Getting staff to think like “Owners” and become “Teams”
WHAT IS OWNERSHIP THINKING?
The idea of performance-based financial goals is to transcend the natural, punch-in/punch-out mentality that seeps into most organizations. You want teams working together for agreed upon wins, not staff collecting a paycheck. In other words, you want everyone thinking like an owner; and owners only benefit from profits and growth of the organization. Owners don’t win simply because they or their staff simply showed up.
As always, the organization needs a compelling vision. Whether you’re clearly saving lives and changing the world or selling widgets, your work can have purpose, meaning, and improve the society we all struggle in today. With a big enough WHY, teams will become excited and committed to the HOW.
An “ownership-thinking” model of bonusing creates teams that are soaring in the same direction as owners and managers. To bonus within this model, everyone understands profit vs. gross. Studies show that the average employee believes that when the product they create sells for $100, the owner of the company made $100. They don’t even consider their own salary as a cost to the production or sale of the product! Once engaged in helping the organization not just open up at 9 and close by 5, but to actually gain more profit, you truly have a teammate and not a staff member or dependent.
QUICK TIP TO CREATE OWNERSHIP-THINKING BONUS PLANS
In the Ownership Model, you create a profit baseline. If the company has been profiting an average of $50,000/month the last 3 months then $50K is your base.
To create a bonus number for your team, take between 5-10 percent of profits above $50K and divide it out among the staff in order of job significance, position, and level in the company. A common number is 7% and everyone wins in this model. The owner or shareholders still obtain 93% of the money they’re now making above and beyond the base and the team is sharing in the growth.
This gets them thinking like an owner, owners profits are protected, and you generate a culture of performance rather than just showing up to work and expecting raises based on not quitting.
Example math:
If the minimum profit you want to take home in your business is $10,000, then the employee(s) only get paid on profits over and above. Thus, if you collected $50,000 and your overhead is $25,000 you are left with a profit of $25,000. This is $15,000 over your $10,000 baseline. This results in employees sharing a percentage of $15,000. If the number was 10 percent they share $1,500 and you make an additional $13,500 ($15,000 less $1,500). You are up $13,500 and they are up to their share of $1,500 and everyone parties like they just won the World Series!
IMPORTANT NOTE:
If you’re at a point in your organization where you may have dramatic growth, then you should put a cap on the amount of additional profit being paid out to team members. This will occur in newer businesses or those that have added what could be vertical divisions that can bring in substantial profits compared to before their launch. Additionally, you can reset the numbers as the average grows through quarterly and annual reviews.
MONEY DOESN’T BUY PERFORMANCE
Studies also show, you can’t buy better work through financial incentives alone. You have to also become a better leader. In my companies and for the clients I consult for, we set up very clear roles and goals, set annual, quarterly, and monthly strategies to hit those goals, and drill down weekly to determine if the strategies are on track or need adjusting. Bonusing is an element of leadership, but money can only get you employees, leadership builds a team.
Have fun saving the world
Dr. Ben
