Henry Ford used to say he’d rather have 1% of what a hundred others made working for him, than 100% of what he made by himself. Some business owners want to have it all, but in the process, cut off the very folks they need to get what they want.
Our business colleagues have chastised us for “overpaying” our sales people. They’d say, “Aren’t you afraid they will make more than you?” Actually, we had several sales people who made more than we did.
When we looked at the efficiencies of scale, the value of stability, and the increase in sales, we knew we were doing the right thing. So, why should you apply this winning philosophy to your business?
1. Reduce Your Turnover. Turnover is the largest hidden cost in business. It can take up to six months to find and train a new person. There is no guarantee that this new person will work out, either. You may have to start all over again with someone new. This can go on for quite a while until you get the right person.
Now you have someone who will be under-producing until he or she is fully trained. You also lose the time of the new hire’s trainer, who now has two jobs to do. Both jobs suffer. And the relationships built by the person who left could either be dropped or taken away by the departing employee. These must be re-built.
Remember, top performers who get a “piece of the action” are generally loyal and truly concerned about the welfare of your business.
2. Attract the Go-Getters. People who know they are excellent at their jobs want to work for a company that compensates them based on their performance. People who are less productive can’t afford to work for a company that has performance-based compensation plans.
When your job candidates ask where your profit centers are and how that flows into their paychecks, you should realize you are talking to a go-getter. Keep your performance metrics well thought out and achievable.
Rewarding for growth over same month last year is a good start. Averaging last year’s prior and subsequent months with the same month will smooth out most anomalies. Renegotiate profit-sharing bonuses annually.
3. It’s Free! If you know the profit of your business now, and you know your rate of growth for the past few years, any increase in that rate of growth attributable to your people’s performance is “found money.” When you cut an employee in for a piece of your increased profit, he is motivated to produce even more. It really costs you nothing. Just make sure the payment is tied into profitability, and not based solely on “growth.”
You are paying too much for labor when you pay for “attendance” alone. It’s their production you really want, because that is where your profits come from.
Why settle for 100% of a smaller pie when you can have more pie by taking a smaller piece of the larger pie others helped you get. When it comes to growing your business fast, it pays to share the wealth.