I know my market here in Alaska is not the only one that goes through seasonal highs and lows in the volume of business. For us, the summers are slow. For many years, I would make money eight months of the year, and lose a ton of money in each of the summer months. It was frustrating to watch those losses, knowing we were going to have to make that up in the winter.
But that really changed once I implemented a team system for all my company’s administrative staff. (I wrote about the structure of that in a previous column, “Implement structure in your administrative team,” August 2017.) Administration costs are a gigantic expense in our industry, but the team pay plan I’ve implemented keeps it relative to our sales and thus very predictable throughout the year. That has allowed me to protect training budgets and things like that. Best of all, it has allowed me to pay my administrative staff more because they will ride the wave with me rather than if I have to pay them based on a worse-case scenario.
When I created the system, I basically told them: “Look, you will end up making more money at the end of the year, if/when it slows down in July, we all fight through it together. Your pay will be lower in July, but in January, you’ll essentially be getting a double paycheck.”
To help them with those fluctuations, we’ve offered some money-management counseling for them. But just as I promised, my average mid-level staff got a 22 percent pay increase, and the company was more profitable at the end of the year. I’m able to pay them more, knowing if things get bad, they’re taking the hit along with me. I can pay them based on what we can actually afford, not a reduced amount based on the possibility that there will be a slow-down or we’ll lose an agreement with an insurer, etc.
One other side benefit to this: In Alaska, the economy takes a hit when oil prices are low, as they have been recently. When that happens, bankers get a little nervous. So they like seeing that I have a system that makes my expenses – and thus my profit – much more predictable.
Having written this column for a couple of years now, I can predict some of you will email me asking for the spreadsheet I use for the admin pay plan. Those who have done that will tell you I’m happy to talk to other shops, but those conversations don’t start with a spreadsheet. I couldn’t have implemented the change I did within my company if I hadn’t developed the right culture, if my employees didn’t trust me, long before we made changes like this.
After reading one of my previous columns, a shop owner in Colorado called me, asking for the spreadsheet I use for a pay plan I’d written about. The first thing I asked him was, “Do your people trust you?”
“Well, I think they do,” he said.
I told him that he can’t just think they do. He has to know they do. Because if you try to get creative with something like pay plans without having trust and the right culture, you’re going to fail. Your employees won’t believe you’re getting creative for the good of the company, your employees and your customers. They will just presume you’re getting creative for your own personal best interests, and that’s it.
That conversation is often as far as it goes with some of the shop owners who contact me, if they’re just looking for a spreadsheet for a quick business fix. I’ll suggest they give me a call to talk though some things they need to work on first, and that never happens.
But the shop owner in Colorado and I have talked for hours. He was going to work on some things I suggested. I could tell from talking to him that he’s one who wants to do things right, making changes in a way that doesn’t end up with him losing his good staff. I hope that happens and I can write about it in a future column.