Introduction
Our previous show tackled the topic of "Investing in Training & Development'. As we discussed this is not a hard cost investment - money out of your pocket. It is the investment of your time and building the infrastructure so people are successful because of the process, not in spite of it. Objectives - The WHY The only accurate measure of business performance is profitability, not revenue. It doesn’t matter how much money flows in; it is all about what is left in the cigar box. If it is true about you as the owner why should it be different with anybody else. Tie all of your compensation to how people impacted the amount of money left in the bank. Why not apply that mindset internally to the business and compensation? Here is your primer to get started: Salary is a recruiting tool, Benefits are a retention tool, and if you want Performance - Pay for it. Let that sink in. How many times have you been unhappy with an employee that works at the same level after getting a pay raise? A salary increase has a momentary positive impact (a week or two depending on your pay period) and then is taken for granted. As for benefits, its impact is to create golden handcuffs making it difficult to leave. Neither of these have any real impact on performance. Key Issues - Owner Perspective:
What You Need to Know - The WHAT Ready for another shock? All compensation systems work! You just don’t like the result. Why is that true? People will do what you pay them to do; even achieving unacceptable results because it was designed badly. The chance for mistakes are lowered when pay is based on how people contribute to business success. Get this right and figuring how to reward them is easy. Get everybody into the game, the great game of business. Most people work in environments where they are forced to bowl with a sheet over the lanes. Imagine the only feedback you receive is noise without knowing how many pins were knocked down or where? And where do you throw the second ball? Why are you the only person losing sleep at night because the company is not performing? Share the load. What You Need to Know - The WHAT Here are Five Quick Tips for Tying Compensation to Profits. The challenge is most small business owners don't understand which customers or products / services are generating the most profit. If this is true for you - start here:
If you are still not sure this is the most profitable customer or product / service, attack the area of the greatest profit potential. Next step is to determine where the greatest contribution to the business can be made by position or step. This is the core of your compensation system:
There are some issues about how to measure I will leave for later Shows. The last issue for creating a Pay4Performance system is linking what they do to what the company needs - giving them a piece of the budget:
If you have any questions or comments, leave it below or contact me directly programming@ibgr.network.
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NEW CHOICE FOR BUSINESS SEARCHAuthorExecutive Team & Show Hosts Commentary and opinions on entrepreneurial capitalism.
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