Ep. 20: Compensation – The ONLY Way to World-Class (6 of 6)
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Speaker 1:the with nine twenty two cross calculations over twenty seven years on a monthly basis, and then systematizing the operational success patterns of the ninetieth percentile. Our intent is to get beyond the brag and the boast and simply share insights from our experience without manipulation or coercion to sell anything except helpful ideas. These messages range from intimate recordings from the Awakened Forest to concerts, national conferences, and broadcasts.
Speaker 2:Welcome back to another installment of compensation. This deep dive into this profound, revolutionary, and the key to your organizational success, this has to be addressed. Right? And, again, realize that most all of your frustrations, heartaches, issues, problems with your respective organizations or enterprises can be solved by addressing the compensation system because it's a world of motivation. Right?
Speaker 2:Okay. Today I'd like to just go through a number of points or recommendations, may I should say, when you're creating your compensation system methodologies. Number one: Bring your people as close to revenue as possible. You want people to be sensitized to the ups and downs of sales, of revenue, of patient volume. Right?
Speaker 2:And because when people are not close to revenue, well, the business can be sucking and where you're staffed up for a certain level of production and everyone's sitting around because there's nothing to do. This is kind of wasteful, right? And in fact, if that goes on for extended periods of time or prolonged periods, people get used to it. And then the sales team brings in all kinds of new business and they're all bitching that they're overworked. This is so not healthy.
Speaker 2:And we see this in factory situations, we see it in hospitals, we see it in long term care facilities, restaurants. You can see it all over the place. But when you make the structural move, and it is structural because compensation is structural, to bring people close to revenue or as close to revenue as possible, suddenly they are sensitized and they know, Oh, business is not so good. And if their paycheck is being diminished because the revenue is not there to pay them, guess what? They get motivated.
Speaker 2:They get inspired. Maybe I can do something to help with sales. Maybe I can dream up some ways of becoming more efficient or different ways we could go about this. But you want everybody linked like owners in the business. That is the healthy business where everybody does their job, walks around and treats the place like they own it.
Speaker 2:And therefore they become much more sensitive, much more meticulous and considerate, and really looking out for the welfare of the overall enterprise and not just themselves. Point two. Get rid of annual bonuses. You want your comp systems to be as frequent as possible, and not of course practical. You don't want to be running payroll every day.
Speaker 2:That would be rather inefficient. But I know this, if you're doing your bonuses on a quarterly basis or semi annual or annual, forget about it. You need to create this cause and effect relationship where people get their paycheck, they look at it. Okay. This has worked out.
Speaker 2:Oh. This didn't work out. Think I'll stop doing that. Because your compensation system is an extension of your people development or your training system, and you want them to learn from every paycheck. And so the closer or the frequency you can have your pay cycles, the stronger the connection between this cause and effect relationship is created.
Speaker 2:Because you want people to be able to easily be able to link their actions, that is this cause and effect relationship, with their paycheck. And that's very strong working. In fact, if you're doing annual bonuses, and I'm not saying there aren't some places where sometimes that's great, or maybe it can be added on to this type of system, but if you're doing this routinely and people are always having to wait on a quarterly, semi annually, or even on an annual basis, you might as well not even do it. People are not learning anything because they can't think back and go, oh, well, back in January, I think I did this, or in March I did this, and maybe that. It's just not clear because it's not immediate.
Speaker 2:Point three, the timeliness of compensation. This is the third point. And it has to be timely. If your marketing reps are going out there and they're just crushing it because they got a kid that needs braces, or they want to get the new car, or they've got a medical situation that they owe upon, Well shame on the controller, or the administrator, or whoever's running payroll who delays that compensation. I remember one time this marketer came in and again she had just knocked it out of the park because she needed it.
Speaker 2:And she was crying to me. And I remember I went up to the controller and I said, Kent, what in the heck are you doing? You have a person that went out there, beat the bush, street on the feet, made it happen, and you have the gall, the low consciousness, not to issue her check. And, of course, he goes, oh, well, we were busy. So what?
Speaker 2:I don't care if you have to work through the night. Pay her today. So timeliness is important because if people are not paid when they expect to be paid, the organization will be held with contempt. Now I'll say it that brutally. If you delay compensation from the expected frequency, you will be held with contempt.
Speaker 2:Contempt. Okay. Let's keep it light. Point four, objectivity is needed when you're creating your compensation methodologies. Because, again, if you have personal contact or a relationship with someone, again, you're gonna get squishy, you're gonna soften accountability, you're not gonna do it, you're gonna be reluctant to do it, I should say.
Speaker 2:And that's unhealthy for the organization. So objectivity is needed. And, again, this is one of the greatest things for contracting with MBI that we can design a system that will monitor your operations from an objective standpoint. We will sensitize your systems. We will put our special pieces of software on that will extract all of the critical information that we need to compare it with our standards, what we want to achieve to make it easy to administer payroll.
Speaker 2:Again, it's one of the greatest features of MultiView. And we've done it for all these different business sectors. And of course we're experts at doing pretty much all flavors of healthcare. Point five. What about accounting errors or adjustments?
Speaker 2:Well, when people are being paid based on their results and they all lead back to your accounting system, you need it to be accurate. And so therefore there is pressure on the CFO and the controller and the senior accountant to get the numbers right, to get it out on time because you can't delay this information if it's being used for payroll. You've gotta get it right because if it's not accurate, there's gonna be a huge bitch factor. People are not going to be happy. And so you wanna minimize, of course, your errors.
Speaker 2:But invariably errors will happen because we are human beings. So in that case, you just have to put them in when they are discovered. And you want to do it with this sense of fair play and equity where no one's too damaged in it. But hopefully they're not that big. So with this kind of performance compensation system, the accounting just gets much tighter.
Speaker 2:That is, the quality of the accounting goes up. Point number six. What percentage of the savings splits, what should they be? Since the model, this proportional method of operating an organization on a day to day, month to month basis rather than the traditional budget. Okay.
Speaker 2:If you beat these percentages, your piece of the pie, if you beat your number, what should the split be? And I'll say this, it'll vary sometimes by size. Sometimes fifty fifty is what really feels good. But sometimes that's too rich. I mean, they're driving not only a Jaguar, a Mercedes, but they're also added a Rolls Royce to their car collection.
Speaker 2:That might be excessive pay. So maybe you might want to go away from 50% going to the manager to 30% going to the manager. Again, the 50% going to the manager, 50% remaining with the organization. Or in this case, 30% going to the manager and the other 70 going to the organization. Of course, the organization has all kinds of other taxes to take out, so don't think that they're getting the whole wad just to make it easy.
Speaker 2:But what are these splits going to be? But you ultimately have to come up with percentage splits that motivate. And if they aren't impressive, then you're really messing yourself up. And you wanna get those as right as you can by modeling it out before you implement the system. Because if you have to start adjusting people's pay all the time, well, that unsettles folks, especially when you have to go up.
Speaker 2:Nobody complains when you have to lower a standard. But when you have to ratchet it back up, that can cause some indigestion. Point number seven. What about taxes on the company and the employee portions? And I just alluded to that in point six, is that though the company is getting 50% or 70%, you know, or 80%, whatever the splits are going to be, realize that the company's not getting all of that.
Speaker 2:They've got all the taxes, all the payroll taxes that are associated with this. This could be federal, state, even local taxes in some places. So just realize that really the company is not getting quite that percentage. Point number eight. Create acid tests when you need evidence of inefficiency or ROI.
Speaker 2:Again, we're talking about here designing your methodologies and determining the different rates. Sometimes things can get very fuzzy, and of course we like simple elegant systems, not complicated. We don't want systems where people are having to read the fine lines, right, of the contract and say, yeah, we can't pay that bonus because it was done on a Thursday and it was cloudy and therefore bonus revoked. No. You can't have it like this.
Speaker 2:But you need these acid tests. And sometimes, for example, like volunteer costs. In hospice work, it's the only flavor of healthcare where hospices are mandated to have at least 5% of the workforce or the work being done, the direct care being done by the community. And I think that more segments or flavors of healthcare need to do this, to get the community really involved in the enterprise. But if I, for example, am paying in a traditional salary situation, let's say the volunteer coordinator is getting $40,000 a year.
Speaker 2:I'm just making up a number. And so the ACID test would probably be simply taking the number of volunteer hours as our unit of production and taking the cost of what we're paying the volunteer coordinators now, that is the salaries, plus their benefits, which is normally around 22 or 23%. And just dividing that production hours, the number of volunteer hours produced by what you're currently paying. And sometimes you'll be mortified of how much it costs for this quote free labor. It's not free.
Speaker 2:There's a cost with everything in life. So then you can go, how can we do this different? And, of course, we like to give the modest base. We need to have the standards component where you have the good attitude and you're doing everything really to the financial standards of the organization as well as quality. But then how much could we afford to pay for every volunteer hour?
Speaker 2:So if it comes out to 14 or $15 when you do this acid test, this simple division, well, what about giving the volunteer coordinator 2 or $3 for each unit of volunteer production? That is every volunteer hour. Or maybe $5 in different settings. I mean, can have it classified based on the value or the needs of the organization. But that's just a simple example of an acid test that helps you cut right through to how much can we afford.
Speaker 2:And in my view, I want volunteer coordinators to be among the highest paid positions, at least in a hospice organization. I want them at the executive level. Why? Because they have to have some of the highest leadership capabilities in an organization because they have to organize and direct and train thousands of people. So they have to be able to cast the exciting, compelling vision.
Speaker 2:They need to organize the workforce. They need to make sure that this quote unpaid workforce is motivated, and they are doing the quality and fire volunteers when they don't do their job. But the point is all volunteers are being paid. It's just not monetarily. They're being paid in karma dollars, in feeling good, in spiritual merit.
Speaker 2:But everyone is doing things for a purpose, for a payoff. And you will find that you can take this acid test whether it's a machine operator or a computer worker or someone that's processing payroll. Again, you can get down that unit basis and then divide the number of units or transactions processed by this individual, and then divide the amount that you're paying them now in salary or hourly plus benefits, and there's your acid test. Point number nine, create systems without COLA increases. And, of course, COLA is cost of living increases.
Speaker 2:In fact, you wanna make your system so rich that people don't even ask for cost of living adjustments. And that is our experience in putting these. In fact, some organizations I went to one award winning one that we had helped and learned a lot about compensation systems. And I remember I was sitting in the meeting and one of the managers poked me in the ribs and said, hey, Andrew, I haven't had a raise in ten years and I'm making more than I ever have. And then the other lady manager next to me, she did the same thing and smiled and the thumbs up.
Speaker 2:And this place retains its managers for decades, decades, whereas the median is only eighteen months in that field. Now that says something about making this rich system where people are making so much, you don't have to constantly say, well, cost of living is up 3% because of inflation this year, and we need to add that. That's all disruptive. We have it already baked into the system. Point number 10.
Speaker 2:If you have a mileage component in your business, as we do in home care, as we have to travel to patients and families, go ahead and change the mileage rate at that time. Normally we don't favor using the federal number, whatever it is, whether it's 53¢ or whatever it is now. Normally we will have a slight base and we will call up AAA or trucking companies or whatever, but we want it to flex as much as we can with current gas prices, with whatever insurance costs are happening. But we want to make all the costs we can as variable as we can. So again, it moves up and down with the variations of revenue or patient volume or sales.
Speaker 2:Point number 11. Establish principles behind raises and promotions. Now with this, I'm probably going to refer you to our podcast, what are you willing to throw your life away on? I'll say that one more time. The podcast, what are you willing to throw your life away on?
Speaker 2:This is where we explore really many profound philosophical topics because after doing all this hospice work, it can't help but shape you in a certain way, and it gets in your blood. It gets in your DNA. And you can't help but become a bit more profound, a little more introspective about the meaning of life. And in this podcast, what are you willing to throw your life away on? We take a deep dive.
Speaker 2:And one of the episodes has to do with the principles behind raises and promotions or really how to promote yourself in this world, because we all do it, right, if we're accountable for our lives. But you want your workforce to be clear about this. This will save you immense frustration, agony, misery. And I'll go through just a couple of them here, that to get a pay increase, you must be doing more than you're already being paid. Why would I pay you more just for doing the same job?
Speaker 2:And a lot of people, it seems so simple, but boy, it just goes right over their head. That longevity is not a good reason for pay increases. You're looking for increased ROI, increased value. And just because someone's been with you for twenty seven years, but they're just sitting in their office, well, they're siphoning off resources that could be better deployed. Another thing is sometimes employees have this idea that there's this unlimited pot of money when the owners know there's only so much to go around and half the time they're sweating it out, just making the next payroll.
Speaker 2:And yet these people troop into the office demanding more money. The point is is that asking for more money is an economic request. And the ultimate determinant of the reply comes down to the realities of the economics of the organization. You can't give what you don't have. And everything an employee is doing should be increasing again, the return on investment, the return on that asset, the added value.
Speaker 2:And so the workforce has to understand this. Also, working hard or spending a lot of time at something doesn't constitute pay increases because people can be working hard but not accomplishing very much. Maybe they're going about it in a very non efficient way. And so just because someone's working hard or spending a lot of time at the office doesn't really mean they're producing value. I think one of the things here is to try to mature the workforce, where the employee may want a pay increase, but they come into your office and the first thing they do is they inquire about the overall state of the business.
Speaker 2:How are we doing? I would like to do better. Let's see what we can work out. Let's explore our options. And if they come in knowing that you can easily increase their pay if they are able to increase profitability, that is their efficiency.
Speaker 2:If they're able to make a system or add to the sales or the growth aspect, that if they can make it easy for the manager to link this additional compensation with a result or performance, the more likely they are to get that increase. And with this said, if I was coming into someone's office, I would offer risk reversal. I would say, listen, I would like to do better. Here's how I think we could do it. We could do it this way, this way, this way.
Speaker 2:You don't have to even give me an increase right now. Let's go ahead and go down this road, go into this endeavor, and then let's do a proof of concept. And if it works, then I would like 25% of the savings or whatever compensation amount seems to be right. Another point that I think is important is to not do annual raises. Period.
Speaker 2:Again, you want your system to be so rich. Again, we already discussed COLA, but annual raises is kind of the same thing where every year there's this expectation that we have to jack things up. And sometimes you can't do that with your products and services. It has to do with demand, scarcity, your manufacturing limitations. Sometimes you can only so much.
Speaker 2:And I think it's a bad mindset for the workforce. And so you want to do your best to dispel that before they come into the office. I think you also dissipate that not all people are paid the same. Some people contribute more, just like there are no two people alike. Right?
Speaker 2:We're all born in various states, different backgrounds, but heck, there's no two particles of dust that are alike. There's no two blades of grass that are alike. And thus there's no two humans alike. Why would we pay everybody the same? The best and healthiest way to pay people is based on the value that they contribute.
Speaker 2:And of course if people want to make more, the easiest way is just learn how to sell. Salesmen, top salespeople are always in short supply. Those people that can go out, bring in the business. And I've seen some people come in with such big accounts, we call them whales, and and they almost sink the boat. But that's the easiest way to get a raise.
Speaker 2:And so I would always make that an option for anybody because almost anybody can improve their ability to sell. Because we're all selling all the time in so many activities of life. Why not cultivate this high value skill? The skill of selling. Whether you're selling a product, but as a manager, or even as an employee, you're selling ideas of how things can be done.
Speaker 2:By virtue of this person coming in to ask for a raise, they are selling you something, are they not? Best to become good at it. Okay. And now we're getting down to the last few points. The twelfth point is in creating your methodologies of your comp system is cross training.
Speaker 2:And you want to have cross training for virtually all of your key positions and functions. That is you need at least two people that can do the job, and we've talked about that. And that can be built into your standards bucket, and it can be tracked by HR that there's at least two people. And we use a particular system, we call it the ten two system, where ten months of the year a person will work their normal position, but then two non consecutive months, they will work in another area. And this does all kinds of things, at least four things for an organization.
Speaker 2:First of all, you have redundancy of function. So if that person's out, the business continues. Next, you destroy the fraud triangle. Once we put it into an organization, once we had discovered and developed it and found out that one of our people had embezzled a half a million dollars. And, of course, it's always the person that would never do it, the church goer, the holy person that would never even think of embezzlement.
Speaker 2:But yet, it identified that immediately. It also serves the creation of a school paradigm because we want to be known as a learning, a teaching organization, one that's rocketing towards enlightenment and goodness, elevating consciousness. So it expands human capability and people normally feel good with this feeling of progress because they're learning a new skill. And the fourth point is that it actually helps with your six Sigma standardization, that all your key processes need to be recorded in writing. That is they have to be documented so somebody can come back and there's a sequential list of how to do the job.
Speaker 2:So there's four payoffs for getting serious about cross trading, but building an end to your compensation methodologies. Point 13. Sometimes you're gonna give people options to stay with their current pay. So you may be changing most of the workforce, but I never let one position, or department even, hold us back. If we can do it for 10 departments, or eight departments, and five we can't get to right now, we value speed, then that's what we do because that's just more expedient.
Speaker 2:And so if you have a payroll clerk that's really nervous about this, but she does a great job, and she would be satisfied with this almost pittance of what she could be making, even when you present to her in the nicest way. I just like to be paid the way I'm being paid now. Well, go ahead and honor that. Go with that. So never let a particular position or department, if you can't figure out how to do those compensation methodologies effectively, just go around them.
Speaker 2:Nothing wrong with that. Point number 14. Use an economy of pay or activity codes. So as you work on your computer systems, your operational tracking systems and all that, your documentation systems, use as few codes as possible. Because the more codes that you add to your system, your screw up factor goes up exponentially.
Speaker 2:Because people go, Well, I think this was really this, but then it could be this. And your data kinda goes to hell, right? Because one of the six Sigma or MBI things is you want to eliminate discretion at the operating level wherever possible. Yes, we've got a code for meetings. In a healthcare context, we have an admission routine visit, we have a death visit if you're in hospice.
Speaker 2:But you have as few codes as possible, rather than, Oh, yes, this is the extended care visit, and it needs this, and this is the bad day visit, and this is whatever. And you'll find all kinds of folks that will just overthink, overcomplicate things, and that is just such a human tendency, because I think people just have a lot of insecurities, and they wanna make sure that all of their bases are covered. Again, is another value of MultiView in that we can kinda shoot right to where you need to go. We can introduce an elegant, simple system because, again, complicated is going to break. And people tend to overthink things, overcomplicate, and wonder why they get a diminished result.
Speaker 2:Point number 15. We want to create a simple system to track time, hours. In most organizations it's a good idea to do, but if you're treating people as a professional, sometimes we don't track hours or the time put in. We track what? Result.
Speaker 2:You're paying people for result. So a lot of times, we'll design systems where we will pay you for forty hour week, normal week, whatever that is. Even if you get it done in thirty hours or thirty two hours, as long as it's done to the standards of the organization, that the quality is there, that nothing is outside of standard, everything is done perfectly. Well, what's wrong with that? So pain for a result.
Speaker 2:And this makes a simpler system. Whereas a lot of people will get very anal retentive. Again, I'm a CPA. By the way, is anal retentive hyphenated? Accountants are notorious for getting anal retentive and again overcomplicating systems.
Speaker 2:You want the system to be easy to administer. That way you can just run a few reports, automate it to a large extent, and there it is. Because even when you introduce a human individual to have to review something, or add exceptions, Exceptions will break your system. And every time you do that, you introduce another element to the screw up factor. Right?
Speaker 2:So you want simple systems, and you want to keep or minimize the humor intervention or review as much as possible. Point 16. We talk about standards. Well, you wanna have as few standards as possible. Why?
Speaker 2:Fewer standards is just easier. We're at five for most organizations. I remember it used to be 24 and then we got a little more conscious or elevated our consciousness and it went to 16. But the point is the higher quality organization you have, the fewer standards you have. Why?
Speaker 2:Because people can't focus as well on 24 standards as they can with five standards. And it's almost that simple. Again, in our world, perfect phone interactions, perfect dress, because this is all done in the sequence that the consumer would experience us and we want to foster customer delight. So perfect phone interactions, perfect dress, dressed to the standards, perfect visits with perfect documentation, time to meet, ass in the seat, everything is done on time. And standard five, report all service failures or gifts, as we call them, to the CEO because we want the CEO to be tortured by every transgression, every violation of our vows and our vows and promises, because the CO is in the position to make the structural changes to the comp system or the systems in general to alleviate or avert the frustration or problem.
Speaker 2:And, okay, two more points. 17, be careful not to overpay. When you overpay people in any position, you damage them because they don't get a good sense of their worth. All compensation should be earned. This is where the highest delight and happiness come from.
Speaker 2:And we've talked about this in prior episodes, that if you give people unearned money, people are not happy. I mean, you look at people that win the lottery and the suicide rates are incredible because they don't know from where this comes from. They they don't know how it was achieved. And thus they go through it, they make all kinds of stupid moves and decisions. But when you give people unearned money, it's just not healthy in any way.
Speaker 2:You want people to get a good sense of their capabilities, of their worth on the market, because people are being paid with market units, I. E. Money. Correct? And you want them to have that deep contentment, that deep satisfaction of a job well done and that I earned this.
Speaker 2:That's how you can actually enjoy your leisure, your time off. And the last point is this, in creating your compensation methodologies. And it's really just kind of a general list, and I'll call it the clarifying point, that all systems must be based on the realities of human behavior, how this planet operates. Anything that's not aligned with nature or with reality is going to fail. Point two, that your compensation system is going to evolve over time.
Speaker 2:It's an evolving system. Just as nature that I'm sitting in right now, this natural world evolves, we have to adapt with it. Therefore, if we have unrealistic beliefs or wishful thinking of how we wish to make a utopia, well, the utopia is a mirage. It's a sweet dream that has no basis in the actual world. And the last point is that the natural world, that is nature, penalizes organisms when they fail to go out and be productive.
Speaker 2:That is to do their job. Again, baby birds do not get fed unless mama bird goes out and gets the worm. And thus, the employee, we go out, we earn money, we bring it back to the home for all our needs and wants of the family unit. And this is the way it is. And if an organism, that is an organization in this sense doesn't do that, that organism that organization will die.
Speaker 2:And in a human organization, since we are a creature made of protoplasm, we have no internal source of energy. Therefore, our lives itself have to come from the lives of others of plants, of other animals, and we have to eat. And so what is the best we can do since we're faced with this dilemma? Well, the best we can do is have reverence. Have reverence for the plant, the animal that gave its being in this time, in this form to you, and respect it.
Speaker 2:And do it as artfully and creatively as you can. And in our respective businesses, we have to honor our consumers, hold them in reverence, serve them with delight. And the one thing, if you know anything about Andrew, I am a customer service zealot. All my employees know that I will fire everyone and do the whole enterprise myself, need be, if things are not done to this ultra, ultra high standard. Because we have to have standards.
Speaker 2:And I don't know quite where this comes from. Maybe I was wounded as a child or whatever, but I just know that I look at life, I look at business as a ministry. And after my second child died in a sudden tragic accident, I dedicated myself to three things. Two, intelligence, the exploration of how to intelligently live, and then to healthfulness, because healthfulness to others is the path of success and to great satisfaction. And then the third point is goodness, which is almost indescribable, but you know it when you receive it.
Speaker 2:And all I know is that when people are served and you're buying your Coke or your water or whatever at the convenience store and you recognize that you have a trained person that knows how to make positive eye contact, that treats you with respect and an element of warmth. And when you realize that this didn't just happen, it's not just a random act of kindness. Well, that's impactful. And it creates what? Repeat business because people want a predictable experience.
Speaker 2:And so, yes, we want a predictable, delightful experience and that can be achieved every day no matter what product or service we're doing. And that's of high consciousness and high ideals. And to me, as we talk about compensation and wrap up at least this series, why not aspire to the highest ideals that we can conceive? Turn our businesses into schools, into ministries of goodness, of helpfulness, working intelligently. And I perceive that perhaps that is the highest compensation of all, the empowerment of the individual and really impacting people's experience of life.
Speaker 1:We hope you are having the best day of your life. If you need something further, just visit one of the Multiview Incorporated websites or contact us through social media. Smoke signals, carrier pigeons, telepathy have not proven reliable. All calls are answered within three rings by a competent real person. Thank you for listening.
