Wednesday, May 14, 2008

Raises on the Way!

We will soon experience one of the great things about Team Based Pay. Next month I will be giving out raises. We have met our salon goals and I have a cash flow plan, so I know we can afford to commit to the higher pay rates. The team has worked hard to reach this point and I'm happy to be able to reward them.

Now the good part - we will be rewarding the most deserving team members! Raises will be based on merit, not on sales. Here's what I mean...

On May 1 we raised some of our prices. Our 1-hr massage price went up $5. If we were still a commission salon, that would have meant instant raise to my massage therapists. One of those therapists has been with us about 3 months. When a therapist is just out of school we give them more recovery time between services than our usual time standards. Three months later, she still requires extra long rest time between services. We also have massage enhancements that may be added to any massage. They cost $15 - $20 and are a great way to get average ticket up. She has been trained on all the enhancements, but is still not competent enough with them that we can add them to her service menu. Now, this woman is a great massage therapist and a nice person--but she doesn't deserve a raise. She needs to be performing ALL our services within our time standards.

On the other hand, I have an Esthetician who has been with us one year. We are a men's salon and when we hired her we really didn't have a skincare practice. She's very good, but still runs only about 50% productivity. When she is not scheduled to do a service, she is behind the front desk helping the salon coordinators. She is one of the best we have for getting clients to pre-book. She is always helpful, never idle. This girl deserves a raise - not because her service sales are great - we're still building that business. She deserves a raise because she makes so many great contributions to the success of our salon.

If my esthetician was paid on commission do you think she would be as eager to help out behind the desk? After all, she would only be getting paid for the time she was doing a service. Team Based Pay allows me to reward the most deserving people. I will be rewarding the behaviors I want repeated.


  1. Hi Cindy,

    I'm glad I found your site. My wife is an esthetician and I am a business manager and we are looking to purchase a high end salon and spa as well. I am really interested in the team based pay you have applied to your business. I'm confused about how it works though...only at every $100,000 in sales do you give out bonuses? What is the eligibility criteria? Do they have individual targets as well as team targets? Could you tell us more about it still working for you? What was the greatest obsticles you faced implementing the system? We would like to implement this type of system, but if we are unsure about it, the staff would smell it and turn on us if we don't get it right...Thanks!

  2. You are so right that if you are unsure of a change like this you are doomed to fail. That's why we worked with Strategies consultants to educate us and the team and help us through the switch. On their website you can order Neil's white paper on Team Based Pay that explains it much better than I can.

    In answer to your specific questions - in our Bonus Bucket system, yes, we only paid out bonus when $100,000 in sales was hit. There are other methods you can use - choose the one that makes the most sense to you (there's a blog post on options).

    My team determines the eligibility criteria. They chose - 1)must be in dress code every day 2) cannot have had an unplanned absenses during the bonus period 3) Must be on time daily. As far as PLANNED absenses go, our plan allows bonus to be paid at a reduced rate if someone is out for part of the bonus period.

    Our individual targets are not used for bonus purposes but come into play when we give raises out. We earn raises together as a team, but they are allocated out based on individual merit. Individual goals/targets are thinks like prebook rate, new and repeat client retention, retail, etc.

    We have been on TBP since October 2007 and I am still a big fan. When the economy tanked we suffered less because we could control our cost more (we cut back our hours for sale by about 15% to more closely match demand - after 2 months of this we were back to normal scheduling). In commission salons stylists were fighting over clients because it was the only way they would get paid. My people knew they would be paid (although maybe for 4 hours less per week) and they maintained the high level of service our clients expect.

    My technicians make more than they did before, but payroll cost as a % of sales is less than it was before.

    I have no divas. Everyone has to pull their weight or they will not get a raise.

    More stability for technicians. Since January 2009 we have had 8 babies!!!! My technicians take maternity leave knowing their regular clients are in good hands. we pay maternity leave because since the clients are still coming in we can afford to pay the technician. When she returns, she gets her regular rate of pay just like before - she doesn't take a step back in compensation like she would on commission because some clients choose to stick with another stylist.

    Greatest obstacles -
    1) fear of change - yours and theirs
    2) divas already in the business that don't want to have an even playing field
    3) mentality in the industry that these are MY clients, not OUR clients and that the technician OWNS the client
    4)lack of trust - if they don't trust you as a leader they will think you are just trying to rip them off. When we switched, they weren't so sure if they should trust me. They do trust me now. (the nay-sayers left a long time ago).
    5) The process NEVER ENDS. You are always educating, coaching, reinforcing, reminding.