Pat Conroy’s book, “My Losing Season” chronicles his senior year at college when he played point guard for the Citadel. He tells the story of a team with talent but no ability to create the team cohesion required for them to produce a winning season. The similarity between this team and many cabinet dealers is striking.
I think of business as a game. If I play the game well, my business prospers. If I play the game poorly, the business fails. Since I think of business that way, I see teamwork as a critical aspect of achieving success and it surprises me how few cabinet dealers focus on getting the whole company involved in winning the game.
My four brothers and I use to play basketball. My oldest brother could kill any of us playing one-on-one. To make the game fair, we use to have two or three of the younger brothers play against him. When the younger brothers played as a team, we could beat him just about every time. However, there were times when my second oldest brother would try to prove he was as good as my oldest brother. He stopped passing the ball and would take a majority of the shots. We usually lost when that happened.
When I was running a cabinet dealership, I saw the competition as being like my oldest brother. It is bigger, stronger, and quicker than me. So when I tried to figure out how to compete, I remembered the lesson I learned from my second oldest brother. I would lose if I made it all about me and I had to get the whole company involved to win against a bigger, stronger, and quicker competitor.
Know the techniques
I have asked hundreds of cabinet dealers about how they get their teams involved and four techniques seem to be common among those dealers who are getting the best results. The techniques are:
- Sales incentives
- Departmental and company bonuses based on profit
- Posting results publicly
- Team celebrations
Most cabinet dealers are using the first technique. Paying commissions is common in our industry. However, there are many different ways people pay commissions. The most effective way I have seen is to pay a variable percentage of the gross profit margin of the job, the commission % being higher if the gross profit margin is higher. This technique aligns interests. The larger the amount of gross margin produced, the more the salespeople and company make. Accurate cost tracking is the real trick here.
Many cabinet dealers struggle with paying on gross profit margin because they do not have an accurate way to capture their gross profit margin by job. To do so requires them to have an accurate measure of all the costs by job. Their lack of systems allows costs to slip through the cracks, not getting allocated to the correct job. So when a salesperson forgets to include the agreed upon hardware when he prices the job, and then rush orders it after the customer complains, that cost never gets tied back to the correct job. A centralized purchasing function will help you solve this challenge.
The second strategy is departmental and company bonuses based on profit. Sales incentives gets salespeople motivated to drive more gross margin to the business, now use profit sharing bonuses to get the rest of the team motivated to drive down costs and productivity up.
The challenge to making this technique effective is making sure you tie incentives to both department level and company performance. For instance, an average warehouse mistake costs you $250 to fix. So a good warehouse incentive is based upon the number of deliveries a month (productivity) that are correct and damage free (cost related).
Purchasing staff can receive incentives based upon the number of PO’s placed (productivity) with no errors (cost). Service people can be paid an incentive based upon the number of jobs completed (productivity) in one trip (cost). Small improvements can result in big changes in profits when you realize the average service trip costs a cabinet dealer $200 (when you DON’T have to replace damaged or incorrect product).
When cabinet dealers are setting up these incentive programs they often worry that the incentives will encourage one department to improve their performance by creating more trouble for another. I have a simple solution. Make 50% of the total bonus paid based upon department performance and the other 50% dependent on meeting company goals. Employees quickly learn they make the most money by improving departmental performance while meeting company goals.
Performance visibility is a key in this whole process. The department and company performance should be posted in a public area for all employees to see. You will be amazed at how focused on improvement your staff becomes when everyone can see how well or poorly each respective department is doing.
The information serves as feedback which becomes the driver of team work. Each individual is clear on their role within the organization, has a clear idea of how each department and the company is progressing on their goals. This gives all staff members the information they need to make improvements on how they do their job and how they can help other departments improve on their performance. This data helps eliminate “turf wars” and encourages cooperation between departments.
Knowing isn’t all
But knowing all this information is not enough. Team cohesion is built during times of celebration. Structuring celebration events is the fourth team building technique. Most people go to work every day to get a pay check. When employees are just showing up for a pay check, they usually spend their time trying to figure out how little work they can do and still get a pay check. Recognition, appreciation, and camaraderie are the catalysts that turn these sloths into valued contributors.
Team celebrations should be both small and large. A great opportunity for recognition is during monthly business reviews. Awarding a traveling trophy to the best performing department is a great first step. Bigger awards, such as a free day off, can be awarded for a significant quarterly achievement. A company outing at an amusement park is a great award for achieving an aggressive annual profit goal. Big and small, these celebrations create memories that connect employees with one another and helps reinforce the concept that business success results in good times for the employees.
If you like these concepts but are skeptical if they really pay off, I encourage you to read Jack Stack’s bestselling book, “The Great Game of Business”. Jack Stack is the CEO of SRC Holdings. In 1983 he bought a failing division of International Harvester and applied the principles I shared with you in this article. His success is impressive. An investment of $10,000 in SCR Holdings then, is worth $5.5 Million dollars today. I think that is a really good payoff!