I was in college when I started my first business. Those days were exciting and full of unpredictable challenges at the same time.
Problems popped up everywhere: unsatisfied customers, quality issues, missing delivery dates, drama with employees… you name it!
Probably my biggest problem was my employees. I was 22 years old and lacked leadership skills. I needed to motivate the workers and improve the quality and productivity of their labor.
At first, I thought that they needed closer supervision, so I hired a manager to stay on top of them… that didn’t work.
Then I tried to get this under control with my own hands, personally spending hours watching how they used their hours — it was energy draining.
Until my dad asked me one day, “How’s the shop doing?”
“I’m struggling to find the right employees. It’s a daily uphill battle,” I said, frustrated.
“Why do you think this is happening?” he asked.
I sat there thinking for a few moments and said, “I don’t know — I think they’re just lazy people that don’t want to put in the effort.”
“I don’t think so,” my dad said.
“What do you mean?”
“What I’m saying is that your employees are lacking motivation.”
I started laughing, making fun of his comment, “Well obviously, Dad!” I couldn’t contain my laughter. “You’re a genius, Dad!”
“Why do you think this is happening?” he asked again in a very serious tone of voice.
“What do you expect me to do? Change the music? Organize a party for them? Hire cheerleaders to wake them up?” I said sarcastically, losing my patience.
“Or you can pay them better,” he said authoritatively.
“Pay more? I can’t afford that, Dad! They make above-the-market wages, plus I offer medical benefits.”
“Fixed salaries?” my dad asked.
“Yes, fixed salaries,” I said. “It’s a big payroll I need to come up with every week! My overhead is too high, I’m losing money every month!”
“Pay them better,” he said.
“Impossible, Dad!”
“Tell me, Hector, why should your employees push themselves more in their job? Why should they make any extra effort when they make the same whether your shop makes a profit or not?”
I sat there quietly thinking, and before I even answered, he said, “They don’t care! Why should they care if you don’t care for them?”
“Well, Dad, they should care about and take care of their job,” I said.
“Listen, I need to go, but test a variable pay bonus based on the results of their efforts,” my dad advised me. “Try it, and share the results with me.”
I wanted to keep arguing, but he just walked out of my bedroom.
“Do it. Trust me,” he shouted as he shut the door behind him.
This was the advice that saved my business. My dad helped me formulate a variable compensation plan for all of my employees.
Incredibly, sales immediately went through the roof! Some of my employees today can make up to 3X more than what the market pays, making my business stand out in the job market.
Results? Sales improved, motivation improved, loyalty improved, customer satisfaction improved, profits improved, supervision was eliminated, employee turnover ceased… to name a few.
This simple change was a key secret to our success and why my business grew and still is running today 26 years later.