How To Do Profit-sharing Pt. 2
In How To Do Profit-sharing, I discussed how so many business owners and leaders ask me if they should have profit-sharing. Today I’ll pick up with some tips on how to implement a profit-sharing plan, and what it could look like.
To figure out how to reward your team members through a profit-sharing program, start by deciding what values are most important to you.
- Are you still here? – For us, it’s longevity. If you’ve been with us a while, that means you’ve continued to do better than normal. Otherwise you wouldn’t be there. What’s the number one thing you value when it comes to team members?
- Oh no you di’n’t! – The second most important thing to us is their personal attitude. What are they like to work with? How do they treat team members? How do they interact with customers? Do they go out of their way to get things done?
- Show me the money! – Finally, we base it on their departmental profit. We have many profit centers in our company, and it wouldn’t be fair to pay the same amount out to a team that’s knocking it out of the park as we pay a team that’s getting it done, but not necessarily going the extra mile. (Great thing is that we don’t really have to worry about that at our place.)
You may have more or less values than we have. It just depends on your particular situation. Either way, each value has a scale. It can be 1 – 10, 1 – 5, etc. What ever works for you. Assign some numbers to those values and this becomes the matrix through which you distribute your profit. For example, if someone got scored an 8 for longevity, a 3 for personal attitude and a 2 for departmental profit, then their overall score would be a 13. Run the scores on all involved and drop in the total amount of profit being shared.
|Longevity # Years||Pers. Attitude 1-5||Dept. Profit 1-5||Score|
|Score||% of 100||P.S. = $1500|
Does it look right? Look over every team member and make sure you feel good with how much each person is getting. If not, you may have to adjust your matrix. After this, scale the livin’ daylights out of it. What if your company grows like a weed? What will that look like? Do you still like the distribution? Also, if it grows like crazy, you may drop the percentage of what you’re putting in the pool so you can use those dollars to bless your team in other ways.
Now that we are bigger, our percentages are different. We like to take care of the team in fun ways as well. We are well known for our Christmas parties. This past year we gave away 310 iPads to our team members. We have given away cars, cruises, etc. But when we were really small, like when we were less than 20 people, Dave gave us a ham for Christmas. Why? Because we didn’t have the profit yet, and he bartered the hams for some on air talent fees. Because that’s what you do when you’re small — just what you can.
Questions: Does this make sense? LOL! If not, which part(s)? Is this helpful to where you are in your business? Have you implemented a strategy like this? Click comment below.