You have sat in class after class, talked to other yard owners about switching over to paying employees for performance, and you are still paying them hourly or salary, and or a small commission plus base (which doesn’t motivate them, though they count on it), thinking all your employees will walk out or might cause chaos in the business.
Yes, just like you I was slow to change to pay for performance. I had all the excuses you are making, all the reasons why I should not disrupt my employees, because they were giving me all they had, but was I wrong! I still remember the day I changed to a pay for performance system for our employees in 1989. In sales, our volume doubled in 3 months, with 2 fewer sellers, dismantling production and deliveries doubled with the same number of persons. New people hired thought it was great, as they didn’t have the “baggage” of the former employee. Yes, it was hard, and some people left, especially the underperformers. Imagine if your competitor changed to pay for performance, say 5 years ago, the advantages in production and cost structure he has had over you for that period of time. It’s hard to believe I did it over 20 years ago, and the majority of the industry by number of operators has not converted. BUT, the percentages of yards that have changed based on large sales volumes, say over $2m annually, and are a majority of those yards. Yet the small operators continue to watch the big guys get bigger. They learned the advantages years ago, and in many if not most cases use the money they save to buy more cars. (Wouldn’t that be nice!?)
So why risk the change? As owners we have faith in our employees. We do not follow them around to see if they are spending their time efficiently or wasting our money. Instead of monitoring their work, we give them raises and hire more employees because, “they just can’t get it done.” If you are paying your employees hourly, take a day and just follow them around you will be surprised at how much they don’t do.
The benefits of pay for performance will increase your bottom line. How? It reduces the number of employees while increasing productivity. Pay for performance will weed out the under performers, and will amaze you with what your strong employees are capable of handling.
I have helped many yards with pay for performance, including dismantlers, parts pullers, drivers, and salespersons. In fact, it’s one of the most rewarding items I teach owners, over and over, site by site. It’s not unusual to see clients get the costs back in a week or less with the changes they implement.
Remember only you can make business great!
Ron Sturgeon, founder of Mr. Mission Possible small business consulting, combines over 35 years of entrepreneurship with an extensive resume in consulting, speaking, and business writing, with 6 books published. His associate, Josh Davis, collaborated for this article. Josh helps budding entrepreneurs and those wanting to build a business using the web; you can find more about him at www.madeinfortworth.com.
A business owner since age 17, Ron sold his chain of salvage yards to Ford Motor Company in 1999, and his innovations in database-driven direct marketing have been profiled in Inc. Magazine. After the repurchase of Greenleaf Auto Recyclers from Ford and sale to Schnitzer Industries, Ron is now owner of the DFW Elite Auto suite of businesses and a successful real estate investor.
As a consultant and peer benchmarking leader, Ron shares his expertise in strategic planning, capitalization, compensation, growing market share, and more in his signature plain-spoken style, providing field-proven, high-profit best practices well ahead of the business news curve.
Ron is a web expert, but he is also an expert in helping all types of small businesses become more successful and more profitable. He has helped owners in industries from restaurants to law firms with a wide variety of business issues, including sales, promotion, production, financial measures, business strategy, and planning for startups. Whatever your unique challenges, Ron can help you.
To inquire about peer benchmarking, consultations, or keynote speaking, contact Ron by calling 817-834-3625, by emailing rons@MrMissionPossible.com, by mailing 5940 Eden, Haltom City, TX 76117, or online at Mr. Mission Possible.