Bonuses

Employees are your most important asset. I know you've heard that one before - but it bears repeating...  Even better, they are non-depreciating assets. :)   To keep them appreciating, remember to reward them appropriately.

When I first started my own small business, I created a rather complex scheme to set goals and reward achievements. It had multiple line items and algorithms for payouts. We reviewed it weekly with the team - and once a quarter we paid bonuses to the team. It was a great idea, well executed, but it didn't have the right impact.

Goals for rewarding the team should be immediate, visible, and variable.

A handful of $50 bills on hand to reward exceptional performance will guarantee that all efforts will be made to do it again. (Caution - make sure all payroll is accounted for - even cash bonuses - and appropriate taxes are accounted for. Work with your payroll service to ensure you are able to execute your bonus program without violating any rules.) The same is true for movie tickets, dinner coupons, and comp time. Be generous with your rewards - and make them very public to all team members. Jealousy drives motivation.

So, I ended up reworking the bonus system. The goals would change based on business need - but were universally simple, actionable, and direct. The team could see what was asked of them, and what they could do to deliver the desired results. Meeting or exceeding the targets resulted in immediate visible reward. Not meeting the goals meant no reward - and a discussion of what went well and what fell short and required structural improvement to achieve the desired results next time.

The goals changed over time to ensure that bonuses were well linked to our company values - quality, customer service, creativity, customer retention, and growth.

Here are some more thoughts on this subject.

Getting Advice

It can be a lonely experience being the owner of a small business. As such it's important to arrange for structural advice. There are two important ways to do this. This first is discussed below.

First, from day one assemble a small team of trusted smart associates - your "Board of Advisors". I would recommend no fewer than 3 and no more than 5. Ideally you will know them well and they are experienced and have time to help. They don't need to have a huge amount of experience - just the time and desire to seriously commit to helping you grow your business. A family member, a former colleague, a peer in another business, a neighbor, and maybe a CPA or Lawyer. This is going to be useful for you, and fun for them. They won't get paid (except for maybe coffee and donuts) and they will need to be available.

Set a meeting for the Board of Advisors once a quarter or twice a year. Remind them that they are sworn to maintain confidentiality. Share with them the financial performance of the business, what the forecasts are for the coming months, key accomplishments, and key challenges. Then challenge them to engage on 2 or 3 issues that are of concern to you.

You will find that your Board becomes a key resource for you - good advice, positive advocates, and knowledgeable partners. They will also be the ones that can throw cold water on a bad idea - or help you refine and execute a good plan.

Treat them well, involve them, and you will be amply rewarded.

Further reading on this subject can be found here.

What to Pay Your Team?

One of the toughest decisions you will make as a small business owner is how much to pay your team members. Even if you purchased the business with a team intact, you will need to review the payroll and benefits and potentially make life changing decisions.

The best place to start is by reviewing your total payroll budget - how much can you afford and how many people do you need? Establish this as a percentage of sales or gross margins - at a level where you want the business to be in 9-12 months. This will allow you to hire ahead for growth.

Collect industry data and association data for your specific business. It's worth paying for the data if it is available. Here is one place to look - and there are many more that you can Google by typing "industry pay rates". If you are using a payroll service of any kind (and you should be) - ask their help in supplying competitive data. Identify your staffing positions taking into account the degree of experience required, degrees, seniority, etc. Establish a range of pay for each position. Do this even for existing team members. Remember that compensation includes regular pay, bonuses, health care, retirement 401(k) contributions, and even eventual ownership sharing. Calculate the Total Compensation - and the split between regular pay and other benefits.

When you have established the positions and the payroll ranges, i.e.  Manager, $35-40K, 10% bonus target, $1000 401(k) matching, and up to $200 / month for health insurance - you can now take the next steps.

Shared Calendars

It is now possible to create and share calendars for your entire team - at NO COST.

Each employee can set up a personal calendar through GOOGLE. These calendars can be created under a master account - with each person given their own page - as well as access to the rest of the team. You can even set up a calendar for "Staff Meetings" or "Installations" or to reserve conference rooms, vehicles, tools, etc. It takes just a few minutes.

One valuable use of these calendars is for each employee to note their Out of Office time (doctor's appointments, teacher conferences, etc.) and vacations. You can easily see a 'roll-up' of the calendars to know when vacations are scheduled and if you need to reschedule something to avoid conflicts.

This powerful tool is available now - and for small business owners worried about cost - and employee productivity - it's a wonderful tool.

Staff Meetings

Keeping everyone informed seems easy - but it isn't. It requires constant focus to make sure everyone knows what's important, how the company is doing, and how their efforts are linked to the overall success of the team.

As part of your communication process - schedule regular staff meetings. This is an all hands meeting (with one rotating person to answer phones). Schedule the meeting every two weeks - and make sure that everyone can attend in person. If you are missing more than 2 key people, reschedule the meeting.

Keep the agenda simple and consistent.

1) Business overview - what are the key indicators and what is the progress against those indicators.

2) What went well since the last meeting? Recognize outstanding efforts, happy customers, good survey results, positive press, etc.  Spread the positive feedback around - be specific - mention names!

3) What didn't go well since the last meeting? Make this data driven - not impressions. Quality issues, missed deadlines, lost orders, late orders, etc. Don't mention names - everyone is responsible for problems.

4) What are the priorities for the next 2 weeks? Which customers are must wins, which orders need attention, where are areas for improvement? How do you achieve more of #2 and less of #3.

5) Opens. Give everyone a chance to chime in and raise issues and concerns. Give everyone a chance to recognize other people for their contributions. Call on each person by name.

Keep the meeting to 30min to 1 hour. Buy donuts, bagels, or pizza.

1:1's

Nothing replaces a 1:1 meeting with your direct employees.

As a small business owner, time is your most precious resource. Invest some of this time each week to meet with your employees 1:1. That means scheduling time that works for your and your team members - same time very week is best. Make it a time that is convenient and won't be rescheduled. Make it a priority for you - and for  your employees. Book 30min for most of the team, and an hour for most senior members - you don't have to use the whole time, but it is reserved!

For the meetings - each of you should bring a pad of paper, pen, and a file with notes from prior meetings. The meeting is for your employee - and they own the agenda for the first 3/4's of the meeting. They should bring topics they want to discuss with you - anything is fair game. Training, jobs, priorities, work place issues, longer term projects, work place organization, hiring, etc. Anything that is on their minds. Your should focus on their issues, not your own. Listen and discuss. You get the last few minutes to discuss your issues and priorities.

1:1's are empowering for your team. They will appreciate your attention and focus. At first they will be nervous - but they will get used to the process and value it. Write down what you have agreed to - and what they have agreed to. Follow-up on your commitments. 

Regular 1:1's will also have the benefit of reducing interruptions. Remind your employees to use their 1:1 time for less than urgent issues - and you will also see that 'urgent' issues become less urgent, and that your employees will solve many problems on their own.

1:1's are an important part of managing and leading your team. Prioritize them and take them seriously.

A great resource is a book by Andy Grove of Intel.

Employee Manuals

Most small businesses do not have a written employee manual. Don't fall into this trap.

With an investment of a few hours, you can both protect yourself and your business - and - increase employee satisfaction and morale. At a minimum, your employee manual should list your expectations (start time, end time, appropriate dress, appropriate behavior, things you don't allow, etc.), vacation policies and sick time, and your rules on performance and hiring/firing. There is room for more and you can add as you go.

When an employee joins the company - give them a copy of the manual (it can be only a few pages, or a complete bound document). Include three tear out pages - one saying that they received and read the manual, one saying they will keep the company's proprietary information proprietary, and one covering a non-compete if they leave or are terminated. All three pages should be signed by the employee, returned to you,  and kept in their personnel file (locked in a file cabinet - with access only by the owner). This should precede their first paycheck.

There are many web sites that will help you write a manual or even write one for you. There are also a few books on books.google.com - that you can view and read.

Take the time to create and maintain an employee manual. When your employee comes to you and says "what about ..." you can pull out your copy and give a consistent, well thought out, policy.