The Case for Team-Based Pay
Neil Ducoff, founder and CEO of Strategies
In a recent post to SALON TODAY's LinkedIn page, reader Joann Lefebvre posted the following question: "Any ideas on how to handle commissioned employees when a salon/spa offers promotional pricing for services and products?" I couldn't resist the opportunity to join the online dialog to talk about the benefits of team-based pay.
This is how I responded:
This is the inherent problem with commission. By design, it creates 'independent contractor' thinking and has the technical staff and owners fighting over who gets what piece. The business can't grow when it's forced to get in 'negotiations' on 'who is going to take the hit' on promotions. The fact is, the business is taking a self-imposed hit because it's pay system is getting in the way. And, in these days when salons are fighting to stay alive, it's sad to see owners having to battle and deal with all the drama simply to run a promotion that boosts revenues.
The issue here is not whether promotions are good or bad. The issue is the "I/Me" thinking and behavior that can evolve in a commission business—when leaders fail to build and nurture team-based cultures. JoAnn clearly is just trying to grow her business, not rip off her employees.
I've never been a fan of commission pay systems because it is so narrow in focus. It's based on sales. Even with sliding scales and service charges, it's simple and still ends up being pay based on what the individual produces. It's even worse when the service payroll gets out of control and saps the financial life out of the business. There are lots of owners out there who would make more money if they were a commissioned employee in their own salons.
Commission and high payrolls have been the salon industry's elephant in the living room far too long. I've been teaching and coaching salons/spas on Team-Based Pay (TBP) for more than 30 years. Just the mention of TBP sparks debate. Owners say "I don't believe in TBP." First, it's a pay system—not a religion. Second, if a salon/spa's service payroll exceeds 40 percent of gross revenues (service and retail), it has a payroll problem.
TBP eliminates all the nonsense of "who takes the hit" because tech staff are paid by the hour. The salon's job is to effectively sell those hours and keep payroll at a manageable level. The culture that CAN evolve in a TBP system is proven to be more sophisticated.
Arguing over "who takes the hit" is low-level interference that just gets in the way. How about eliminating it with a pay system that lives above that interference? How about a pay system that is driven by first-time client retention rates, attitude, technical skill advancement, attendance, attendance, teamwork, retail recommendations, integrity, cooperation, collaboration, putting the customer first, follow through, etc.? Sorry...commission is too one-dimensional and lacks the horsepower to allow empowered teamwork to occur.
I'll be happy to e-mail anyone my White Paper on Team-Based Pay. Email me at email@example.com if you are interested.