Pay for performance – what are you waiting for?
You have sat in class after class, talked to other yard owners about switching over to paying employees for performance, and you are still paying them hourly or salary, and or a small commission plus base (which doesn’t motivate them, though they count on it), thinking all your employees will walk out or might cause chaos in the business.
Yes, just like you I was slow to change to pay for performance. I had all the excuses you are making, all the reasons why I should not disrupt my employees, because they were giving me all they had, but was I wrong! I still remember the day I changed to a pay for performance system for our employees in 1989.
In sales, our volume doubled in three months, with two fewer sellers, dismantling production and deliveries doubled with the same number of persons. New people hired thought it was great, as they didn’t have the “baggage” of the former employee. Yes, it was hard, and some people left, especially the underperformers. Imagine if your competitor changed to pay for performance, say five years ago, the advantages in production and cost structure he has had over you for that period of time. It’s hard to believe I did it over 20 years ago, and the majority of the industry by number of operators has not converted. But, the percentages of yards that have changed based on large sales volumes, say over $2m annually, and are a majority of those yards. Yet the small operators continue to watch the big guys get bigger. They learned the advantages years ago, and in many if not most cases use the money they save to buy more cars.
So why risk the change? As owners we have faith in our employees. We do not follow them around to see if they are spending their time efficiently or wasting our money. Instead of monitoring their work, we give them raises and hire more employees because, “they just can’t get it done.” If you are paying your employees hourly, take a day and just follow them around you will be surprised at how much they don’t do.
The benefits of pay for performance will increase your bottom line. How? It reduces the number of employees while increasing productivity. Pay for performance will weed out the underperformers, and will amaze you with what your strong employees are capable of handling.
I have helped many yards with pay for performance, including dismantlers, parts pullers, drivers and salespersons. In fact, it’s one of the most rewarding items I teach owners, over and over, site by site. It’s not unusual to see clients get the costs back in a week or less with the changes they implement.
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Ron Sturgeon is past owner of AAA
Small Car World. In 1999, he sold his six Texas locations, with
140 employees, to Greenleaf. In 2001, he founded North Texas
Insurance Auction, which he sold to Copart in 2002. In 2002,
his book “Salvaging Millions” was published to help
small business owners achieve significant success, and was recently
reprinted. In June 2003, he joined the new ownership and management
team of GreenLeaf. He also manages his real estate holdings and
investments. You can learn more about him at WWW.autosalvageconsultant.com
He can be reached at 5940 Eden, Haltom City, TX 76117, email@example.com or
817-834-3625 ext 6#.