Anatomy of a Team-Based Pay conversion

June 25, 2012 by

I just returned from Oklahoma City where I converted Richard and Jan Hill’s three Eden Salon & Spas from commission to Team-Based Pay. I’ve been doing TBP conversions for over 35 years. I have done them for salons, spas, manufacturing companies and high-end retail stores. And for over 35 years, I have been at the epicenter of the often heated debate between commission and non-commission believers. My usual response to, “I don’t believe in TBP,” is, “It’s not a religion – it’s a compensation system.” Then again, if I’m perceived as some “TBP Guru” on a global crusade converting commission companies to TBP, then perhaps their perception is somewhat true. Commission believers see their method as a prime motivator to perform. TBP believers see their method as a means to create a dynamic culture.

Just last month, J.C. Penney’s new CEO, Ron Johnson, eliminated commission in all stores including clothing, jewelry, cosmetics, appliances, electronics and salons. Until late 2011, Johnson, along with Steve Jobs, headed up the creation and operations of the wildly successful Apple Stores. Apple Stores are non-commission and Johnson wanted to create the same “do what’s best for the customer/relationship building” culture at J.C. Penney. It was a bold move that clearly rocked the boat throughout J.C. Penney, but it also cleared the way to shift the culture to customer-centric rather than sales-centric. It will be interesting to observe the transition.

Pay conversions away from commission top the list as the one change that owners and leaders fear most. However, the fear comes from a lack of understanding about TBP, the conversion process, the systems that drive it, and how to lead a company that no longer has commission as the prime motivator – if it even is the prime motivator. [Read more...]

Filed Under: Compensation, Monday Morning Wake-Up, Teamwork Tagged With: , , , , , , ,

Six must-knows about Team-Based Pay compensation

May 17, 2012 by

Pay is always a hot-button issue. With the news about JCPenney Salons eliminating commission, the rumors are flying fast and furious. Don’t be motivated by fear when it comes to your pay system. Separate fact from fiction, starting now:

  1. The right pay system is about more than just a dollar figure. It’s about fostering a positive culture where your staff works as a team and is dedicated to helping the business grow. They enjoy coming to work every day — and you do, too.
  2. You can’t achieve consistent bottom-line profits when your payroll percentage is a variable and ever-growing expense. You won’t grow when you are held hostage to commissions. If a salon/spa/medspa’s service payroll exceeds 40 percent of gross revenues (service and retail), it has a payroll problem.
  3. Team-Based Pay is a pay system; it’s not a religion. Team-Based Pay is an hourly and/or salary program, which ties a team bonus to the achievement of critical numbers, such as revenue, gross margin, client retention and productivity. Just doing hourly/salary is NOT Team-Based Pay. Individual growth is tied to overall performance – not just the employee’s ability to generate revenue. A Team-Based Pay system is designed to reward the right behaviors and performance – those that support the company’s goals and culture.
  4. An employee’s compensation should be based on more than just specific tasks. Successful compensation programs take into consideration a wide variety of skills and behaviors: attitude, technical skill advancement, attendance, teamwork, retail recommendations, integrity, cooperation, and customer service.
  5. No pay cuts or hour reductions. Successful pay conversions are executed with integrity and fairness.
  6. A successful compensation system must meet five non-negotiable criteria:
    • It must fit the financial reality of the business.
    • It must be controllable, not a large “fixed percentage” of revenue.
    • It must encourage and reward the actions that are consistent with the vision and culture of the business.
    • It must give clear guidelines and pathways for individual growth.
    • It must inspire and reward team and the attainment of the company’s overall performance and revenue goals.

Does your pay system make the grade? If not contact Bruce Hourigan at 800.417.4848 x203 and learn more about how team-based pay can help improve your bottom line.

Filed Under: Compensation Tagged With: , , , , ,

Creating a foundation for salon and spa growth

May 3, 2012 by

You’d never open a salon without the proper tools — state-of-the-art scissors, top-of-the-line blow dryers and, of course, fabulous, effective products. Similarly, no one would try to run a spa without massage tables, pedi chairs and wonderful scrubs and lotions.

Unfortunately, many owners do try to run their salons and spas without the proper business tools needed to be profitable and successful.

Many salons and spas struggle with cash-flow and figuring out what’s coming in (and going out). Without a clear financial picture, it’s impossible to plan for steady growth, as expenses always pop up. Many owners (maybe even you) start using their personal credit cards to pay the bills — even to cover payroll. It’s impossible to build a strong business without a realistic cash-flow plan.

Numerous other owners and managers grapple with staff concerns, from hiring to pay design to performance evaluations. Some owners have leadership issues, uncertain how to translate their vision to their employees so that everyone is working toward the same goals. Proper communication is one of the first steps in building a successful business, yet it is one of the basics that many salon and spa owners believe they don’t have time for. A culture where employees want to do their best, stay and grow is one of the hallmarks of a thriving, profitable business.

Providing consistent customer service is also difficult for many businesses. As you know, customers expect more — just doing the minimum is no longer effective in today’s super-competitive environment. Surpassing customer expectations in every area of the business is a requirement to develop a loyal customer base that will recommend a salon or spa to their friends.

Do these challenges seem familiar? While perhaps not as glamorous as offering a great cut, a photo-worthy up-do or a creative manicure design, solid business practices are what every salon and spa need to be successful.

The path to addressing these issues starts with you — the leader. Start coordinating your game plan for change now. Now is a good time. And you can find the time to make it happen. The alternative action — putting it off again — will only leave you in a declining holding pattern. If you want change, do it now.

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Looking for the best place to start?

The Strategies Incubator is designed to jumpstart the business side of your salon/spa. In four intense, exciting days, you will learn the basics to grow a strong business, including financials, leadership, teamwork, communication, compensation, employee retention and customer loyalty.

Without a proper business foundation, a salon or spa cannot grow in a healthy way. It may appear to be doing well, but it’s no more stable than a castle built in the sand.

Start building your foundation for success at the Strategies Incubator, June 10-13. Find out more here.

Filed Under: Customer Loyalty, Financial Literacy, Information Flow, No-Compromise Leadership, Productivity, Profitability, Staff Retention, Teamwork Tagged With: , , , , , , , , , , ,

Three keys to creating the ultimate salon or spa experience

March 29, 2012 by

A friend and fellow entrepreneur once told me when it comes to going to a salon, it’s important that the stylist get the cut and/or color right every time. If you don’t get that part down, you can forget about everything else. However, when you consistently get the cut and/or color right, then it becomes about everything else, the experience.

Salons and spas throw the word “experience” around like nobody’s business. “We charge higher prices because our clients pay for the experience.” “Our clients come to us because of our great salon experience.” What the heck does that mean? While every salon/spa has their own way of doing things, many owners and managers have no clue what matters to their clients.

In my salons, the experience starts with the initial point of contact. How the guest-care coordinators greet our clients is important, including their words and tone. We often tell new team members to “smile through the phone.” When a client comes into our business, we have a two-second rule. That means that when clients walk in the door, they are warmly greeted within two seconds.

Next, we offer a complimentary stress-relieving treatment. After a thorough consultation, we begin the service ritual with a scalp massage and stress-relieving shampoo. We also give clients a hand massage while their hair is blown dry. We expedite the checkout process by offering to reserve the next appointment while our guests are “in the chair.” We finish with a quick makeup touch-up, before we escort our guests to the front.

We’re often asked how we’re able to incorporate so much into the salon visit and how we deliver this experience to every guest, every time.

It comes down to three things: culture, accountability and systems. As a team-based business, our staff understands the importance of team service. They understand that everyone is responsible for taking care of the guest. Period. From the guest care coordinators to the salon interns. That’s our culture.

Next up is accountability. Everyone is responsible for ensuring our commitment to the customer is kept. It’s that simple.

The third thing is systems. Systems create the foundation and the support to create consistency. Consistency breeds loyalty. With systems in place, we can always focus on the client.

We all like to think that we provide superior salon and spa experiences for our guests.

Can you answer “yes” to these two questions?

  1. Would I pay full price for the services we offer?
  2. Is the experience worth the price every time?

I can answer, “Yes” and “Yes.” If you can’t, start thinking about culture, accountability and systems.

Your turn:  How does your culture support your vision? Let us know in the “Speak your Mind” field below.

Filed Under: Customer Loyalty, Information Flow, Productivity Tagged With: , , , , , , , , , , , , , , , , , , , , , , , , ,

It’s getting personal: When salon & spa owners aren’t taking a paycheck

March 22, 2012 by

paycheckWhen the owner of a salon or spa isn’t taking a paycheck, it’s more than business; it’s personal. When you’re feeling stuck and your debt is out of control, it may seem as though all is lost — it’s not!

Need a little encouragement? Start here:

  • Take some time and reconnect with your passion for the beauty industry and think about what your long-term goals are for your company.
  • Realize that there is a path to achieving your dream. You can do it by holding yourself accountable to doing the work, developing a sense of urgency for tasks and renewing your commitment to your business. It may not be easy, but it is very possible.
  • Learn the tools that you need to build strength and structure in your salon or spa.

 Here’s a quick to-do list:

  1. Face your financial reality, including current debt. Use your Balance Sheet and Profit & Loss Statement. Be honest!
  2. Make a plan. This is your Cash Flow with projections for revenues and expenses. Look for areas where you can cut expenses and maximize revenues. Develop specifics for each area so that all players know what needs to be done and how to do it.
  3. Share the urgency. Help your team understand why changes need to be made and how they fit in.
  4. Celebrate small wins. It can be daunting to look at the “big number.” Set goals along the way and celebrate their achievement with your team. Keep it positive. Regroup when goals aren’t met, then set new goals. It’s a process.
  5. Get help. A professional coach can help hold you accountable to your goals and offer a “safe space” for discussing fears, realities and strategies.
  6. Believe in yourself. You can build an amazing, enduring company.

What steps are you taking to achieve a better financial future?

Filed Under: Compensation, Financial Literacy Tagged With: , , , , , , , , , , , , , , , ,

More than 30 years of carrying the Team-Based Pay torch

March 12, 2012 by

Some people called me a pioneer – others thought I was crazy – to suggest that traditional commission-based businesses could convert to a non-commission system. “They won’t be motivated. They’ll quit. What if sales drop? I can’t afford it.” These are the basic responses I’ve patiently listened to and responded to for years. I didn’t create the Team-Based Pay (TBP) system to create controversy; I created it as a business model capable of building dynamic world-class companies.

The challenge with commission is its simplicity. “You earn a piece of whatever you sell.” It’s an “I/me/mine” pay system. Creating extraordinary customer experiences requires systemized and coordinated team effort. It’s virtually impossible to get “team” without rewarding team effort. Commission is used as the prime motivator for performance, while countless studies have proven that money is not the prime motivator. If commission is a motivator, why do you have employees who you’re constantly pushing to perform and achieve “average”? The 80/20 rule is in play with commission, which means that 20% will be motivated to perform. The 80% require extensive leadership engagement, performance systems and accountability. Commission, even with sliding scales, lacks the horsepower to achieve the extraordinary. [Read more...]

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