First, why does compensation matter?
A good performance-based compensation strategy does three things:
1. Attracts performance-driven employees.
2. Keeps them.
3. Incentivizes them to push beyond their current best.
Meaning, your best employees will consistently improve if you give them the right incentives.
That said, compensation is only a single piece of the puzzle — a big piece — but a piece nonetheless.
Know Your Employee’s Perspective
It’s important to understand your employee’s perspective when you put together your compensation strategy. In some areas of the world, pay is a matter of life or death. Here, it’s not.
For most of us (some might argue all of us), maintaining a competitive compensation is a must.
Now that you know your employee’s perspective, you can plan out the core of your strategy.
Types of Performance-Based Pay
Here’s a few examples of performance-based pay:
-Billable hour bonus structure
-Piece-rate pay for installers
-Commission for sales
-Hourly plus spiff
Your tech gets put in a truck and sent out into the world with your brand and reputation fluctuating with every action he makes.
They’re on their own. You usually won’t see him until the next morning.
Unfortunately, you have very little if any oversight to what they do in someone’s house.
You place an insane amount of trust in your techs, because you have to.
Heroically strong management is what you need, but that’s a challenging role to fill as a growing business.
So it’s vital to teach your people how to represent your company.
Instill your expectations, and hold them to it.
Your manager, heroic or not, will never be omnipresent.
This is why I like performance-based pay.
Why I Love Performance-Based Pay
Performance-based pay gets them to do the things you need them to. Especially the “above and beyond” spiff-worthy things that they should do anyway, but…
…probably won’t, like tagging shut off valves with branded shut-off tags. I’d even give them incentives to take off competitors stickers.
Simply put, it works. So I like it.
Why I Dislike Performance-Based Compensation
If you take it too far, performance-based pay is a nightmare.
If you focus more on performance-based pay than a strong culture of expectations, you’ll develop a “we only do this when we get paid” mentality. That’s an expensive problem.
Here’s something you all know. Techs are hard to find.
So they tend to get away with a lot more.
Here’s something you may not know. It doesn’t have to be that way.
Find the Balance
You have to set certain expectations and ensure they’re adopted by your culture. Tagging shutoff valves with branding material is something they should do on their own. And they won’t.
Unless you create a culture where it’s not just expected but enforced. Not by you. Not by your manager. By everyone.
Because you aren’t in the field every day with every tech, and neither is your manager (although he should be going out with them almost every day).
When your techs see someone leave without planting a tag, they should immediately report the incident.
That’s one example of the many expectations you should set.
More than anything, just remember that there’s a point of balance between performance-based compensation and a culture of positive expectations. It’s not easy to find it, but it’s there, and it’s worth finding.
When it’s all said and done, performance-based pay works, and it usually works very well. But don’t lose sight of developing a culture that gets them to do the things they should already be doing without extra pay.