F5.006 (Employee Capitalism) BUILDING A VARIABLE COMPENSATION SYSTEM - WILLIAM EASTMAN

If you are truly interested in employee capitalism and want people like they care, and I mean really care like you do - help them make money from performing and sharing the upside. 

INTRODUCTION
We are big advocates of this approach and have a few shows on the topic. Today's show will pull it together with something you can apply today.

OBJECTIVES

1. What prework is required to get the business ready for variable compensation.
2. What is the simplest method for getting started?

WHAT YOU NEED TO KNOW

• EPISODE D4.010 COMPENSATION IS FAIR
• ​ALL COMPENSATION IS VARIABLE- WILLIAM EASTMAN
• ​EPISODE D.005 NEW MODELS OF COMPENSATION OR PAY4PERFORMANCE
• ​P5.002 THE REVOLUTION REVISITED - OPEN BOOK MANAGEMENT & THE GREAT GAME OF BUSINESS - WILLIAM EASTMAN
• EPISODE C4.003 SALES COMPENSATION

​
The Basics

• develop pay bands - based on the local market what is the minimum, average, and maximum paid for the position
• evaluate where in the band each employee falls
• develop a plan to bring everyone to comparative levels - slightly below average 
• determine how much of each salary/wage you want to make variable
  • Tie Incentives to Profit, Not Revenue
  • Tie Incentives to Contribution, Not for just Breathing, and
  • Everyone has a Piece of the Budget
• develop a pay4performance plan

WHAT YOU NEED TO DO
You are still not sure this is the most profitable customer or product / service, but you have attacked 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:

1. First thing is to figure out how much to share. 5-10% is a good place to start and see what happens. It is better to pay less at the beginning and adjust up than taking it away.
2. Find the behaviors critical in each step to bonus. Wrap your head around the real goal - you want them to do more of the right things so they make more. What behavior will help your bottom line?
3. Make sure you measure it. If your current system doesn’t capture the information, find the easiest metric and add it to your measurement puzzle.

"The World of Business at Your Fingertips" 

1. Follow the "Employee Capitalism" Series all season.​
2. Join our private Facebook Group and go way beyond what is possible on radio
3. Get your business growth news everyday from IBGR.News​
4. DOWNLOAD the IBGR Growth App
5. RESEARCH anything related to Starting, growing, or Exiting a business on the IBGR Network