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| Some of your survey responses
from this Newsletter
edition: |
"We work on giving our store staff a group bonus twice a year (paid in June and December). It's based on giving them a share (1/3) of the gross profit on all increased sales (after adding an increase for inflation) over the previous 12 months (less the previous 6 month bonus). This may sound complicated, but I prefer calculating it over a period of 12 months because it shows (and rewards) for more sustained sales growth - anyone can have a good month or two then lose it the following months! The bonus pot is split amongst the staff pro rata to hours that they have worked. Also, it is less work to do this just twice a year and tends to create a more useful sum - at least when we are doing well!
I like the $ incentive idea for data capture too.
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- Martin - Sussex, England
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"Spiffs work well for us for certain items that take some "extra effort" by the salesperson, such as to promote extra service items, footwear add-ons, & selling last season's footwear (it's tougher to sell out of broken sizeruns). Our only problem is this works great for one department but not very well for another, so we end up having unnecessary spiffs to quell the resentment among salespeople."
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"Rick,
Once used a commission/spiff plan where when the months' target was met we doubled the spiff amount on those items which had a spiff (highest grossing items). This plan worked great as we met our sales goal earlier and earlier each month of the plan. It also assured us that the best sales people wanted the hours at the end of each month which increased our sales and our margins because the spiffed items became the featured goods to sell.
Jack"
- Jack Dillon - Orlando Florida
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"I own HobbyForce in Mansfield, Ohio (which is the 2008 Hobby Store of the Year, we're quite proud to be named #1 in the nation). I recently started a similar program to the one you outlined in your newsletter.
Each week I set a goal (based on sales from past years/months). If they reach the goal, everyone gets $1 raise for that week. If they surpass the goal by more than $1000, they get a $2 raise.
I use a free Google Docs spreadsheet to track the progress. That way it is accessible in real time on any computer. Plus I can update it from home. It shows if they are ahead or behind for the week.
BTW for what it's worth, I am trying to grow my email list. This month we are doing a free drawing for a Radio Control Truck. The sign-up form simply has a place for Name, and email. Of course we will add the entries to our database. That's a great way to gather qualified names."
- Arnie Clawson - Mansfield, Ohio
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"Commissions are a great way to turn off your customers when applied on an individual basis. Customers are savvy enough to recognize commission sales and they will question your motive when you are trying to assist them. They also deter teamwork within the store. Individuals have varied skills and when put to use together, you benefit your customer and your business. I use the Group Bonus structure on a monthly basis, the entire team is rewarded for achieving the sales goal, from the top selling salesperson to the stock employees who keep the behind the scenes organized so we can provide great service."
- Ken Cavanaugh - Massachusetts
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"I had several thoughts:
Capturing customer data - At my store that's an expectation - they are required to do it as part of their job, and they understand from hiring day that customer data capture is one of the most important things they can do to drive future sales (and therefore keep their hours up).
Loved the spiff idea! I'm going to quit having them give me sales goals and start some kind of a spiff program that motivates them even more. Thanks!
Bonus program - 1 yr ago, I set up a bonus program after a month when we beat plan by $11,000 in one month! I wanted a way that would consistently reward them for their "extra" efforts in going above plan. It works very much as you described. Annual plan is broken down into monthly plan, which is further broken down into daily goals. The daily communication form tells them what goal for the day is, as well as where we are (ahead/behind for month - unless we are several thousand behind, in which case I don't demoralize them w/ depressing numbers, I try to keep them focused on TODAY!) All over plan $$ for the month go into a "pot." Bonuses are paid quarterly (allowing for up and down fluctuations over a 3 month period). They each get a % of the "over plan pot" based on the % of hours worked during the quarter.
Great newsletters. I look forward to them!"
- Lisa Busch - Columbus, Ohio
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"I havent done commissions, because when customers find out you are being paid one, they dont trust you to not sell them something they dont need. YOu get that "car salesman" mentality.
I have paid bonuses for working sales, and it got employees to line up to volunteer to work those days, but the bonus became and "expected" thing, weather the sale was good or bad....I wish I had never started it. Once you offer an incentive, I have found it is hard to not offer it the next time, and then it looses its effectiveness, and just becomes an added expense.
I dont have spell check here, so don't reprint this unless you clean it up .....thanks"
- Pat Lorenzo - Los Angeles, Calif.
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"Clarity, por favor. Are we discussing commissions or incentives? Not that a distinction is imperative. Both are like vegatables. Both are good for you for a finite number of days. With time, both become stale and potentially harmful. Commissions, however, tend to become permanent and thus can harm the enterprise for a long, long time.
Fresh incentives can be invigorating but must always be offered with an expiration date. It puts a load on management to maintain freshness. If management is up to the task then good things might happen. Initial presentation is key to performance. Who, What, Where, When and Why. The incentive will last for X days and management will report on the business result on MM, DD, YYYY.
Otherwise, the incentive/commission mentally moves into the overall compensation bucket with two damaging, and inevitable results. 1) The desired effect is no longer achieved (and may not even remain desireable). 2) Management resents the employee expectation of X dollars of flexible compensation (while simultaneously failing to revisit core compensation to maintain its competitive posture).
Then there is the eternal effect upon the business environment. Not only are you paying Suzy more than Johnny but you are doing it openly as a measure of success. I don't have Nordstrom's budget for infrastructure employees. Johnny doesn't sell as much as Suzy but he always makes sure the showroom is clean and inviting. Suzy couldn't clean her way out of a catbox. I need both. Suzy's sales would drop without Johnny's work. Johnny's paycheck is possible only because of Suzy's sales.
If management is up to the challenge of maintaining an always-stimulating flex compensation environment, then have at it. Recognize first, however, that the responsibility is huge, and permanent."
- John Artley - Staunton, VA
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"Rick - Hi! We have several ways we reward our employees.
We do offer commissions based on the individual employees sales. We have a 3 tier plan: they get 3% on everything they sell, 5% if they meet the goal & 7% if they meet what we call our "kick ass" goal.
Then we also have a grab bag of goodies they can pull out of based on meeting other types of sales goals (# of items, types of items, etc). The grab bag has things like 1/2 day off paid, gift card to local restaurants, free car washes, etc.
Lastly if we have a really great month we'll reward everyone with something special. Last time we took the girls for pedicures (we're an all girls team).
We have found that a regular commission plan coupled with unexpected & sincere rewards are the best motivators.
We love our employees & want them to know it!"
- Rachel Esposito - Marietta, GA
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"Rick,
Hi, Jennifer Harriss here. I met you when I was the director of downtown Edenton, North Carolina. Well, I am on to a new chapter in my life and have opened my own retail store, "Urban Village." I always worked retail in college at small home decor/gift and stationery stores. I was NEVER paid commission and quite frankly, never REALLY pushed to sell merchandise. I knew I would make the $7 an hour regardless of my efforts. Now that I have my own store, I pay a small commission to my employees. It has already worked to my store's benefit. For example, I told my employee that she could close early on memorial day if no one came in after 3:00. She called me at 5:30 and was still at the store and had sold approx. $1,500 in merchandise! She was thrilled with her commission and I was thrilled with her dedication!
Just an example of how I think paying commission is a good incentive for more dedicated employees.
Thanks!
Jennifer Harriss"
- Jennifer Harriss - Edenton, NC
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"Hi,
Sometimes in a small store when sales are a team effort - making sales fun can be a better incentive. We play product bingo. Nine slow products are listed on a 3 x 3 grid, just like in tic-tac-toe the first sales person to sell three items in a row, up down or through the middle - is the winner. We give a fun prize, movie tickets for two, chocolates or a novelty item.
It's fun, it's motivational and it's good for the team spirit."
- Judith McDonald, Scuba Warehouse - Sydney Australia
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"We do hourly plus commission, our girls have to sell 4000.00 to make commission, but when they do get there, they get 3% which I think is a good commission. I heard David's does hourly plus commission but they take the base pay out if they make too much commission. I don't know exactly the formula. My girls seem to like the extra money they make a month when they make commission, the only people that make it are the people that work hard. We also have weekly contests."
- Jennifer Thompson - Broken Arrow, OK
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"After many years of a straight hourly rate I changed my strategy. My staff is paid hourly plus a commission that starts at 3% of gross profit. As the item ages the commission increases to a high of 8%.
There is a store goal set every month. If the store reaches the goal commissions double for everyone.
I felt that is important to have individual as well as team goals.
The results have been mostly positive and I am pleased. While the new system has created a few of the issues you have mentioned it has motivated my staff and created a much more balanced selling floor. Everyone takes their turn and makes every attempt to satisfy our customers.
I also pay my staff $5.00 if they can convince a customer to open a store charge and make a purchase using that charge."
- Elva Valentine - Dallas, Pa
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"Rick,
The subject of commissions is driving me crazy. In desperation I hired a woman last summer, offerings $15 an hour plus 5% commission on all sales for the days she worked (four days a week) whether I made the sale or she made the sale. It has been one year and now and I am fit to be tied!
My reason for paying commission on all sales was to avoid the "this is my customer, or who is writing this ticket" ordeal. I figured if I am really working a sale and someone else walks in, my employee will take the next customer and work it as hard as I am and also help me in closing sales, etc.
Well, after a year, I am noticing less insentive to make the sale. I am noticing that she suggests we put things at half off to unload them. All along she is still making 5% commission. I was even so stupid as not to create a goal that had to be met before commissions kicked in. Every now and them we have an "off" day where she makes more than the store does. It is rare, but it nearly kills me when it happens. On days we do three to five thousand dollars, I start looking at the tickets and realize I am the one writing the big tickets.
I have to correct this situation. I am about to hire a consultant who will help me establish sensible pay scales. I have learned one thing for sure: Don't make any offers to anyone until you have played with all the numbers and examined your margins before sharing the profits. I am thinking a store's margins tell you more about what you are able to pay than anything.
In retrospect, I would have said that a certain number of dollars had to be met by her personally before I started paying commissions on sales. Also, I would have not paid commission on my own tickets.
I will really look forward to what others are experiencing with commissions.
Thank you for all your help and insight. It has meant so much to me over the past four years.
"
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"Hello, Rick:
We have a very small cappuccino and fine foods store in the heart of Southwest Saskatchewan, a region on the move. We have one full-time employee who has been with us about six months, a single mom who struggles to make ends meet. Our business is somewhat seasonal, tied to tourism and seasonal holidays.
Our employee has shown a decided talent for sales, and has asked us to find gifts and out-of-the-ordinary household items for her to sell. We listen to her suggestions and also search out new items on the Internet and at gift shows. By doing this, the store's gross had increased by at least one third over the last two months, due in part I feel sure to an agreement to pay her a commission of gross sales. This agreement has turned her from an employee to an active, engaged team player, and has also improved her quality of life.
We decided not to discriminate between coffee sales, food sales and gift sales in order to keep it simple, and also to recognize that developing a relationship with every customer, not just those spending X number of dollars, is important.
This has worked so well that today we have added a part-time member to our staff, and we have started planning an expansion of our business.
While I don't enjoy shopping in stores where employees are obviously jockeying for commissions, this small change in our compensation package has sure paid off! And better yet, it is invisible to the customer."
- Tina Cresswell - The Daily Grind, Maple Creek, Saskatchewan
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"Don't do Commission.
Our employees are paid fair wages for what they are expected of. It it then up to us managers to generate the proper knowlege, excitement and sales programs to allow our products to move at our desired rates. Commission only creates long term stress and unfair expectations. It creates a "me" attitude among the employees and that doesn't make for a positive, team oriented work environment."
- Graham Stuart - London, Ontario Canada
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"We went from a salaried staff to a commission staff and our selling expense dropped 5%. Our associates increased their income by $5,000 to $10,000. We offer spiffs, and bonuses for certain sales goals.
As for e-mails, we offer a weekly drawing for the customer whose name is drawn, $25 gift card and for the employee who got the e-mail, $25 cash. We are getting 95% sign up."
- Rick Ravel - Karavel Shoes, Austin, TX
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"1) I love your idea about a store-based commission based on the hours each employee works. I'm going to try it and I'll let you know. I also completely agree that most of the time, commission doesn't work.
2) We have a small bonus system that is store-based. Each day, there is a store target based on the previous year. Anyone who works when the store makes its target gets a gold star that is stuck on the calendar. They can use that star to purchase merchandise, put it towards paid time off, or have it paid into their salary at the end of the month. Everyone, without exception, chooses one of the first two options. They go mad for stars, even though each star is not worth a lot. ($5 towards a purchase and 10 stars give a half day's paid time off). Everyone likes to see a calendar month page filled with stars.
3) On a different subject: we live in a small coastal town in Washington. This past weekend, a Seattle yacht club, which has an outstation here, held their Independence Day party here. I organized 22 of our stores to award raffle prizes, give refreshments and discounts etc the day of the 5th. Each yacht club member got a ticket and a list of stores participating. They had to go round the stores to see if they'd won.
We had a tremendous sales day and so did almost everyone else who joined in. We got many new customers, who'll be back several times during the year. We also got about 50 goodwill ambassadors for our town's stores.
It took a lot of organizing but almost no money (in our case a $25 gift certificate and 3 bottles of Chardonnay, plus our share of printing ink). It was a very targeted group, who obviously had some money and were well-disposed towards us. We learned a lot from this promotion. Cast your net in a small pond where you can see the fish swimming, or something like that.
Julia Ensley,
Zamboanga
Bainbridge Island, WA
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- Julia Ensley, Zamboanga - Bainbridge Island WA
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"Since my shop is mainly custom made hats with a few things like t-shirts, hat cans, ball caps, etc I decided to give my 2 guys that work every other Sat. a bonus if they hit certain figures.....understand we are not a full blown retail store that has lots of inventory.... So if they sell $500 worth of new business they receive $50 if they sell $1,000 or more dollars they receive $100...
Would love to know how you feel about this....am I doing the right thing or should I do something different.
Shorty"
- Shorty's Hattery - Okla. City, Okla.
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"Since I would never work on commission it would not be something i would want to do with my store. I also don't think commission is a good tool for building your employees into a team."
- terry myers - kaleidoscope toys
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"I own a small farmstead cheese retail shop where I sell other items made by small farmers in NYS. Because we sell mostly food items, it is difficult to get the employees excited about making a sale. I have tried a number of approaches, but to no avail. I have encouraged them to "up-sell" --if they sell cheese, remind folks that we sell homemade crackers too, but when I look at the tally at the end of the day, it's never done! I have thought about bonuses, but there are months where I struggle to make ends meet as it is, and the bonus would have to come out of my "other paycheck", shorting my family! WHAT TO DO??? We operate with a part-time seasonal staff and a lot of family member support--anyone have any suggestions for us? our email is farmerswife@htva.net if someone cares to contact me."
- Carmella Hoffman - FingerLakes of NY
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