Pay For Performance
Flat Rate vs. Pay for Value
This is probably the most overlooked aspect of making a business run like it should. So let’s get right to the heart of the matter. If you pay people for their time instead of for what they accomplish, they will never think like an owner. We call this Flat Rate thinking and it’s ruining small businesses every day!
Have you ever said to your team, “We have to get more efficient…”? Of course you have but did you ever realize that if they do work harder and better and become more efficient that this usually winds up meaning that on the one hand, they showed you what used to take 40 hrs now only takes 36 and on the other hand that you will likely reward them by filling the newly available 4 hrs with more work. So the net result for them is that by working harder, they just got more work without seeing an extra dime for their efforts. Doh!
To further our example, let’s say you have two employees: One is Joan Superstar and the other is Steve Slacker.
They do the same job. Started on the same day. But…Steve does just enough to get by while Joan goes above and beyond. With flat rate thinking you have to pay them the same. Regardless of the value they provide to the business or the losses they cause, you have to pay them the same because you’re paying for time not for value and inadvertently forcing them to be at odds with you and probably each other too!
So not only is this just bad math, consider what it incentivizes: Steve will never get better and will continue on in his “entitlement” mentality, expecting pay for time regardless of value provided. In his world, you OWE him. You are in debt to him and he demands prompt payment every two weeks!
As for Joan, she started off loving her job but as things have gone along she sees nothing from her extra efforts and will soon become another Steve or she’ll leave. In both cases you lose.
If there’s no real accountability for results, no amount of systemization will help. Why? Because people go where the rewards are. Just like you do. An owner’s mentality is to create value at a profit. So if you want a team of owners who think and work like you do, you have to bring them into the ownership game. That means risk and reward – no more entitlements.
Owners think in terms of financial outcomes…
What would happen if you had Steve and Joan’s work well systemized and measurable? In terms of time spent, outcomes attained, and methods used? Further, what if their work was easily recorded in a system that gave them and you real time feedback in terms of a performance score? What if their bonus was dependent on that score?
We call it a big win/win. They call it getting rewarded for good work. With MasterPlan™ you now have a system at your finger tips that makes this seamless. Owners think in terms of financial outcomes. Employees think in terms of entitled paychecks. Which do you think will make your business run better?
Get Rewarded for Valuable Work, Not Time
Your new team of owners know if they do great work, they’ll be fairly and consistently get rewarded for it. Not at some far off event that is really just another entitlement due date. Now every pay day is about the VALUE they created. If it’s there they benefit, if not, you don’t pay for work that’s not valuable. They finally have skin in the game.
The bottom line is this: You’d be happy to pay more for higher value work that makes the business more profitable – but only if it were proven valuable…
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