrelevant. When leaving is more attractive than being an employee at your company … don’t blame anyone but the face in the mirror.
To learn more about Team-Based Pay … click here.
– – – – – – – – –
Please share your thoughts with me about today’s Monday Morning Wake-Up. Click below to comment.
Pass this e-mail on to your business colleagues, managers and friends. They will appreciate it.