A conversation I’ve had many times through the years typically starts with, “John, I have something I want to go over with you,” or, “John, I need to pick your brain about this project. Let’s meet and I’ll be happy to pay you for your time.” Translation: I don’t need a big commitment (or fee) for what I’m focused on right now. How can I invest a lesser amount for this one thing and do so with something smaller than a full-blown consulting engagement?
My response is consistent: “My fees are value-based, so I don’t charge for my time. I don’t have an hourly or daily rate for coaching, consulting, facilitating, strategizing or planning. Your investment in working with me is based on the value of what my involvement can do for the accomplishment of your goals and objectives.”
Enter Consulting by the Cup, a single issue consulting engagement focused on getting the client freedom from stuck. The client sends pertinent documents ahead of a one-on-one meeting for approximately two hours to discuss the issue. Then the client has seven business days following that meeting to ask follow up questions and cover anything that may have been missed or requires a closer look.
Before the process ends, clients have clearly determined which steps they’ll take based on our discussion and my recommendations. They’re unstuck and have a new energy they bring to bear on the opportunity at hand. In other words, they’re back in action.
Could this be useful to you right now to get you closer to where you want to be professionally or personally? Let’s discuss how Consulting by the Cup could get you moving again.
It was the greatest thing they’ve ever done over there at your friend’s company. They found a way to improve their results by adding an incentive payment plan for the employees. Now you’re inclined not to reinvent the wheel and simply copy and paste the plan into your own business and watch as the increased revenues and profits roll in.
First, you might want to get your foul weather gear because it’s about to rain on your parade. Perhaps the worst decision you’ll make this or any year is to import someone else’s incentive payment or bonus plan and put it to work for you. It’s certainly the worst decision you’ll make on behalf of your people who are trying to help you accomplish departmental and company objectives. Don’t do it. Don’t cave to the temptation that created and tested elsewhere means that it will work here.
If you build it…
The first thing you should know about performance-based incentive plans is that they need to belong to those who are participating in the plan. That doesn’t mean that you bring in the plan, present it and trust that your people, who want to make more money, will accept it, understand it fully, work within it and everything will turn up roses.
The way that your people will own the plan in which they participate is that they’ll also participate in its design and creation. Yes, this will require more time than putting your friend’s plan into effect in your company. Yes, this will require a handful of meetings during which you or someone will explain some of the financial implications of what you’re trying to accomplish and why the status quo needs to be changed to achieve certain goals and objectives. Yes, this will require patience on your part and theirs since they, too, would rather just get the rules, start the plan and see more money in their checks.
If they build it…
By the time your people have answered the questions necessary to build a reasonably designed and structured performance incentive plan, they will indeed own it. They’ll also be ready for the test drive to see if it does as intended, both for the company and for them. Be ready for them to ask questions galore if they can’t see numbers reflecting how they’re doing in the area of focus.
If they build it, there’s still no guarantee that it will work perfectly on its maiden voyage. It’s more likely that, with time and increased familiarity, there will be opportunities to revise and improve the performance-based incentive plan to cause or enhance the win-win outcome.
When building, answer these questions
Three questions constitute the guiding steps in designing and creating a performance-based incentive plan. When these questions are asked in order and answered in the affirmative before moving to the next question, the plan has the best odds of accomplishing what it was created to do. Let’s look at the three questions and how they work in order and interactively:
1. Does the plan promote greater productivity among its participants? At its core, a performance-based incentive plan should change some behaviors of those who would benefit from the plan. To get a clear and resounding yes to this question, it’s a good idea to dig into making sure that any proposed delivery of benefits (financial payout, personal time off, etc.) rises to the level of the desired change in behaviors. In other words, would your team members improve 20 percent or more on a dozen key performance indicators over a year for a financial reward of $5.00 per person? Likely, they wouldn’t. Conversely, would plan participants work on three areas of potential improvement over the course of three months for the opportunity to earn an additional $500? Even if you don’t get the full chorus of positive responses, you’re probably getting warmer and closer to yes. Despite the fact that we don’t have the money set aside just yet, we need to ask this question before we can delve into Questions 2 and 3.
2. Does the plan generate sufficient incremental funds/profits to the company to cover the proposed rewards? Done well, the performance-based incentive plan should have a positive impact on the bottom line. We need to be able to connect changed behaviors with new dollars flowing to net profits before tax, as an example. Once we can do that, we can also begin to determine whether the company has to dig into its existing income to pay for the plan’s proposed rewards. This question addresses the issue of fairness to the participating organization and its owners. If the company is forced to finance the plan’s payouts with existing income and funds, it soon becomes unsustainable or at the very least a source of irritation and frustration for company owners. Plan designers who are about to be participants demonstrate their understanding of this fact when they say that they don’t want to bonus themselves out of their jobs.
3. Is the plan perceived as fair among its participants? While the first two questions are much more focused on the formula of the incentive and what it will take to generate the funds that are to be used as rewards for behavior change, this one is all about the rules. Who will participate? As new team members arrive, how long before they’re eligible to participate? What about payouts? How does one qualify to receive the incentives, i.e., must the individual be employed by the company on the date of the payout? Other than separation from the company, how would one become ineligible for future payouts? The caution here is that plan participants would like to jump straight to this question without first addressing the first two. The best way to bring the discussion back to focusing on the first two questions in order is to remind participants that they must first define the way that they’ll generate the additional funds before turning their attention to distributing rewards fairly and equitably.
What to expect
Done well, this approach takes time, as noted earlier. Done well, this process also gives both participants and stakeholders the platform for discussing issues and opportunities near and dear to their respective hearts. Along the way, virtually anything under the sun can and often does come up in discussion. Issues that are parallel and not central to the process can and should be recorded and parked for attention and possible action later. Finally, done well, the steps shown here increase participants’ business literacy in small increments and over time. With repetition of measured results and repetition and reinforcement of the implications of those numbers, understanding increases and good things are more likely to happen in collateral areas of the business.
While there are certain seasons and cycles for specific elements of business, the request for a raise from one of your employees/associates/team members can happen at any time, often without warning. In fact, you’re likely to be blindsided by the question. How you respond speaks volumes about your ability to be prepared for a true leadership issue.
So, how do you respond when one of your team members asks you for a raise in pay?
If you’re like many managers and owners, you might mention some numbers that provide objective evidence that you’re not in a position to be giving pay raises at the moment. You could pull out the old standby, “Let me think about it” and hope that it doesn’t come up again. You can also simply turn down the request without giving a reason. After all, you’re in charge and you make the rules, right ?
Here’s why some of the standard approaches may not be working for you, or for that team member hoping for a pay increase:
Your people often don’t understand the fact-based, objective numbers that help explain your company’s financial performance. This is a common condition called business illiteracy, and it causes a host of issues that adversely affect many organizations.
That person requesting the raise will not forget about it, so your put off is simply delaying the inevitable, when you’ll have to face him or her and provide a true response. Your non-response could also get you a notice of departure, truly bad news if this is a valuable and contributing associate.
Doing much of anything these days without putting a reason behind it simply adds to a team member’s feeling of being kept in the dark most of the time. That’s a productivity reducer rather than enhancer.
Another way to respond
Try this four-step the next time someone asks you for a raise:
Recommend that he or she purchase and read the book Big Bucks by Ken Blanchard et al. This is a wonderfully clarifying, short read, available in most any bookstore as well as online. (Ahead of this conversation, you’ll want to purchase and read the book yourself so that you’re ready for the next step.) Incidentally, if you’re thinking you’d simply loan or give your copy of the book, think again. If this person is hungry for a raise, taking the initiative to find, purchase and read the book (or borrow it from the library) is a key element of this process. Don’t provide the book.
Invite the person to come and talk with you once he/she has read the book. (This step of reading a book can thin the ranks considerably of those looking for greater compensation.) Suggest that he/she come prepared to discuss the key points in the story.
Since the book clearly spells out that raises go to those who increase their value to the company as measured by increased revenues and/or profits, you’ll want to know what he/she has in mind that will increase his/her value to the company. Don’t settle for “try harder” or “show up on time,” although you may be tempted to provide a raise for what others are already doing as their own standard procedure. (This reminds me of the days when the non-smokers, noticing the company’s new policy of rewarding those who kick the habit, considered starting just long enough to stop and collect the reward.) Don’t fall for this.
Set a process for measuring this person’s additional value to the company over a given period of time. Agree on a way that tracks the measurement and monitor how that measurement goes. Also set a target that gives a certain increase in pay based on a specified level of improvement in the company’s numbers.
What you can do in the meantime
I often recommend that clients begin sharing their business financials, i.e., the monthly profit and loss statement, also known as “the numbers” in such a way that compensation information remains confidential. You can do this in any of several ways. (Send a note to me at[email protected] with biz lit in the subject and I’ll provide some details.)
As you start sharing the numbers, several things are likely to happen:
You get eyes rolling in disbelief – “How in the world can we do all this work and you only have three percent net profit before tax?” is a probable question. At that moment, you’ve got them thinking as owners, because you’ve asked yourself the very same question many times.
You get that “deer in the headlights” look – They’ve likely never seen these numbers before. It’s going to take repetition and explanation before they do. If you’re going to do this just once, you may be better off skipping it altogether because of the confusion that misunderstood information can cause within the ranks.
The lights begin to brighten – Your top performers/producers will appreciate the information and begin to use it in making better decisions consistent with the company’s goals, targets and objectives. This is one key area of employee learning that can reap significant rewards.
Of course, if you’re the owner of this organization and you desire the raise, consider your request granted. (Skip the book if you like.) You can simply vote your own raise by increasing your sales and keeping your costs reasonably level so that your own personal raise comes directly from your own increased productivity. And, of course, when you earn your raise and reap the benefits, be sure to celebrate at some appropriate level to reinforce your own positively productive behavior.
As a friend and client provided the blow by blow account of his company’s participation in an online reverse auction, I listened in horror. As you may know, a reverse online auction is the business version of Online Limbo, in which the prospective customer or client invites suppliers to bid on a specific project or piece of business.
Once you register as a participating supplier, you check the specifications of both the auction and the product or service for which you’re bidding. Once the clock begins, you have a preset time period to bid for the work. Here’s the limbo piece: you choose, based on how badly you want the business, just how low you can go by the price you offer.
The worst news in such a scenario is not whether you’ll get the business or get it with a reasonable margin to deliver it. The toughest element here is that the relationship has been replaced with an impersonal, no-holds barred, price-comes-first basis for doing business. While this is often perceived as an extreme practice and a shock to those invited to participate, it signals a situation in which value has turned into a commodity and the customer or client now paints all prospective suppliers of the product or service with the same brush. In short, you just don’t want to be there.
The true value of customer relationship management
Consider this vintage bit of sage advice: The best time to make a friend is before you need one. If you’re blindsided by the invitation to such an event, make every effort to remove yourself from that situation, think hard whether you can afford not to participate and look closely at the relationship that hangs perilously in the balance.
Having worked with clients up to and through the onset of online, technological transformation of business sectors, I regularly see entire industries faced with the hijacking of key information. Individuals and businesses formerly held such information close to the vest as part of their client/customer value equation. It arrived earlier in some sectors and later in others. The common theme is that if it hasn’t already intervened in your value equation, expect that it will. If you haven’t already considered and/or taken action to somehow add it to your arsenal, you should at the very least evaluate it. Realistically, if you’re just now considering it, you may be hopelessly behind the curve, which could require a radical reshaping of your business model. That’s another topic for another time. For now, look at the impact that such advances may have on your client/customer relationships.
Consider the value of customer relationship management based on these facts:
You lower your cost of sales with repeat and return business – Perhaps you’ve heard the research citing the savings involved. It costs a minimum of five to six times more to do business with a new client or customer than it does to continue, resume or restart doing business with someone who already depends or has counted on you for something he or she values.
You improve the frequency and quality of referral business – Brian Tracy calls it the golden chain of referrals, that wonderful place characterized by getting so busy following up on referrals from clients, customers and friends that there’s no time for prospecting and cold calling. In addition, the selling cycle shortens, as it does with returning clients and customers, because the trust bond between your customer and the referral transfers to you. Note here that while referrals sometimes arrive as manna from heaven, top relationship managers ask for personal introductions and referrals as part of their regular sales improvement arsenal.
You build credibility in the mind of new prospects with a strong client/customer list – When you can show a list of customers and clients that is a veritable who’s who in a vertical industry, specific profession or key geography, you can often gain instant credibility with those who are considering your products or services. This is also true with reference lists containing contact information of key clients and customers who can and will speak with prospects straightforwardly about the value you bring to them.
You enjoy high strength of network – In addition to the value you can provide with your specific products and/or services, your ability to connect people often depends upon the level of your relationship with them. Recently I met the president of a business relocating to the area. In a first meeting, I was able to accomplish three key objectives. First, I secured an introductory meeting between him and the founder of a client organization. Both are busy executives, yet they afforded me the time to meet one another based on my knowledge of and relationship with the client. Second, the relocating executive also agreed to be my guest at a local business association luncheon, where he was able to make valuable new contacts for both business and networking purposes, as he’ll need many services covered by those attending the event. Third, the relocating executive provides a very attractive package for trade associations, so I was able to connect him and his offerings to several such organizations, either clients or professional groups of which my firm is a member.
Check your own level of customer and client relationships
How do you know just how strong the relationship is with your key customers or clients? Check each against this scale of customer relationship value:
Top of the mountain – Your client or customer can’t live without you. You’re perceived as essential to his/her success/effectiveness. You enjoy consistent top of mind awareness (TOMA) in key outcome areas, and you’re asked as a trusted advisor before that client buys anything in or near the realm of what you provide.
Near the summit – Your customer can live without you but would rather not. You’re perceived as helpful to client/customer success/effectiveness and you enjoy regular TOMA when one or two topics or areas of concern surface.
Still climbing – This client can live without you and might miss you occasionally at holidays and other gift-giving times. You’re perceived as a role player who, if the price is right, can assist in some minor area of client/customer success/effectiveness.
A few feet above the foot – This customer can live quite well without you and usually seems glad to hear from you. Your mailing goes into the inbox stack for later review and possible action.
Sea level – This client is living very well without you and will take your e-newsletter as a kind gesture to avoid any hard feelings on your part that could result from his or her unsubscribe request. You figure into none of this client’s plans and rarely does your name surface in thinking or conversation. You’ve either been gone so long or never enjoyed any measure of standing. With no momentum, growing this relationship may be best characterized as slow and heavy lifting.
By looking realistically at your strength of relationship by client or customer, you can also predict with reasonable certainty the volume and profitability of business you’re likely to win from each.
How to build and enrich your customer and client relationships
Here are some ways in which you can be sure to maintain and enhance your relationships with key customers, clients, suppliers and associates:
Be sincere about improving their results and show it – First and foremost, provide deep and lasting value with whatever you sell to your customers and clients. To the degree that you’ve done what you committed to doing to add value to a person, team or organization, you’ll be known as reliable and a valuable asset to that person or business.
Show that you’re thinking of them when you’re not asking for business, money or favors – Reach out and touch with no strings attached. Read on their behalf and send a book, a clipping, a link to a story or web site that pertains to their business or industry. One of my favorite ways to do this is to share stories I’ve found in the online editions of newspapers and magazines to which I subscribe. They almost always provide subscribers with an easy way to e-mail a story or item to anyone with an e-mail address. It takes a few moments, costs nothing beyond your existing subscription and shows that you care.
Read on their behalf – With the ever-increasing load of information available, no one can read everything pertinent to his or her business and interests. Become a valuable partner to someone by reading items and books valuable to them and their business. Send the book or article. Give a year’s subscription to a particular periodical and check back to see how valuable the recipient has found it to be.
Connect with them while adding true value – As you deliver your product or service, provide a bonus of some sort. Go beyond their expectations of the typical transaction and delight them with a gift, an added volume of the product or service or a related item of value.
Give them something they can find nowhere else – In a society where anyone can purchase virtually anything, provide a gift or product that’s otherwise unavailable. I learned this from Rufus Barkley, the late chairman of Cameron & Barkley Company. He would give friends, associates, employees, customers, suppliers – nearly anyone who stopped by his office – a special, homemade mustard that he had discovered locally. He apparently purchased cases of the product from its maker, who didn’t take the steps to make the mustard available commercially. You can do this with food items, innovative crafts and products from faraway lands.
Be the best referral source they’ve ever seen – If you sincerely want to stay close to someone in business, send referrals, provide personal introductions and generate opportunities to sell that client’s products and services by bringing prospects and customers. Nothing says you love customers more than by beating the bushes to help them grow their own client or customer base, hit their numbers for the month or quarter and grow their own circle of influence. Be sure to ask them for the ideal profile of their customer or client, get to work combing through your own network and let the matchmaking begin.
Change it up now and then – As Wayne Dyer has said, some people live to be 70 years old. Others live to be 30 and relive their 30th year 40 times. When you do the same old thing time after time, you run the risk of having someone feel as if you’re merely going through the motions. That, of course, defeats the original purpose. Instead, keep an eye out for new ways to tell others you appreciate and value them. Even if you just take a break from a particular method of giving for a year or two, you will likely see a renewed sense of gratitude when you return to that particular practice.
“She doesn’t have to be asked, she just takes care of things.”
“He’s the first guy to offer to clean up the job site.”
“I can always count on them to get things done even when I’m in a meeting.”
These are the comments overhead from supervisors and managers who value the quality of initiative. Taking initiative, of course, means that you start, on your own, to act and add value to the work you and your team are doing. This makes requests from the superintendent, manager or supervisor unnecessary, since you’re already doing top priority work and getting things done.
If you’re the type who naturally takes the initiative, you probably wonder why others don’t do the same. Sometimes it’s a matter of your upbringing, where you were expected around home to take care of things without having to be asked. It can also be a matter of your own personality style, that you’re more comfortable making a decision and acting on it rather than waiting for permission or commands. Mostly, it’s a level of confidence that one gains by learning his or her job, looking around to see what needs to be done next and taking care of it.
If taking the initiative seems foreign or risky to you, there can be contributing factors. You may have been raised in a home where you were expected to ask permission to do virtually everything and it was taken as a sign of respect that you ask before you act. You may also have a behavioral style that lends itself to being more cautious and checking things out a bit before you take action. Sometimes it’s as simple as handling a new job or a lack of familiarity with the needs of the job you’re doing at the time.
Some things you should know about taking initiative at work:
Before you take any action, you should ask yourself if what you’re about to do is safe for you and all others concerned.
When you regularly take the initiative, people will see you as a hard worker, even if you’re not working any harder than those who wait for requests.
Taking initiative is one of the best and fastest ways to get noticed by others in the company and often a leading factor in being considered for career advancement within the company.
When you take the initiative, you may get it wrong. People will often forgive you for acting, even if it’s not perfect. You’re likely to get a suggestion or two to prevent the problem from happening again and a “Thank you” or other sign of appreciation.
In a growing company, new challenges and new opportunities arise regularly. By taking the initiative and helping the company address these challenges, you’ll find that you get more opportunities to learn and grow with your company.
John Carroll is an entrepreneur, consultant, author and president of Unlimited Performance, Inc. in Mount Pleasant. You can reach him at [email protected]
You know the scene. You walk into a room of people with the purpose of expanding the network of those who know you, trust you, would buy from you or recommend you to others.
You know you need to be out among prospective customers or clients. You have yet to see a single such event (breakfast, lunch, dinner, happy hour) result in your meeting someone who promptly did business with you. You’re behind on a critical deadline back at the office. Yet here you are, with a string of similar, non-productive events in your past. Do you simply endure it and rush back to work? Or do you slow down just a bit and make the most of this opportunity? Continue reading →