Wages
What is the Difference Between the Top Wage Earner
and the Bottom Wage Earner at Your Business?
The difference in wages from the top wage earner to the bottom wager earner is important for two reasons. The main reason a small business should evaluate this portion of their compensation package is to make sure that the lower wage earners can perceive the difference in workload, responsibilities, and experience of their higher wage earning counterparts. If the higher wage earners aren’t perceived as having more responsibility, longer hours, or more experience than the lower wage earners hostility may arise.
If the lower wage earners in a business can see that they have an opportunity to achieve higher wages through more work, responsibility and experience they will be more likely to stay with the company. This will in turn save the company hiring costs and the associated training expenses. In general there will be several levels of wages in most small businesses and most employees understand this. Just make sure that the wages and perceived workload are balanced for all wage levels. Your business may decide to use a formula or diagram to determine wages such as the one below:
Sample Wage Formula:
Base + Experience Component + Responsibility Component=Wage
In the above formula you would start with a base pay, whether it be the federal minimum wage or some other figure and then add the other components. For example you may want to at say $1 per hour for each year of experience that the prospect or employee has in the field for the experience component. The responsibility component may be determined by either direct employee reports which may be worth $.25 each per hour or by specific responsibilities which may be worth $.50 an hour, it can also be a combination of both direct reports and responsibilities.
Wage Pyramid showing relationship between experience, responsibility and growth opportunities.
From the above diagram you can see, and more importantly your employees can see, that as responsibility and experience grow so too do wages. But as the wages, experience and responsibility grow the opportunities for growth and advancement become fewer because there are fewer management and leadership positions available as one “climbs the ladder” and therefore, fewer opportunities to achieve a new level of responsibility.
In order to keep peace within the business between the upper and lower wage earners it is always a good idea to keep salary and wage information confidential. Another important thing to consider when comparing the difference between the upper and lower wage earners is to make sure that the business is receiving everything it should be receiving from all employees. Using different levels of wages in a business is a good way to reward good employees and to show all employees that the business is willing to invest in their success.
Filed Under General Business, Human Resources | 1 Comment | March 20th, 2010
Book Review – Death To All Sacred Cows
Book Review
Death To All Sacred Cows
It is always refreshing to read a business book by an author, or in this case authors, that have a good sense of humor. Bernstein, Fraser, and Schwab use a perfect combination of wit, sarcasm, and humor to make an impact on the reader. The authors hail from a very large advertising agency, The Gate Worldwide, where they kill sacred cows on a daily basis. Now before calling PETA and complaining about an advertising agency killing cows please continue reading…
The notion of a sacred cow is more than a blissful bovine grazing in a field. The authors have coined the term sacred cow to mean a “saying, motto, or aphorism about how business should be conducted that is widely assumed to be unassailably true.” So the cows in the pasture are safe but what we thought were our business norms are sent to the slaughterhouse in this sometimes hilarious but always insightful read. The authors have cleverly created chapters for each sacred cow and have included tidbits of case studies, horror stories, and anectdotes to prove their point that business norms as we know them are not always true.
For example, the sacred cow “Don’t Screw Up” is something that we think about just about every day. By all means don’t screw up the sales presentation…don’t reply all to an email, etc. etc. But the authors of this book tell the tale about Pfizer’s screwup in the 1980s that failed to treat hypertension yet created an enormous blue pill that created the hit single “Viva Viagra”. So screwups are okay and these authors present other great tales about how this sacred cow should be killed.
Other sacred cows that the authors recommend killing are “The Customer is Always Right” (my retail experience will pull the trigger on that one), “Follow the Leader”, and “The Goal of Marketing is to Sell a Product.” By sending these and other sacred cows to the slaughterhouse Bernstein, Fraser, and Schwab have left the pasture for the competition and will give the reader’s business an surge of innovation, energy, and efficency. Even without the business insight and information in this book the humor and wit by themselves are well worth the read. Bernstein, Fraser, and Schwab deserve a fine cut of steak for writing this book.
Filed Under Book Reviews | Leave a Comment | March 19th, 2010
Hours Worked
How Many Hours Per Week do Most of Your Employees
Work? Who Works the Most? The Least?
The amount of time that employees spend at work can be indicative of several things. For example if some employees are able to leave work early while others are working late there may be an issue in workload or employee efficiency. If lower wage earners are consistently working more hours than their upper wage earning colleagues issues may arise out of a fear of inequity. On the other hand, if the managers of the business are working extended hours on a regular basis it might be time to divide their workload or determine if there are any efficiency problems.
In many instances the amount of time spent physically at work isn’t the only work an employee may be doing. There may be several times a week or even every day where some employees may take work home with them to complete. If this is occurring and employees are working on their own time business owners might want to consider workload changes or wage changes to compensate the employee for the extra work. It will be well worth the company’s money to keep good employees that work beyond what is required.
On the flipside are employees that consistently leave work early. If this is happening in your business two things may be the cause. Either the employee is very efficient at getting his or her responsibilities accomplished or they are leaving work to be accomplished on the next day or by a different employee. In either situation action needs to be taken by managers. For the efficient employee that gets work accomplished it might be helpful to challenge that employee with new tasks and responsibilities (and an increase in wage or benefits). For the employees that leave work incomplete they might benefit from a frank discussion of what they are responsible for on a daily basis and what is required from them.
Effectively managing the time that employees spend at work and the work that they get accomplished will help your business achieve the most work in the most efficient manner possible. It is also important for all employees to see their counterparts working efficiently and receiving equitable compensation for work. The perception that all employees are pulling their own weight helps with office morale and eliminates shirking of responsibilities.
Filed Under Human Resources | Leave a Comment | March 18th, 2010
Toxic Employees
Do You Have Employees that Bring Others Down?
Most people would rather be doing any number of activities than working for someone else. Yet most people go through the day, do their job and go home to their family. Sometimes people are so put upon at work that they become toxic to the rest of the workforce. Some people make it painfully obvious that they do not want to be at work, deal with customers, or cooperate with fellow employees.
Toxic employees can ruin a company. We’ve all had co-workers that just didn’t want to be at work. They would complain about everything from their commute to the temperature of the office to their workload, and on and on and on…Not only do these employees not perform their day to day tasks well but they also infect the rest of the employees with their grievances. Nobody wants to work with a downer for eight hours a day. It’s unfair to your good employees to have to share space with someone that either doesn’t care about the work or doesn’t want to work.
Toxic employees can also be seen, heard, and felt by customers and vendors. The mere presence of an employee like this can turn customers away or make vendors think twice about dealing with your company. We have all been to a business that has one or more toxic employees. The experience is uncomfortable and unpleasant and the desire to return to the business is non-existent. If you think you have a toxic employee make sure to document the issues that arise from the employee and deal with them as soon as possible. Your business is too important to let one employee ruin the morale, focus, and trust of all of the employees and your customers.
Every aspect of the company is affected by these bad apples. A Harvard Business Review article presented these very interesting statistics that back up this fact.
Christine Porath’s and Christine Pearson’s study showed the following results of employee reactions to toxic employees:
48% Decreased their work effort.
47% Decreased their time at work.
38% Decreased their work activity.
66% Said that their performance declined.
80% Lost work time worrying abut an encounter with a toxic employee
63% Lose time avoiding the toxic employee
78% Stated that their committment to the organization declined.
With these stunning statistics it is very important for business owners to deal with toxic employees quickly and effeciently. The problem can become so serious as to impact all aspects of the company and just imagine if this employee comes into contact with customers! Those statistics would be frightening.
Filed Under Human Resources, Management | Leave a Comment | March 17th, 2010
Empowering Employees
Are employees empowered to make decisions?
Do you trust your employees?
There are many good reasons to empower employees to make decisions. First of all it shows confidence in their abilities and is a symbol of trust. Empowering employees to make minor day to day decisions will lift the burden of those decisions from management so that managers can focus more on strategic issues with broader implications. Also, the front line employees are quite possibly more capable to make some decisions since their day to day responsibilities may directly relate to the decision being made. This is especially true for decisions dealing with processes and procedures. When employees are empowered to make decisions they may be able to increase the efficiency of the business because of their specific and unique knowledge of their job.
It is impossible to empower employees if management doesn’t trust them. Trust is a very important factor for all businesses, managers, and employees. When a business hires an employee they are entrusting that person to not only act in accordance with the company’s policies, but they are entrusting that person with the company’s intellectual property, physical property, and potential for success. If the company cannot trust the employees there are serious issues somewhere. The issue could be that the company doesn’t treat the employee fairly and therefore the employee wants to seek “justice” through distrustful activities. The issue could also be that the employee is just a bad seed and has done something to violate the trust or has yet to earn trust.
All issues of distrust in a work environment need to be investigated and explored. If criminal activity is the culprit the decision is obvious but if other minor issues cause the distrust then a plan needs to be developed so that the employee and the employer can both regain the trust of one another. Trust is also one of the most critical issues in allowing employees to be empowered to make decisions. Empowering employees to make decisions is a good way to show management’s trust in the employees and the employees should respond by making good decisions for the business.
Filed Under Human Resources, Management | Leave a Comment | March 17th, 2010
Good Employees
How Frequently are Good Employees Promoted or
Given Raises?
It is very important as a business owner and manager to reward the people that help you succeed. Employees that receive promotions, benefits, or even raises for good work will continue to be productive. These employees will also provide an example to the rest of the workforce that management is committed to the success of employees that are committed to the business.
The benefits that good employees receive need not be through promotions or raises. In many circumstances it would be entirely appropriate for management to provide certain perks to employees who have contributed heavily to the success of a project, have show commitment to the company, or improved their performance during a certain time period. Perks that you might consider providing to your employees may be movie tickets, tickets to a show or sporting event, gift certificates, or spa packages.
Depending on your employees it might be beneficial to create in-house competitions for sales, attendance, or other metric that will reward the most successful employee for whatever the competition may be. If your company is organized into teams or different locations it might be possible to use perks and rewards to promote friendly competition between the different groups. This is beneficial so long as the competition remains friendly and the environment is positive. If you are going to use this type of reward for employees it makes good sense to keep a written record of the reward, the tasks to be completed, and the calculations for obtaining the reward. These perk based rewards for good employees are relatively inexpensive while still providing your employees with the recognition and rewards they deserve.
Promoting good employees to more responsibility and more compensation is another great way to reward your top performers. As you hand out promotions make sure to let the other employees know your reasons for promotion the individual and that there are other opportunities for growth within your company. It is important to let all of your employees know what you are looking for when the time comes to promote someone. Promotions and raises shouldn’t necessarily be provided to the employees with the longest tenure. Awkward moments may arise during the promotion of good employees but deep down most employees know whether or not they deserve a raise or promotion. This is especially true if a good employee with less tenure is rewarded over a long-time but possibly less productive worker.
Good communication from the start combined with keeping records of each employees’ successes, failures, rewards, and reprimands will help you in determining who to promote and when. It will also provide you with backup in case an unruly employee disagrees with your decision.
Filed Under Human Resources | Leave a Comment | March 15th, 2010
Bookeepers and Accountants
Do you utilize the services of an accountant
or bookkeeper?
Many small business owners are so involved with the day to day operations of their business that they really don’t have the time or special skills necessary to handle the bookkeeping and accounting for their business. Granted, with today’s technology such as Peachtree Accounting and Quickbooks it is easier than ever for non-accountants and non-financial minded business owners to manage their own day-to-day accounting activities. Even with this software many companies hire an in house employee to perform the bookkeeping and accounting activities for the business.
Hiring someone to work on the bookkeeping for your company is a good idea because it lets the business’ owners and managers focus on growing the customer and product base. Everyone knows that hiring employees is an expensive activity. Bookkeeping and accounting are the first area to consider outsourcing. Many times it is more cost-effective to hire an outside firm that specializes in accounting and bookkeeping than to hire an in-house employee to do the work. The main reason it is cost-effective is that your business doesn’t have to pay payroll taxes, benefits, and vacation time, not to mention the office space, software, and computer equipment costs associated with an in-house accountant. One other thing to consider is most accounting firms are bonded and insured. In the rare event that a mistake happens you are more secure by having a third party do your accounting and bookkeeping than by doing the work in-house.
Filed Under Financial Environment, Human Resources | Leave a Comment | March 13th, 2010
Employee Functions
What are Your Employees’ Functions?
On paper, most managers and executives know and understand what each employee is responsible for accomplishing during a given time period. Employees, on the other hand, may have different views entirely. A good exercise is to have all of your business’ managers specifically write down each employee’s responsibilities. Then have the employees write down what they do on a day to day basis. Next have some of the employees write down other employee’s responsibilities. Having done this look everything over and see how closely each responsibility sheet matches the others. During this exercise it might be beneficial to work with a third party to ensure that the true nature of each position is being expressed and an anonymous assessment may be provided.
The above exercise will also let you know where responsibilities overlap which may in turn lead to finding some efficiency in the organization. For example you might realize that a particular task is being performed more than one time and resources within the company aren’t being fully utilized. You might also find that changing the location of certain stations within the company might make for a more efficient use of time and resources by your employees. It is always helpful to ask employees what can be improved upon because they know their job better than anyone else and more than likely have official or even unofficial ways of handling things that could be shared across the company.
Your employee’s functions are very important to your business, vendors, and customers. Understanding what each employee does on a given day will help business owners and managers improve processes and gain insights and appreciation for the day to day goings on within the company. Cost savings and process improvements may greatly impact relationships with vendors and customers. Employees may also feel more empowered if they are provided an opportunity to explain their functions and ways for possible improvement.
Filed Under Human Resources | Leave a Comment | March 12th, 2010
The Fullfillment Process Part 2
From creating/purchasing the goods/services
that you sell to delivery to your customer
how many steps are involved?
Service Business:
Phase 1: Service development: In a service business the first and most important process in the fulfillment process is to determine exactly the service you will offer and what need or problem your service will satisfy. Other processes involved in this initial phase include developing the service procedures, assessing the qualities necessary to perform the service, and setting a pricing structure for the service that your business offers. There may be several more processes in this phase that need consideration before your product can move on to the next phase.
Phase 2: Sending the service to the market: Once you have determined the need for your service and your service offering sending the service to the market is the next phase. During this phase there are several processes that the business may utilize. From advertising and marketing to cold-calling and website creation and promotion this phase will be a determining factor in the success of the service business. These processes are more than likely the most expensive for service businesses and therefore should be routinely analyzed for effectiveness, efficiency, and expense.
Phase 3: Signing the service contract: This phase is a direct result of the success from phase 2. During this phase the contract needs to be developed and signed and other process pertaining to the sale such as payment methods and options, timeframe for service completion, and other such necessities. It is very important for both sides to understand the contract terms and if similar issues continue to arise it may be necessary to make appropriate changes. The processes in this phase should be as simple and straightforward as possible.
Phase 4: Delivering the service: The purpose of the fulfillment process is to complete this phase. By the end of this phase the customer should be completely satisfied. The primary process included in this phase is delivering the service. The processes involved in this were probably developed in Phase 1 and need to be executed here. Thoroughly following your plans and processes will allow your service to be delivered successfully and efficiently. Periodically, it is a good idea to audit your processes during this phase to ensure that they are working as efficiently and effectively as possible.
Phase 5: Follow-up with the customer: This very important phase will determine how effective your service is and what, if any changes need to be applied to you service, your delivery, or pricing. Don’t be afraid to ask your customers questions about the service you provided to them. They will appreciate the opportunity to provide feedback and your service offering will benefit from the information you receive from your customers. Analyze the information customers provide to you during this feedback phase and pass the information back down the line so that appropriate action may be taken to improve the business and service offering.
Retail Business:
Phase 1: Product purchase decision: There are several processes in this phase for retail businesses. During this phase retailers must determine what market they are going to serve, broad based retailer, niche retailer, etc. Once that determination is made they must decide the process by which they will obtain goods to sell. Options include trade shows, internet searches, and trade magazines, etc. Once one or more channels are selected to purchase goods to resell the business must decide which specific products to buy using whatever means they have decided. Many companies use an ROI formula while other small businesses purchase based on product specifics. During this phase the business determines all processes related to purchasing the goods it is going to sell such as the goods themselves, when they will be ordered, when they will be shipped, the quantity of goods, and the payment method.
Phase 2: Merchandising the product: Once the goods are in the retail location it is up to the business to merchandise the products in a way the customers will purchase them. Again, there are many processes involved in merchandising goods in a retail location. For example, the business may decide to organize the goods by use, by brand, or by some other factor. Not only does this process need to be cost-effective for the company but it also must make sense to the consumer.
Phase 3: Making the Sale: Retailers must make a positive impression on consumers and that impression begins before the consumer enters the store. The processes of making the sale consist of outside the store: advertising, community events, and promotions, and more. Once inside the store: employee contacts, sales promotions, merchandising, and other processes determine the success of the sale. Once a customer decides to make a purchase other processes must be addressed such as the forms of payment the business accepts, the return policy, gift certificates, and on and on. There are truly hundreds of processes that retail stores must look at and analyze during the sales process for efficiency and cost effectiveness. There is also a myriad of options available to retailers for the sales process that will be discussed later.
Phase 4: Delivering the goods: This phase is pretty straightforward, once the sale is completed title of the goods transfers to the customer, however, many businesses drop-ship or make special orders for their customers. In these instances the business needs to develop the process for the shipment, and the associated costs. Other factors to consider during this phase are the packaging of the goods such as plastic bags, shopping bags etc; special coupons that go with the goods, or a rewards type of program (more on this in the promotions chapter).
Phase 5: Follow-up with the customer: Following up with the customer is essential in the retail industry. By making constant contact with your customers you gain valuable insights into their shopping habits, their likes and their dislikes. It is also an opportunity to probe them for information about where they would like to see your business go in the future with new product lines and styles. Easy ways to follow-up with customers include surveys, coupon offers, or rewards programs. It is always a good idea to strive for customer retention rather than new customer acquisition and following up after a sale is one great way to do just that.
Filed Under Purchase and Fulfillment | Leave a Comment | March 11th, 2010
Market Segmentation
How can I segment my target market?
Every business owner should know and understand the principle of a Target Market. Purely defined the target market is a fairly homogeneous group of customers to whom a company or product appeals. This is a great definition for selecting a wide group of potential customers for marketing purposes. Sometimes a product or service can be further broken down into smaller groups for more targeted and effective marketing and promotional strategies. One of the best ways I’ve found to help in segmenting a target market into smaller segmented markets is to use a simple Microsoft Excel spreadsheet. Here’s how…
Let’s say for example we are in the florist business. Now of course our target market will be people or organizations that have a need or desire for fresh flowers. Within this market I have defined three market segments for the florist: Funerals, Weddings, and Special Occasions. As you can see in the spreadsheet below I have included under each segment the reasons a customer may choose a florist for that service.
|
|
Florist Business | |
|
|
Market Segmentation | |
|
Funerals |
Weddings |
Special Event |
| Timely Delivery | Highly Customized | Ease of Ordering |
| Ease of Ordering | Well Researched | Quality of Product |
| Cost | Long-Planning Process | Timeliness of Delivery |
| Quality of Product | Non-Recurring (Hopefully) | Cost |
| Quality of Product | Recurring | |
| Cost |
You can also add color to the similar qualities a customer may look for between the market segments to make it easier to see. In this example, customers of each market segment are looking for a quality product whereas only the weddings are considered highly customized. Now that we have this segmentation chart we can begin to craft a specific message to each individual segment as well as to the market as a whole.
In crafting the marketing message to the whole target market-people needing fresh flowers-it is important to incorporate the items that are listed in each of the market segments multiple times. So in this situation we would want to focus our marketing to the broad market on our product quality and cost and also provide information on the timeliness of delivery and the ease of ordering. This marketing message will help us with the broad market as well as two of our segmented markets, Funerals and Special Events. Plus it will place the business in a top of mind area for weddings and other floral needs.
Now if the business really wanted to target the wedding market segment they could create a separate marketing message in wedding targeted media. This message should incorporate the florist’s ability to customize the wedding flowers to meet the needs of the bride as well as the florist’s ability to aid in the planning process and researching of the flowers for the wedding. This targeted message in a targeted media will allow potential customers to place the already known broad market message in line with the special targeted message to form a positive impression of the florist’s business.
Targeting market segments with both a broad based marketing message and a targeted message is a sure way to increase conversions in specialized market segments. Using the visual tools in Microsoft Excel during a brainstorming session can help a great deal in developing the similarities within market segments-and the differences too. Market segment targeted messages provide more information to potential customers, especially when combined with an effective broad market messaging strategy.
Filed Under Target and Other Markets | 5 Comments | March 11th, 2010
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