Download the PDF - Stylist and Salon Newspapers

Motivate Your Salon Team and Maximize Your Profits
Team-Based Pay Compensation
Proves Effective
Better Business
Neil Ducoff
Would you like to find a way to motivate
every person working in your salon to maximize
profits for your whole team?
Today’s salons and spas have evolved
from “beauty parlors” into full-service image
centers, where highly-trained professionals
consult with their clients about all aspects of
their personal care. Often, team members
work together to provide all the services a client
needs.
However, salon compensation has not kept
pace with the new approach to client service.
In fact, the professional salon industry is stuck
in micromanaging individuals’ pay in the form
of the commission percentage, when business
owners need to be managing payroll according
to the profit and loss statement if they want to
run profitable companies. The simplest and
most effective way to do that is by implementing
a team-based pay compensation program.
A team-based pay program not only
provides for consistent, bottom-line profits by
maintaining service payroll between 30 and
35 percent of gross service and retail revenues
but also makes sense to everyone—owners,
management and team members.
It solves the problem of providing income
growth for top producers who are booked
solid and can’t work more hours, when raising
their commission is impossible. It also
provides employees with a fair and predictable
income. They can plan what they’ll earn in
any week without having to worry about how
many clients will sit in their chair.
Implementing this team-based program
keeps clients loyal to your business—not to
any one individual – while it cultivates a team
culture that is fueled by passion for growth.
This gives you bulletproof systems to run a
profitable business.
Team-based pay always sparks a lively
discussion between die-hard believers and
die-hard commission advocates. But in recent
years, a gradual yet powerful shift in compensation
is taking place.
Owners and managers are searching for
ways to incentivize and reward a multitude of
behaviors that contribute to business growth—
behaviors that reach far beyond sales. Teambased
pay does that and more.
The mandate of team-based pay is simple:
Everyone is responsible for growing the business.
Those words are powerful, but words
alone aren’t enough to inspire dynamic team
performance. A pay program also cannot instill
a business-wide sense of urgency to drive revenues
up, manage costs and build net profit.
Given that, team-based pay uses team
bonuses as a means of driving the four business
outcomes: productivity, profitability, staff
retention and customer service.
In fact, team-based pay is about more than
compensation; it’s a better way to do business
for both business owners and their employees.
It also sets the tone for cultural transformation
and the standard for success in a changing
world. For example, a commission pay
structure is driven entirely by individual sales
dollars, not overall performance, and does not
inspire team performance.
In its simplest terms, team-based pay is an
hourly or salary program that ties a team bonus
to the achievement of critical numbers, such as
revenue, gross margin, client retention, productivity
and net profit. Individual growth is tied to
overall performance—not just the employee’s
ability to generate revenue. A team-based pay
system is designed to reward the desired behaviors
and performance of those who support the
business’s goals and culture.
Team-based pay also includes “broadbands,”
which are designed to offer employees
guidelines for growth in key areas, such as
performance goals, technical skill development
and non-technical skill development. Within
the broadbands are the cultural behaviors that
drive teamwork.
Team-based pay allows owners to honor
their commitment to their employees because
they are not cutting pay; they are guaranteeing
at least current earnings, plus the opportunity
for team bonuses. It disconnects individuals’
pay from what they produce.
By capping payroll at its current level,
the entire team focuses on driving revenues.
That combination creates an immediate drop
in the service payroll percent that later allows
owners to affordably give raises to those with
the right overall performance, skills, attitude,
attendance, etc. It creates a culture in which
everyone rows in the same direction and has
a vested interest in growing overall sales—not
just their own chair or treatment room.
Team-based pay, an exciting way to grow
a company, gets the business juices flowing
and gets rewards. In reality, if you want a salon
team, team-based pay is the way to go.
Neil Ducoff, founder of Strategies and author of the upcoming book
“No-Compromise Leadership,” developed the team-based pay concept more
than 30 years ago and developed a company that trains and coaches to
ensure businesses implement the program successfully. For more information,
visit www.strategies.com.
CALIFORNIA STYLIST & SALON | SEPTEMBER 2008 | 15