Thursday, December 22, 2011

Year End Bonuses

Year end bonuses are so common in business.  But frankly, they are so worthless.  OK, I know I sound like Scrooge.  But I am talking about productivity...

Your employees might like... and even expect a year end bonus if that is what you have traditionally done for them.  But I would suggest something different.

At the beginning of the year, have a meeting with all of your key people.  Before the meeting, consider what it is that you would like them to accomplish in that year.  What are 3-5 key items that you would like to judge them on?  I like 3-5 because it is a reasonable number of things to hold your people accountable to. 

Items could include:
  • Reduce Inventory by $50,000
  • Grow sales by $100,000
  • Keep your costs under budget (I will save budgeting for another post... it is key though)
  • Reduce turnover by 2 people
  • Add 5,000 new Facebook fans for the company
If people establish bonus criteria, it is usually more like this:
  • Improve customer service
  • Be a team player
  • Do your job (OK I am just joking about this, but sometimes that is what we give bonuses for!)
These goals don't have any measurement to them.  At the end of the year, it is impossible to sit with your people and say, yes you are a team player.  Make the goals SMART.

T-time frame

So you develop your goals, then you need to determine how important it is that they accomplish these goals.  If it is VERY important to the company, then give them more money.  If it is NOT that important to the overall company goals, give them less money (or perhaps reestablish NEW goals!).

For example, you might believe the criteria are mission critical to the company.  If you hit these goals, you will be a better business next year.  Therefore, I would give my employee 25% of their base pay in this bonus package.

Or conversely, it is good to establish the goals for this particular employee, but frankly, if they accomplish the goals, your business is only going to be marginally better, I might only have a bonus pool of 2-5% of base pay.

Then you can weight each category.  So for explanation sake, let's use the items I included on top.  Which of those is MOST important to the company next year?  I would always say that SALES is the MOST important thing, so I might give that a 50% weighting.  Second might be reducing inventory, so I give that a 20% weighting.  And the other 3 are equally important so I give them a 10% weighting.

The year happens.  Your employee hits the sales goal and misses the other goals.  So of the bonus pool you established, they are only eligible for 50% of the pool of money.  This employee makes $50,000.  I gave them a bonus pool of 20% of base pay or $10,000.  Because they ONLY hit the sales number, they are eligible for a $5,000 bonus.

I love having bonus criteria like this.  Because I HATE to talk about money with my employees.  There is NEVER a good answer to how much they get paid.  The employee always thinks they should make MORE money.  And the boss always thinks the employee should make LESS money.  And each of them is right!  There is no way to make everyone happy.  So, I like to establish a pay amount and bonus that changes based upon their value to the company.  We "value" their value on the bonus criteria.

If they didn't get a bonus, do they deserve a raise?

If they did get a bonus, they are making the business better.  They are definitely worth paying more money to.

A caveat that I might establish with the employee is that all bonuses are based upon the profitability of the company.  If the company doesn't make money, no one is eligible for bonuses.

This is a tough one as many small businesses do not want to share the financial data with the employees.  I personally disagree as I like to share everything with the employees.  Generally they think the company profits what they sell.  They never factor in all the expenses of actually running a business.  It usually makes them better employees if they know the whole financial story.

So that caveat is really only reasonable if the employees know the financial picture.  At the end of the year, you decide your company is not profitable enough to pay bonuses.  You had better have a REALLY good reason, or you have just lost the faith and trust of your people.

Tuesday, December 13, 2011

Why don't you succeed? One word...

I honestly believe that most people don't succeed because they are not competent.  I believe they engage in the wrong activities on a regular basis.

What do you spend your time on during the day at work?  If you are like most people, you spend your time answering the phone, handling the next client or crisis.  These activities are in quadrant 1 above.  They are urgent and important.  But most people spend their lives here.

The successful people take the time on a regular basis to do the important activities... that are NOT urgent.  Writing a blog is important for some people.  But for me the biggest missed opportunity for most is the lack of planning.  I am too busy to plan!

As we enter the next year, take time prior to each week.  Maybe it is Friday before you go home or Monday morning when you get back to work, but take 30 minutes with a blank piece of paper.  Write something you would LOVE to accomplish on top.

Then write down the steps necessary to actually make that goal happen.  Then, START. 

Or maybe planning for you is about the quarter.  You travel throughout an area, how often are you going to be away.  What would you like to accomplish when you are there.  Begin planning for your best trip ever! 

Perhaps you are a person who has a more creative job, like a stylist.  You just do what is in front of you each day.  Take 5 minutes before the first appointment, look over your clients, what could you do to make that a better interaction?  How could you prepare better for a great visit?

This is just as important for your personal life!  What are you doing to make an impact?  Plan to do GREAT things for your community, your friends and your family.

Monday, December 5, 2011

Phone etiquette continued...

Have you ever met someone in the mall and their first question to you is, "I know you, do you remember me?"  One of the most awkward questions... if I knew your name, I would have used it!

Whenever you meet someone, give your name.  Before you leave them, repeat your name and make sure that you have their name correct.  There is nothing worse than seeing the same person and having to call them pal, buddy, etc.  Let's just learn their name.

Let's say you are with someone else, introduce them to your new acquaintance.  This usually spurs someone on to give their name, therefore reminding you of their name!

We all want to be known!  One of the most important words is your own name.  It is so sweet, just rolls off of peoples tongues!

So what about the phone?  Do the same thing on the phone.  When someone greets you on the phone and gives their name, write it down.  Then refer to that name throughout the phone call.  When you end the call, say goodbye to them by name.

OK, today's pet peeve!  I get a phone call from someone that is asking questions about something related to Mirabella.  I answered the phone, "Thanks for call Mirabella this is John Maly."

This person went off telling me about the situation.  I tried to break in to get their name.  But it wasn't until the end of the call did I finally secure the name.  As I said earlier, I always have a pen and paper by the phone.  I begin writing notes immediately on every call.  Ideally, I write down the caller's name, salon name, phone # at the least.  Then while they are explaining their issue, you can be looking up their account and hopefully have a little more information about this person. 

In fact, if you call any large service provider now, they will get your name and number right away.  They say that it is so they can call you back if they get cut off.  I am sure that is correct, but it is just as important so they know who they are talking to.

And how about voicemail?  My worst voicemail is from someone who goes on and on for 5 minutes about what they want to talk to me about.  Then just before they leave their name and number, they get cut off!

So when leaving a voicemail, state your name (spell it if you have a confusing name) and phone number... s-l-o-w-l-y.  Think of how long it takes you to write out a phone number and pace yourself at that speed.  Nothing is worse than to have to rewind messages 10 times to properly write down the information. 

Then leave your message.  At the end of the message, again leave your name and number... s-l-o-w-l-y!

As a business person, these types of things are small things that make you that much more effective!