How to Have the PAY Discussion

How to Have the PAY Discussion

There is no discussion that creates more anxiety for a business owner or manager than that of talking pay with a team member.  It doesn’t need to be like that.

When you have guiding principles, and a written document, that everyone understands, the discussion simply become another business discussion.  It simply, is not a big deal.

I was talking with a Kyle, a private client, last week and we got on the topic of pay, and raises.

He had previously done Performance Reviews in his business and like most business owners he hated them.  He admitted that he was, in fact, months overdue in getting them done because he hated them.

He was also feeling guilty because the Performance Review was the time they discussed pay, which meant he was behind in giving raises.  Then he confessed that one of the main reasons he hated Performance Reviews was the pay discussion.

Everyone was used to get a raise at their review, and he had a lot of people that didn’t warrant a raise right now.

I pointed out to Kyle that his experience with Performance Reviews and pay is the same as everyone’s.  It’s a NO-WIN for both parties.

I told him the experience of my brother-in-law at Boeing who hated Performance Reviews and why the discussion of pay during Performance Reviews was a NO-WIN for both parties.

When my brother-in-law had a Performance Review and was told he did everything great and got a dollar raise, he left saying to himself, “I did everything great and I got a measly dollar.”

But, seldom would he leave being told that he did everything right because the manager knew he had to limit raises, so he had to find something that was lacking.

So he would be told that he was lacking in some area, and then the next time we saw him he complained about how he wasn’t appreciated at Boeing.

Performance Reviews are stupid to start with.  Managing one’s performance in REVIEW is idiotic!  Adding pay into the discussion is BEYOND IDIOTIC!

Kyle’s question was, how do you address pay in The Make-You-Happy Management System?

My answer – “Pay needs to be transparent.  I don’t mean everyone needs to know everyone else’s pay.  In fact discussing your pay with others in our business if forbidden.”

“What I mean by transparent is, they need to know what is taken into consideration in determining pay.”

We then talked about the pay document included in The Make-You-Happy Management System.  It’s entitled, “How Pay is Determined.”

I told him this needs to be shared with every team member on their first day of employment.  It will make pay transparent for that individual, and it will motivate them to continually look for ways to improve the business.

I also told him he needs to distribute the, How Pay is Determined document to his entire team right away.

How Pay is Determined has eight bullet points that spell out exactly how each person’s pay is determined.  Kyle and I discussed the preamble to the document and the first bullet point.

How Pay is Determined

It is the manager’s responsibility to review the pay of each of their team members, at least, once a year (more often if the manager sees fit).  Whenever the manager thinks it is necessary (s)he should review the team member’s pay with the president of the company, and make recommendations for adjustments.

This is a discussion of how pay is determined:

If you are on commission you should expect that your pay will rise and fall with your commission and that you will create your own pay raise.

While many of the issues discussed below may apply to commission positions, this statement deals primarily with salaried and hourly positions.

A number of issues are involved in determining wages at <Business Name>.
Here are a few:

  • Prevailing wage – The reality is no manager, including the President of the company, sets the pay at <Business Name>. The biggest factor in setting a pay range is the market.

It is very simple.  If our wages are too low, we won’t attract or keep quality employees.  If our wages are too high, we won’t make money and we will be out of business.

Just because someone is here for a matter of time it doesn’t mean they automatically get a cost-of-living raise.  It is very possible, in fact likely, that we currently have positions in which the job being done simply is not worth any more money to the company.  At this point, regardless of how well the job is being done, a wage increase would be very small and possible nothing.

A huge problem with mature businesses is that over time their payroll can get out of line with the rest of the industry and the company can no longer be competitive (think United Airlines, Trans World Airlines, Pan American Airlines, General Motors, Ford).

When we as a company are more efficient and productive than others in our market place our team members can be at the top of the pay scale for a particular job.  In fact, we can create a NEW top above what the market pays for a particular job.

This is why it is so important that you are an active participant in our continuous improvement.  You are needed to insure that our MJRs service both our internal customers and clients in the most efficient and effective way possible.  You need to speak up when you see an opportunity to improve a MJR.

In every Personal Development Interview you will be asked, “Since we last met, what did you find that was broken, or could be improved; and what did you do to fix, or improve it?”  It is critical that you always look for ways to improve our deliverable to our clients.

The How Pay is Determined document then goes on to discuss the other seven factors in determining an individual’s pay in a Make-You-Happy Management System business.

There is no reason for a pay discussion to cause the anxiety it does.  Discover how to truly take control of every part of your business in my book, “How to Control Your Business and Your Life.”  It’s free for you.  All I ask is your help with shipping and handling with a $2.97 fee.

Click here to get “How to Control Your Business and Your Life.” 

Beating The Odds – Part 2

Beating The Odds – Part 2

We’re picking up our conversation on one of our great clients at American Retail Supply, McLendon’s Hardware, which has seven locations throughout the Seattle area.  To review part one, refer to the last blog post (Beating The Odds).

Competition Makes Them Better

I’ve done a lot of research over the years on how to compete with the national chains.  I’ve been sharing that information with my clients in my monthly newsletter for 21 years and my bi-weekly email retail tip since 2004.  In my research I found that those companies that survive and thrive look at the new competition as a challenge to get better themselves.  McLendon’s has done this also.

For years McLendon’s knew they should be looking into better automating their inventory and point-of-sale computer system.  When the retail giants came to town they made the investment in their future but also were sure to invest in new software that really helped them stay focused on their customers and not allowing the software to take away from their exceptional customer service.

Other areas in which McLendon feels the competition has made them better are display, advertising and pricing.  McLendon says, “We never really concentrated on end caps other than to put things on them.  Now we have a person in every store hire just to do that.”

McLendon’s realizes that with the big guys right down the street they need to be much more aware of price competition so they can be seen as having “good” prices.  Their advertising person consistently pushes to have “hot buys” in their ads.

What can you learn from the competition to make you better?

Variable Pricing Structure

McLendon refers to his variable pricing structure as A item, B item, C item pricing.  “A” items are very competitive, commodity items, that everyone uses and everyone knows the price.  McLendon knows his prices must be “good” on these items.  They don’t need to be the same or lower than the retail giants, but they need to be very close.  “B” and “C” items are not as competitively priced and the company can get better markups.  Sadly, too many independent retailers refuse to accept this type of pricing strategy.

Buy Right

McLendon’s, like many who compete well with the mass merchandisers, is a member of a buying group.  They buy a lot of their product though True Value.  With the exception of direct import items, McLendon feels their costs are in line with the retail giants.  But he believes the retail giants often get advertising allowances that he does not get.

Don’t Compete Directly With the Retail Giants

McLendon’s knows their niche-huge selection and great service.  In addition, McLendon’s now very carefully considers location as a niche when opening a new store.  When opening a new store McLendon asks, “Is it their market?”

The retail giants in the hardware business like to be near freeways and locations that attract large number of people.  McLendon’s looks for a niche that is not close to freeways, has a good population base, but isn’t a place that the retail giants are likely to put a store that requires a huge population to support.

This is huge.  How can you position your product and/or services to go where the competition ain’t?

Brand Names

A strategy retailers like to use to compete with the retail giants is to carry brands that the giants don’t carry.  In the past, McLendon’s tried to carry brands that the big guy didn’t carry.  With the number of competitors now in the market, and the huge popularity of a few brands in the hardware business, that strategy doesn’t really work.  As a whole, McLendon’s tends to carry quality brand products.

Hours of Operation

Historically hours of operation for McLendon’s shows the company’s long roots and reflect the work ethic in the community – early to bed, early to rise. The company has always opened early and closed early.  Today they’re finding they need to extend those hours.

Store used to close on Sundays.  Today, Sunday is the company’s second busiest day of the week.  McLendon’s stores used to close at 6:00 PM.  Now they close at 8:00.

Temporary Sales Decline

McLendon’s has found that retail giants moving into their market is a cause for concern and an opportunity to improve, but it is not a cause for panic.

Like retailers across the country, McLendon’s has found that stores sales drop somewhat when a retail giant opens a store close to McLendon’s.  but like many independents, McLendon finds that within nine months sales are back to where they were before and growing… maybe not growing as fast as they did before the big guys moved in, but growing.

You Can Thrive

Mike McLendon and McLendon’s Hardware have proven that yes, you can thrive in the shadow of the retail giants and compete with them, but not directly against them.  McLendon’s focuses on a broad product line, great customer service, and a niche location to not only survive, but thrive in the shadow of retail giants.

Discover more ways to improve your business by requesting one of my free books: How to Control Your Business and Your Life and The Happy Customer Handbook

by Keith Lee

Beating The Odds

No matter what business you’re in, you likely have competition from a discounter, national chain, huge franchise, or something along those lines.  Regardless of the competition or the industry we can all learn from those who survive and are thriving in the face of this competition.  This article is about one of those businesses who are beating the odds and what you can learn from them.

You might know that I own American Retail Supply (www.AmericanRetailSupply.com) We provide independent retailers with the things they need to run their stores – the bags they give you, displays, fixtures, marking equipment, point-of-sale computer system, etc.

Let me ask you a few questions. Think back 20 years, or even 10.  How many independent drug stores do you see now versus 20 years ago?  Pet stores?  Department Stores?  Office supply stores?  Hardware stores?  The list goes on and on, and the answer is the same:  NOT MANY.

In those 20 years, while the market has shrunk dramatically, our sales at American Retail Supply have grown more than 10 times.  But this month’s article is not about my business, it’s about one of our clients who has beaten the odds and huge competition from the “BIG GUYS” and not only survived, but thrived.

McLendon Hardware opened in 1926.  Today they have 7 stores and continue to grow while Home Depot and Lowes blanket the market area with new stores.  At the same time that the entry of these retail giants forced the biggest regional hardware chain into bankruptcy, McLendon’s continues to thrive and open new stores.

How do they do it?  How does McLendon’s Hardware continue to grow, survive, and thrive while the old leader in the market has gone bankrupt?  I interviewed the president of McLendon Hardware, Mike McLendon, a few years ago to find their secrets, and you can use these same secrets to thrive in your market place.  Throughout this article I’ll use italics to ask you questions about using the ideas previously discussed in your business.

Find a Niche and Fill It

McLendon’s niche hasn’t changed in 87 years… Their niche – SERVICE, SELECTION, and LOCATION.

McLendon says they see themselves as being more family oriented than their competition.  That makes sense coming from an 87 year-old family business.  McLendon says, “People come to a hardware store because they have a problem, and they want to be able to go home and fix the problem themselves.  And they want to be able to understand something about the problem.  That’s one of the reasons we stay in business.  People think we can help them with their problem, they get the solution, go home and fix it, and they’re happy.”

Seems kind of simple, right?  Give your niche what they want.  McLendon’s wide breadth of products and friendly, helpful staff, insures that customers go home with solutions that make them happy!

What makes you different?  As my mentor Dan Kennedy says, “Why should someone do business with you versus every other option in your business category?” 

I shop at McLendon’s Hardware.  Here are just a few examples of their selection and great service.

I had a chip in my bathroom sink that I wanted to repair.  I went to the national chain about a half mile from my house.  They had one color – white.  My sink is cream.  I drove 5 more miles to McLendon’s.  They had the exact color match and 50 other colors!

What do you offer that your clients can’t get from the competition?

I needed a Philips head screw driver bit for my power drill.  I went down to McLendon’s, and like always quickly found someone to help me.  She suggested a bit and then said, “Here, try this one also.  We just got them in.  You can have it for free.  Let me know what you think of it.” Are you kidding me?!?!

It really is the little things.  What can you do to surprise and delight your clients with the little things?

I traced a leak in my hot water tank to the flexible copper tubing water inlet hose.  I took the old hose to McLendon’s where again someone was ready to help me.  Instead of just handing me the hose and letting me go, the sales person took an extra 30 seconds to tell me exactly how to install the hose.  His information made the job much easier and the repair will last longer.

What information, education, expert advice can you give to you clients that your competition doesn’t?

I’ve learned my lesson.  I now drive right past the national chain and go a few more miles to McLendon every time.  For me, McLendon is right on the mark.  When I go to other hardware stores, because it’s convenient, I often leave discouraged.  When I go to McLendon’s I go home with the solution to my problem.  McLendon tells me he often hears customers saying, “I should have just come here in the first place.”

What can you do to create loyal customers who, even if more convenient, don’t even think about going somewhere else?

Finding Good People

With the national chains coming into town, finding and keeping god employees has become a bigger challenge.  The big guys can often afford to pay more.  But McLendon’s relies on great help to send customers home with solutions.  How do they do that?

McLendon’s attracts employees who want to be more than just a clerk.  Trades people are attracted to McLendon’s.  They have a tool guy who was a contractor and didn’t want to be a contractor anymore.  He likes his job, he likes the people, and he gets the regular hours he wanted.

A journeyman electrician hurt his back and couldn’t work as an electrician, so now he works at McLendon’s.

The new store manager at the Kent store started at McLendon’s when he was in high school.  McLendon finds that people may leave the company to go to work for a new competitor, but they often come back to McLendon’s.

What can you do to attract the kind of employees you want, and will give your customers Out-Nordstrom Nordstrom Customer Service, without having to pay premium wages?

There’s more to this article, but you’re going to have to wait until part 2 of this series next month when I reveal the six core strategies McLendon’s is using to not only survive in the shadow of the retail giants, but thrive.  Stay tuned!

See how the Out-Nordstrom Nordstrom Customer Service System can help you

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Find out more about the Make-You-Happy Management System

Temptations by Dan Kennedy

Dan Kennedy

Intro given by Keith Lee

Dan Kennedy is not only the leading expert in Marketing; he is the highest paid Copywriter in the world and is my personal mentor.  Everything Dan says to do, I do because I know what an impact it has had and will continue to have on my businesses.  If you are a small business owner looking to grow your business you’d be wrong to NOT listen to Dan.

Temptations by Dan Kennedy

Success and productivity are not the same things nor does maximum productivity necessarily translated to success. You might, for example, achieve a very high level of productivity at cold-calling prospecting and pushing through CEO’s doors in order to sell your services, but come to understand that you do not feel at all successful as a result; instead, perpetually stressed and anxious, demeaned by the ‘numbers game’ and the rejection; burnt-out…and come to realize you would have been better served devoting productive energy to building a marketing system that brought interested prospects to you.

As you set out to get a far stronger grip on your time, to enhance your performance, it’s important to be constantly assessing your reasons for doing so and the validity of the objectives you are pursuing and achieving.

Entrepreneurs tend to be under more constant assault than executives or others, so it is easier to lose grip on the thread that leads through the muddle to the prize. Prizes you don’t really want to get set up in front of you by others, and you race to get to them while losing the critical thinking that questions the appropriateness of the prize. This takes your time and invests it where it can’t get a desirable return. Entrepreneurs are, by conditioned habit, often by ingrained compulsion, perhaps even by nature Problem Solvers and Mountain Climbers. It’s what we do. But not every problem is one you need to solve or should care about solving. Not every mountain you are led to needs conquered by you.

My racehorses are incapable of critical thinking. They are bred and trained and conditioned nearly from birth to race. They are notable and fierce and automatic competitors. When I climb into the sulky and drive the horse to the track, get him moving behind the starting gate amongst the other horses, never, never, never does he stop and think—gee, maybe this is a race I don’t need to run. But you and I are capable of such critical thinking. We can reign ourselves in. As entrepreneurs, we are automatic competitors, automatic problem-solvers, automatic mountain climbers—but we are capable of overriding our automatic inclinations.

If you put a business problem or opportunity in front of a true entrepreneur, he automatically leaps upon it and begins solving it or capitalizing on it. He reacts as if a lion is thrown a hunk of raw, red meat. The lion will respond even if he has just had a big meal and is not hungry.

The entrepreneur will respond even if he has more on his plate than he can handle, no need to respond, no time to respond. In this way, entrepreneurs are dangerous to themselves.

You can reduce that danger with more disciplined time management. With entire weeks scheduled and scripted in advance, the new and unexpected must take a place in line, patiently wait, and instead of reacting impulsively, you can attend to it more calmly and thoughtfully. One of my principles is that nothing is ever as bad or as good as it initially appears. Before acting hastily based on first impressions, each new thing—problem or opportunity—must be carefully inspected.

Temptations by Dan Kennedy

Click here to find out what Dan Kennedy is giving away!

Nine Things More Important Than Money by Jim Rohn

*Note from Keith:

I have been a huge fan of Jim Rohn’s for years.  When I think about the heavy-hitters when it comes to business and life success Jim Rohn always comes to mind along with Zig Ziglar, Dale Carnegie, Brian Tracy, Earl Nightingale, and Napoleon Hill.  Whenever I read or listen to Jim I get extremely motivated and feel as though I can take on the world, and that’s a great feeling!

 

Nine Things More Important Than Money

Jim Rohn

When starting any enterprise or business, whether it’s full time or part time, we all know the value of having plenty of capital (money).  But I bet we both know or at least have heard of people who started with no capital who went on to make fortunes.  How, you may ask?

Well, I believe there are actually some things that are more valuable than capital that can lead to your entrepreneurial success.  Let me give you the list.

Time

time is more valuable than capital.  The time you set aside not to be wasted, not to be given away.  Time you set aside to be invested in an enterprise that bring value to the marketplace with the hope of making a profit.  Now we have capital time.

How valuable is time?  Time properly invested is worth a fortune.  Time wasted can be devastation.  Time invested can perform miracles, so you invest your time.

Desperation

I have a friend Lydia, whose first major investment in her new enterprise was desperation.  She said, “My kids are hungry, I gotta make this work.  If this doesn’t work, what will I do?”  So she invested $1 in her enterprise selling a product she believed in.  the $1 was to buy a few fliers so she could make a sale at retail, collect the money and then buy the product wholesale to deliver back to the customer.

My friend Bill Bailey went to Chicago as a teenager after he got out of high school.  And the first job he got was a night janitor.  Someone said, “Bill, why would you settle for night janitor?”  He said, “Malnutrition.”  You work at whatever you can possibly get when you get hungry.  You go to work somewhere – night janitor, it doesn’t matter where it is.  Years later, Bill is a recipient of the Horatio Alger Award, rich and powerful and one of the great examples of life style that I know.  But his first job – night janitor.  Desperation can be a powerful incentive.  When you say – I must.

Determination

determination says I will.  First Lydia said, “I must find a customer.”  Desperation.  Second, she said, “I will find someone before this day is over.”  Sure enough, she found someone.  She said, “If it works once, it will work again.”  But then the next person said, “No.”  Now what must you invest?

Courage

Courage is more valuable than capital.  If you’ve only got $1 and a lot of courage, I’m telling you, you’ve got a good fortune ahead of you.  Courage in spite of the circumstances.  Humans can do the most incredible things no matter what happens.  Haven’t we heard those stories?  It’s humans.  You can’t sell humans short.  Courage in spite of, not because of, but in spite of.  Now once Lydia has made 3 or 4 sales and gotten going, here’s what now takes over.

Ambition

“Wow!  If I can sell 3, I can sell 33.  If I can sell 33, I can sell 103.”  Wow.  Lydia is no dazzled by her own dreams of the future.

Faith

now she begins to believe she’s got a good product.  This is probably a good company.  And she then starts to believe in herself.  Lydia, single mother, 2 kids, no job.  “My gosh, I’m going to pull it off!”  Her self-esteem starts to soar.  These are investments that are unmatched.  Money can’t touch it.  What if you had a million dollars and no faith?  You’d be poor.  You wouldn’t be rich.  Now here is the next one, the reason why she’s a millionaire today.

Ingenuity

Putting your brains to work.  Probably up until now, you’ve put about 1/10 of your brainpower to work.  What if you employed the other 9/10?   You can’t believe what can happen.  Huans can come up with the most intriguing things to do.  Ingenuity.  What’s ingenuity worth?  A fortune.  It is more valuable than money.  All you need is a $1 and plenty of ingenuity.  Figuring out a way to make it work, make it work, make it work.

Heart and Soul

what is a substitute for heart and soul?  It’s not money.  Money can’t buy heart and soul.  Heart and soul is more valuable than a million dollars.  A million dollars without heart and soul, you have no life.  You are ineffective.  But, heart and soul is like the unseen magic that moves people, moves people to buy, move people to make decisions, move people to act, moves people to respond.

Personality

You’ve just got to spruce up and sharpen up your own personality.  You’ve got plenty of personality.  Just get it developed to where it is effective every day, it’s effective no matter who you talk to – whether it’s a child or a business person – whether it’s a rich person or a poor person.  A unique personality that is at home anywhere.  My mentor Bill Bailey taught me, “You’ve got to learn to be just as comfortable, Mr. Rohn, whether it is in a little shack in Kentucky having a beer and watching the fights with Winfred, my old friend or in a Georgian mansion in Washington, DC as the Senator’s guest.”  Move with ease whether it is with the rich or whether it is with the poor.  And it makes no difference to you who is rich or who is poor.  A chance to have a unique relationship with whomever.  The kind of personality that’s comfortable.  The kind of personality that’s not bent out of shape.

And lastly, let’s not forget charisma and sophistication.  Charisma with a touch of humility.  This entire list is more valuable than money.  With one dollar and this list I just gave you, the world is yours.  It belongs to you, whatever piece of it you desire whatever development you wish for in your life.  I’ve given you the secret.  Capital.  The kind of capital that is more valuable than money and that can secure your future and fortune.  Remember that you lack not the resources.

Jim Rohn is considered to be America’s Foremost Business Philosopher.