Are You Paying for Attendance or for Production?

When you are a startup entrepreneur, you must hire those who are production driven and not attendance driven. Brian Tracy says, “Fully 80% of all production problems are caused by compensation plans!” In other words, you get what you pay for. If you pay by the hour, you get hours. If you pay for production, you get production. We think the best hires are other entrepreneurs.

When you pay by the hour or based on tenure, you’ll hear, “I haven’t had a raise in a year,” like the amount of time that has passed earns them the raise. You will also hear, “I’ve got enough to keep me busy,” as if keeping them busy is a goal of the company. And then there’s the classic, “I was there. Pay me,” as if their mere attendance is all you needed.

This is not to say that hourly employees and outsourced services ipso facto aren’t good producers. Many are. Especially the ones who know their job is on the line, and the ones who clearly understand their goals and deadlines. But there is far less lurking and sandbagging among folks who get paid for deliverables. They simply can’t afford it any other way!

As an entrepreneur, there is no question in your mind about the critical nature of sales and customer service, but what if your team gets paid whether or not you make sales, and whether or not your customer is happy? Do they have the same incentives you have? Probably not.

We like to say, “If you are paying your people right, the non-producers can’t afford to stay, and the producers can’t afford to leave!” Just take a moment to think about that…

When you pay your people right, you increase production, engagement, urgency, sales and the excellent customer experience you are looking for. Here are some ideas to get you started:

1. Clearly Define the Deliverables. Plainly state exactly the expectations you have of each team member. It is likely different for each player, so consider this carefully. One approach to get going is to ask each person to make a list of what they do and the relevant deadlines. This gives them ownership and forces them to think in terms of outcome. Then refine this list to better suit your company goals.
2. Create a Bonus Structure. It’s easy to pay the salespeople on production – their commission is based on it! But what about the receptionist, the assistant, and the bookkeeper? What about the marketing, legal, production and administrative people, and other folks who are paid by the hour industry wide? For them we created a quarterly bonus. The bonus was paid as a corporate contribution to their 401K tax-free retirement plan, matching at 50%, 100%, or 150%, and was based on sales, growth, and profitability.
3. Take a Smaller Slice of a Larger Pie. Be prepared to share the wealth in various ways appropriate to each individual’s accomplishments. One way is to bonus for a specific accomplishment that clearly adds to profits, like a new client, a big savings in overhead, achieving a stretch goal, or meeting a difficult deadline. Once your team sees the direct relationship between their production and their compensation, they will become more interested and engaged in the process of making your business more successful. Plus, now you have more “found money” to share with them.

Congratulate each one publically for their achievements, especially those who impact everybody’s bonuses. You’ll see more of what you acknowledge, create a stronger and more cohesive team, and get the production you paid for!