One Monday a few months back, I had lunch with a friend who owns a lumberyard. While his yard was well outside our trading area, I recognized his complaints. Things like "increased service demands" and "rising costs of doing business" know no borders, so we passed a half hour or so swapping war stories. One in particular held my attention.
"Are you sure?" I asked.
"Absolutely," he assured me.
"How are his sales?"
"I'm not sure," he answered.
"Then how do you know you're paying him too much?"
"I've never paid anyone this much money in my life," he answered. "I'm going to have to do something about him, and quick. Can't afford fat during lean times."
"Still, his sales might..."
"Too much! I'm paying him too much!"
Alonzo was a shoot-from-the-hip kind of owner. Energetic, savvy, and dedicated, he preferred to move through the business world guided by his own internal compass than rely on reports and meetings. He reminded me of many owners in the industry, including our own.
Eventually, he told me how much he pays the salesman. It was, in fact, an insanely large sum of money. I agreed with my friend, and the conversation moved on.
On Wednesday, Alonzo called me with an update.
"He's got an offer from a competitor," he told me, speaking of the same salesman.
"Sounds like that problem took care of itself," I told him.
"What do you mean?" Alonzo asked.
"You told me Monday you had to do something about him," I reminded him.
"I can't lose him."
"He's a good salesman."
"What were his sales?" I asked.
"I'm not sure."
"You said you were paying him too much..."
"I can't lose this man!" he shouted and hung up.
On Friday, I called Alonzo. I had to know what happened.
"I gave him a raise to stay," he told me.
"I found out his sales." It was an equally insane sales figure and, once again, I agreed with Alonzo. He couldn't afford to lose this man.
I can think of several times that I lived Alonzo's story, learning from top-performing employees moving on that our compensation has fallen behind the competition.
Likewise, too often we don't understand individual contributions to sales and profit. In our company, we've structured our sales staff compensation plans as salary plus bonus. We also have two salespeople on full commission. While I think these plans have been great for both the companies and our salespeople for several reasons, chief among them is the constant feedback the plans give to both the employee and the manager. If the bonuses and commissions are good, the salespeople are doing well. It's just that simple to get a snapshot of performance.
Alonzo vowed never again to lose sight of individual performance and compensation. He began creating bonus and commission plans for every employee in his company, from his manager to his cashiers. Everyone's compensation would be linked to their performance.
"Want to know how much Rick sold last quarter?" he asked the next time we spoke. Before I could answer he told me. "How about Susan?" And he told me.
"Want to know how many deliveries Tom made?" I didn't, but he told me. "Want to know how many customers Fred checked out? How many times Anne answered the phone? Or how many times Lee emptied the trash? Or how many..."
While I admired his energetic commitment, it's possible he took things a little too far.
Tad Troilo is a manager for Cranmer's Kitchens by Design in Yardley, Pa.