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

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.

It doesn’t matter if it’s a salon, spa, medspa or any other form of business. In July 2011, I did a Team-Based Pay conversion at an upscale, multi-million dollar woman’s boutique in El Paso, Texas, called Tres Mariposas. Owner Nan Napier wrote, “One of the things I recognized as I listened to customers and observed our business was that I wanted an alternative to commission-based compensation for our sales staff. Now, I am a strong believer in rewarding performance. My entire industry is commission-based. Yet sales commissions don’t reward teamwork. Instead they contribute to an ‘I/me/mine’ mentality that isn’t good for the customer. Massive change occurred at Tres Mariposas, with our pay system representing just one of the pieces. No question: Change is hard. Employees have been holding on for this bumpy ride. Yet, even just six months down the road, I see that we are much better positioned to give customers a great experience.”

It’s not about the pay. I repeat – it’s not about the pay. Team-Based Pay is a comprehensive business model and system. Without knowledge of how these systems must work in concert, too many fall into the trap of thinking that Team-Based Pay is just salary or hourly pay. Far from it. If you’re paying hourly, you’re on “hourly pay,” not Team-Based Pay.

Here are the five Team-Based Pay non-negotiables:

  1. It must fit the financial reality of the business.
  2. It must be a controllable expense — not a fixed percentage of revenue.
  3. It must encourage and reward the right behaviors and performance.
  4. It must communicate clear guidelines and pathways for individual growth.
  5. It must inspire and reward teamwork — and the attainment of company goals.

Exploding Team-Based Pay myths:

  • It’s not a “cure” or “magic pill”: TBP allows the right culture to emerge. In the process, it gives the company a high degree of control over payroll costs.
  • Commission is not the big personal motivator it’s touted to be: If it was, why are there so many unmotivated service providers and sales associates sitting around in every commission business?
  • There will be a “walk-out” if the business converts to TBP: Absolutely not! Walk-outs occur in businesses where trust has been compromised and leaders short-change the conversion process.
  • TBP won’t work: Correct — if all that changes is your method of pay. You can’t grow a TBP company if the owner/leader still runs it with a commission mentality. You can’t grow a company by picking and choosing which systems and accountabilities you want to use. TBP requires owners to lead and be accountable in all functional areas.

If you want to know about Team-Based Pay, talk to the man and the company that created it. Over the past 30+ years, I have personally done hundreds of Team-Based Pay conversions. In the past 10 years, I have trained a team of Certified Strategies Coaches in the intricacies of pay conversions and they are as qualified as I am.

SPECIAL WEBINAR: Team-Based Pay is a massive topic that cannot be explained properly in a short article. On Tuesday, March 20, at 1 p.m. Eastern, I will be doing a Webinar about Team-Based Pay that will answer many questions and controversies over what it is, how it works and why it works. The Webinar is free. Click here to register. Everyone who registers will receive a link to the recorded version of the Webinar, so if you can’t make the live broadcast, you’ll still be able to watch it.

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Please share your thoughts with me about today’s Monday Morning Wake-Up. Click above to comment.

Neil Ducoff, Founder & CEO of Strategies and author of No-Compromise Leadership

Pass this e-mail on to your business colleagues, managers and friends. They’ll appreciate it.


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