Anatomy of a Team-Based Pay conversion

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.

Five reasons ‘information flow’ needs to be better and faster

Think of “information flow” as the signals your brain sends and receives to engage in a conversation, drive a car, process data to solve a problem or to respond to a threat. Millions of bits of information and instructions are processed every second to create the coordinated ability to multitask and get results. Any disruption in the flow of information can be life-threatening. A company functions very much the same. The objective is to get results through the coordinated efforts of teams of people. Just like your brain, your company needs massive amounts of information flow to deliver consistently excellent results. Extraordinary results require even more.

I often ask seminar attendees, “What is the most asked question in the history of leadership?” The answer is, “How many times do I have to tell them?” Everyone chuckles, but it’s the reality of how inadequate current information-flow systems are that rings true.

Companies, small and large, are like complex organisms that require massive amounts of information flowing in all directions. Insufficient or missing information chip away at the company’s ability to consistently deliver quality results. The causes are directly tied to poorly designed systems, lack of leadership, procrastination, indifference and accountability issues. All are self-inflicted. All are curable.

Six ways to know what’s really going on

Scenario One: A key employee leaves your company. As you begin to assess the work and status of various projects the individual was responsible for, you begin to discover things that are disturbing and quite different from what you thought was being done. Projects were far from complete. You learn of conversations that undermined your leadership and created division within your team. You scratch your head and wonder how all this was happening under your nose.

Scenario Two: You have some long-term employees who have become increasingly and openly resistant to change. In fact, they’re outright ignoring change initiatives. You see it. Everyone sees it. It’s been going on for some time and has become the norm. You feel as though they’re holding you hostage. Your frustration hovers near the breaking point. Then, they quit without notice and open a competing business. You feel blindsided and as you discover the elements of their plot, you wonder how all of this was happening under your nose.

How much is your company worth today?

If you were leading a publicly held company, your ultimate job responsibility would be to create value for the stockholders. Run an innovative, efficient, fiscally responsible, customer-service driven company with a strong brand identity, on a consistent manageable growth track, and the stockholders love you – and you get to keep your job. Wow, in one big sentence I just encapsulated the primary objective of a successful CEO who reports to the Board of Directors that represent the stockholders. At the end of the day, business and leadership is about growing the value of the company.

This whole concept of creating company value becomes a blur when you’re the owner, leader and primary stockholder. You’re doing work that you’re passionate about while pushing to grow sales, keep people productive, pay the bills, solve problems and generally keep things heading in the right direction. Yes, all your hard work has a direct impact on creating value for your company – but you probably have no idea what it’s worth.