Ep 229 - Understanding Performance Pay & Bonus Structures

Hello, hello, hello and welcome back to yet another episode of Electric Pinner Secrets, the Electricians podcast. This is episode 229, understanding Performance, pay and Bonus Structures and all the convoluted payment options around that. I'm sure you've been thinking about this, we've been thinking about this. We keep getting asked. We decided to break down a bit of what we know on the topic here today. I'm your host, clay Neumeier, with me, as always, my esteemed co-host, joseph Lucani, and we're the Electric Pinner's, just a couple of master electricians with business addictions. This is your freemium coach call. The admission for this is to sit back in the hot seat, take everything we give and just promise to take action and report those wins back to us as we help you master your sales, simplify your pricing and deliver premium level electrical service. Joseph, how are you doing today, brother?

Man, I'm feeling great. I was going to say I almost come to predict your hello, hello, hello, and I just love when it's right on the cadence that I think it's going to be at. It's just like a satisfying feeling. I'm feeling real great today, man. What about you?

Yeah good, Most people don't know this, but for Christmas Joe actually got me a hello, hello, hello shirt. Canadian customs denied it. They sent it back to America, to his house, so he put that on for me on Christmas and did a little video. It was quite hilarious to see Joseph doing that. Hello, hello, hello, and I'm wearing your Christmas gift.

Yeah, it's the craziest thing, right, man? I literally sent you a box of stuff and they said it was an insufficient description of items. I'm like it's a shirt. It says hello, hello, hello on it. That's exactly what it said. Where is the what in Canada made them decide that that was not an acceptable present?

You know what? The problem was All Canadian products need to also have a French translation.

Oh, I thought it was because they didn't make it out of flannel.

Needed to be flannel and plaid and have French version on the back. Then customs were declared that you offended someone, brother. Otherwise I'm doing good. I don't have any Christmas gifts. What can I say?

Why Is it going to be? People online can hold me to this Is that when we're going to come and I'm going to come see you in Canada we're going to have an event on me or we're going to have an experience on me.

Okay, difficult topic today. Here's why I say difficult. There's a lot of different ways to slice this one up. It wouldn't actually be fair of us to say that we've experienced all the ways From a humble point of view. We've got a good friend who we've consulted with once in a while and can't wait for a conversation with Danny, but ultimately we're going to share our experience of what we have as a foundation for understanding performance, paying bonus structures today to help guide you guys just a little bit. I'll just kick that off with letting everyone know a few things. A. I personally feel, and with strong evidence, that strong culture and an investment in that culture is the best medicine when talking about this topic, because the ultimate reason for this topic is to motivate people. To motivate people to want to do great work for you If you're not properly invested in culture, in a system that properly communicates, at least weekly, your vision, your values and ties recent experience and stories to that vision and values, to help people understand and articulate it and feel it themselves and remain congruent to your brand. So they want to serve. I personally feel that's the A plus method to making sure we've got a great foundation for this. Would you agree with that, joe?

I do and I have some add to it. Perfect. I'm going to double down even further on what he's saying and say that if you don't focus on culture as a primary and you're not compensating people primarily on that culture, you don't have a team of technicians, you have a team of mercenaries, because if they're only loyalty to anything that you're doing, is them getting a paycheck. Obviously this capitalism works. I'm not arguing that. But people have to have some sort of vested, some sort of belonging to this culture, some sort of. I believe in what this is doing and I believe in the cause and why it's doing it. That will create far stronger senses and ties of loyalty than you know what. Here's another, here's another, here's another, here's another. Yeah, they'll be happy, they'll be paid, but the moment the pay stops, so does their loyalty.

And we've, honestly, we've heard of service companies doing 10 million plus a year without additional pay, strictly on conviction to those values, that vision and doing the right thing. And that's the kind of the right thing, is the type of process that we have. One of the common questions I get, joe honestly, on sales calls, on calls with electric pernurs who are considering maybe working with us on the inside track, one of the most common concerns is we don't like to feel salesy. Have you ever heard that before? Yeah, neither do I I get it, and so the big question I get is when anyone with a larger team is considering working with us. They say yeah, but how have the employees responded? From other companies and from some of the biggest teams that we've helped, I've found that it's freeing to have a system that's rooted in service instead of sales. And that's been the experience of the teams that we've helped train as well. Would you agree with that?

I do, and I actually have one personal experience that I can share with it Perfect, the team is not stupid. We will all have an understanding of what the company is really trying to do. I was at a company back in 2011, and there was a moment where they decided that they were going to have a great big announcement about how the price of generator maintenance was going to go up by double. And the reason they said they were doing it is so they can serve the client better. And when I asked how does this serve the client better? They gave me the same reasons that we were currently selling the agreement for. So I was like well, hold on for a second. If they're already receiving these things and we're doing a price increase to serve the client more, why are we not just giving them more or keeping the price where it is? And I was pulled aside to be like you cannot do that. That is completely damning. You will get fired if this happens. So the fact is is that people will recognize pretty quickly. Bob Marley said you can fool some people sometimes, but you can't fool all the people all the time. So if you're gonna do performance pay, do it for the right reason.

One of the best, absolute best motivators and sales is belief Belief in what well, it's the things we talked about and it's the product that you present, and having a stronger culture means your sales. People also have a stronger belief in their team to represent that as well and and pay it forward. Here's what happens on the other side, where money actually leads culture, we start to see like we've had clients say, well, I had to let someone go because they're getting complaints when I literally had a homeowner reach out just to let me know, as the owner and the manager of this company, that this dude was there swinging for the fences with no hope and hell to sell anything and making us quite uncomfortable. Mm-hmm, that's a reality. That happens again. When money actually leads, that's like a leading indicator of this money or a lagging indicator of money leading the culture, and that's a really dangerous place mm-hmm that aside, let's move forward with this, because what I see is there's a few simple principles to building a structure that rewards high performance and high achievement standards. I Feel this is the base. Joe, you tell me if you agree, in every relationship, we either have a salary and and maybe I should correct this his performance pay would be a bit different but a salary and or an hourly basis which is your agreed upon standard for payment for this individual.

Correct. They have to have some sort of minimum that says, if nothing happens, if I punch in and punch out, what am I obligated to for showing up?

That's a your base for level at the second piece of this, for for On track earnings, really, the accumulation of everything would be a commission, and In many cases people would use all three of these. We have this in our own staff, but having a commission for the sales that are achieved as well.

Mm-hmm.

Have you seen that in industry as well, joe?

Yeah, like a profit share where it's simply saying like you know what we all did really well and, as a result, your efforts Contributed to the whole, you'll receive a percentage of that hole that adds up mixed with us.

Awesome and that's something I would consider long term. It's the kind of stuff you set in place to say, okay, when you achieve this threshold, you earn this percentage or this fixed rate on this type of service. But the third piece is actually more bonus structure and this is actually my favorite piece, although it's short term in nature, or could be. I consider it short term Because this is the kind of thing that you can actually adapt to promote Individual or group efforts that you want to see. So if, for example, you noticed, hey, for some reason we've got three reviews From three texts out of the last 30 jobs, we've done Might. You want to promote a few more reviews than that, joe.

Yeah, I mean part of our process is every single call you finish, you ask for and have ways of getting a review. So if we were to hear that one of our clients only got three reviews from 30 jobs, it means that they literally were not running the play because that's lower than their minimum average, like that's lower than the minimum amount that you could expect if they would get.

And this tells us stuff. It tells us stuff about our training, it tells us stuff about our process and it tells us stuff about our staff. So if we can then take that message and go okay, where is our training yet? Do people effectively understand the process? Okay, and if that's true, then is the process serving us to get the reviews? And, of course, if all this is proven, like in our process, then the third one is have I empowered my staff well enough, or do they have incentive to want to do that? With the right tonality, voice inflections, timing to have an impactful exchange and receive the review at 60, 70, 80% exchange rate?

I think that's a very fair situation because, at the end of the day, the review is the pulse, like when you understand where the technician is at from the customer's perspective. That's like a great way of correcting the goal, because you're able to say all right, you're getting too much this way, correct you this way. Oh, you're going too much that way, aren't go that way. But the fact is is you're getting the feedback and without feedback you're literally just going and trying to hit a dart but you don't even know which direction you're throwing. At least now I'm like okay, turn around, you're throwing in the wrong direction, let's go.

Yeah, and then I kind of think of like the goal framework, which is like smart goals. You ever heard of smart goals? I'd love to hear it explained. Well, basically there's an acronym to make sure that the goals we're setting are actually, and I'll just use the first three in this case for a bonus structure. Like it needs to be specific right. It needs to be measurable and it needs to be attainable, and what that actually creates, I mean it brings to mind another quote like complexity is the enemy of execution. You've heard us say that right, yeah, I love that the simple things get done Well. When we're laying out different payment structures, it's really important, especially with commissions and bonuses, that our staff understand the framework and have a means of calculating ahead of time what's on the table for them, what they might be earning this month.

That's kind of like the gamification side of this, and I can see that being extremely essential, because without knowing where you're at, you don't know what kind of push is required, like if you're like I need round number. I need $5,000 a month to live, but out of my current performance I'm only getting $4,500. Then I'll be damned if I'm not pushing for $6,000 so I can have a better coverage. Now I know what I got to do. I'm showing up, I'm getting those extra calls, kissing babies and shaking hands.

I'm doing what I got to do 100%, man, I love that and that's something that can be fun about the bonus side of this, those short term, you know, encouraging the behaviors we want to see. This isn't very much like training dogs, which we've talked about before. Right, any dog you've ever seen trained with repercussion, with consequence, is a dog with their tail between the legs that sometimes, when you go to pet it, it wets itself on the floor. We don't want our staff like that, we don't want our team like that, because what happens? Long before they wet themselves on the floor, they show themselves out the door. I had no intention of making that a rhyme, joe, but I might be a poet, I'm not sure, but you know what I mean. So this positive reinforcement, pavlov's dog, right, we can create different trigger, action, reward, and that's the gamification of everything around us and that can really help to do other things too, not just reviews. I mean, what are some other areas that we've been able to bonus to help out? Joe, I got you.

So one of the things that sounds silly was do you clean out your van? Now I know some people are like no, of course we do Our van's against us, okay, would you trust that if a customer were to walk behind your van and have the doors open, that they would either be impressed or repulsed? Because I've been in technicians' vans before. I've seen the piss jars that people keep, you know what I mean. Like yeah. So the fact is is you can say all right, in order for you to take a van home, you need this many amount of reviews. You need to have no high-speed alerts and you need to be able to submit for a proper inspection Every week. We're going to make sure we check out your van. We're going to make sure the tires have air in them. We're going to make sure that everything is good, you've topped off your fluids as necessary, your cockpit is clean, no garbage and the back is clean in orderly. If you can do that, I can trust you with my property. Bio means taking home with our good graces.

Yep, I love that. Great thinking, right, great great thinking. And I mean there's other things too, like post-call facts. What a valuable. It seems like the extra piece where people take the shortcut, but it is a piece of the process that we want done, post-call facts being a tool that we use to truly get a blank slate again and to assess the call. We just did put their words on the sheet, their objections, the number of options presented, to see then, at the end of the week, end of the month, end of the period, how well we've stuck to that process. Now, when you're just asking someone to do this and it becomes a behavior we're trying to have learned, I mean it becomes also a little bit well, I would say. You know people get complacent on this stuff sometimes, so could we build a bonus structure to help encourage it? The answer, of course, is yes, and why would we do that? Well, so we have better data, so we have better training, which all means better conversions in the end. So there is a tangible impact on that too. I gotta be careful of the time, brother. I see you putting a hand up. Please jump in there.

I wanted to just do one thing on the post-call facts, because you mentioned that people can get complacent, and I wanted to put a specific time period on that, just for the audience to have a good perspective. Is that fair? Yeah, so why would people get complacent? The only reason that usually happens is imagine the busy season spike, where you're doing the post-call facts but you're closing on such a high consistency, either A because you're following our process or B because people are literally telling you to shut up and take their money. So, as a result, you don't need your process to sell. In your opinion, your closing deals regardless, just by showing up. As a result, you wouldn't need to do the post-call facts because, hey, screw it, I'm making all the sales, I'm closing everything. I don't need to value it myself. But then, when winter comes and now the season drops off, you having those post-call facts is your way of saying. I stayed sharp and I was practicing for the real game, and the real game starts in September when the drive starts to go down, but I was on the process all the months prior. So where everyone else is gonna drop off because they were selling from the hip, I have a process that I was to the heart and I sell from the heart now with effective tools.

Absolutely. Yeah, valid point, man, super powerful. Because the time's running low and there is something else we need to fit in this episode. Clearly there's more to this, but we actually are gonna draw on more experience to help you guys out with a deeper understanding of this in time. But here's a common myth that I want to dispel. I wanna give you guys an actionable piece from this. So one of the things I've heard is well, is it common practice to do this? Would it be common practice to increase someone's salary or move them from hourly to salary, or would that undermine our performance? Pay and the questions around that begin to suggest and imply that it would be incorrect of us to want to increase someone's salary or hourly pay Based on that first category, the agreement of the body of work. Like you come to work and do your standard operating procedures, you run the play for this amount. All performance aside, this is you. What I want to change here is just this feeling of like well, if everyone's doing it this way, or if someone says I can't do it this way, like, let's get rid of all that, because the same thing happens with your pricing and pricing's where I wanna draw from here. Okay, and so what happens in market that we see all the time is people even come to us and say, well, I can't charge more than $110 an hour. Yet everyone in our group is between 350 and 650 an hour. Now, we're not time material. That's for a flat rate commitment, but it still goes to show how we can achieve at this level and face the same number of price objections, because it's the same people with price objections anyway, from that same archetype of buyer. So what I'm suggesting here is to build a business by design. Have a plan or you'll fall into someone else's plan, right? So if you're going to go and ask someone else what you should bonus, then you might as well ask them what they charge and what they're paying for all their expenses too, because so far, the advice that you're taking is not actually replicable, if that's the right word for your own business. Yeah, unless it's an apples to apples comparison. Does that make sense, joe?

It does. I follow you here, brother.

So a great exercise. We're going to dive actually more into the simplifying budgeting and pricing for the new year and your goals tomorrow on the Friday episode. But suffice it to say here use a 10% rule of thumb for some performance pay, incentives and bonuses when you do the pricing exercise, as we'll go through again tomorrow your total revenue that you're projecting and those total expenses. But that total revenue based on your current expenses, your growth expenses, your profitability, taking 10% and adding it to that chunk so that you have bonus there to distribute. That way you're covered. That way you know a hard figure amount for what you're projecting for this year that you can distribute amongst your team when you need it but, just as important, when you want to, and you can lay out some healthy structures that way. Did that make sense, joe?

I did. I think this is actually pretty helpful for a lot of people who don't have a lot of experience in this kind of subject.

Awesome. So as a basic action, that's it. We're going a bit long here, but take and add 10% to your budget. Add 10% to your pay, To your pricing, rather for this pay. That way you can begin to design a structure in your business that makes sense for you. Your techs keeps everyone on the same page, Of course, leading with Culture. First, Joe, do you have an Ulster for us, brother?

I can work on that. I don't have anything top of mind, but what comes to mind is, whenever we're talking about performance pay, I really want to understand and push that, if we're going to go down this route, it needs to be not just a way for you to try to get more from your techs, but instead as a way that you can encourage them to give more. I don't want to do performance pay because it's oh, this is the most efficient way of collecting our margin, but if you did performance pay to encourage them to serve your client at a higher level, then that will be the culture focus and, with the culture focus being of service rather than tight margins, your team will start to pick up why you're doing what you're doing. Make sure it's for the right reason.

Don't make money. You're a prime motivator. Just make it a little bonus on top. Guys, this has been episode 229, short and sweet on understanding performance pay and bonus structures. I know we've given some great fruit to begin with, including again, again, again. I cannot stress Keep it simple and keep culture your priority. The money follows, guys. I'm Clay Neumeyer. This is Joseph Lucani. We're the electric printers here again to help you master your sales, simplify your pricing and deliver premium level electrical service. We're going to see you again tomorrow for more money, talk more pricing and getting that right for 2024.

Cheers to red success.