Get The Most Out Of Your Employee Christmas Bonus

If I had a dollar for every bad business incentive or bonus plan that I have seen, or have helped to unwind, I would have, well, a nice bonus for myself for Christmas.  Incentives, including year end bonuses are not designed, or taken, as gifts.  Some business owners may argue this point, but I have yet to experience the employee who receives a Christmas bonus one year, and is not disappointed or even angry if that bonus is not the same or greater the next year.  After the first gesture you make, a year end bonus becomes an expected part of the employee's pay. 

As I write this blog, it seems to be the good start of a cynical and negative message at a time when everyone is gearing up for a month of holiday festivities.  It is exactly the opposite.  A well thought out and properly structured employee bonus plan can actually become the most important component of a business looking to find a way to consistently reward their employees, while benefitting or enhancing the good of the company itself.  When done properly, this can have amazing and even transformational effects on a small business.  The first question you have to ask is this.  Does the bonus structure you have in place, or are thinking about implementing benefit the employees and the company equally? 

Year end bonuses are problematic.  Nobody gets out of bed on July 15th prepared to do a better job at work because they know that they will be getting a Christmas bonus.  The cycle and timing of the bonus needs to be short enough and frequent enough to be on the minds of your employees throughout the year.  The Legacy Alpha bonus structure tracks monthly performance that ties to quarterly results and annual goals.  The actual bonus dollars are then paid in quarterly increments, with the largest amount reserved for the last payout of the year... The typical holiday or Christmas bonus.  With that structure, your employees may very well get out of bed on July 15th with a mindset of doing a better job for the company.  It is the same on July 20th, September 15th and any other date you pick during the course of the year.  That is the mark of a properly functioning employee incentive plan.

The biggest mistake made when determining employee bonuses is what to base the bonus dollars on.  An ill-conceived bonus structure may end up paying bonuses on something other than profit dollars and will either add to the struggles of the business or will be abandoned.  Abandoning a bonus structure because it was poorly thought out is an investment in bad employee attitudes, and can be a very negative proposition for a small business.  The Legacy Alpha employee incentive plan has three safety nets built in to ensure that the business will never pay bonus dollars on anything other than profit dollars, and that employees will know when and why their bonuses are small or non-existent. 

An often overlooked benefit to a properly structured employee incentive payout is the tax advantage gained by the owners of the small company.  In a good year, the dollars paid in bonuses can represent upwards of a 50% tax savings.  In other words, you get a 50% discount on the dollars paid to your employees compared to paying the taxes on those same dollars that were not bonused out. 

For a complete review of your employee bonus structure or plan, contact us today.  There is still time this year to take advantage, and reap the benefits of a properly structured plan.  Going forward, a properly structured plan could be the best Christmas present a small business owner can get.

The Lifecycle of Business

Pasquale Marinelli, owner of the Marinelli Bell Factory in Angone, Italy isn’t just the third, fourth or fifth generation to run his family’s business.  Marinelli Pontificia Fonderia di Campana is a company that has been in operation since 1040 A.D.  There is also evidence that bells produced in the year 1,000 were made by the Marinelli family before the business was formed.   Think about that for a minute.  Many businesses can’t survive a spat between a husband and wife, employee issues or a downturn in the economy.  Marinelli Bells have been designed, manufactured, packed and shipped to customers for a thousand years.  Even if each generation controlled the business for twenty five years, that is at least forty different configurations of ownership, management and business models that the company has had to endure to survive. 

Although Marinelli Bell has seemingly achieved business immortality, most businesses go through a normal birth to death lifecycle.  The conception phase of the business lifecycle can be the most exciting.  There is no failure in a business that exists only in the mind of the entrepreneur.  An idea for a business usually comes from some point of reference or experience of the hopeful future business owner.  Very often, businesses are started by restless or disgruntled employees who simply feel that they can do a better job of producing a product, providing a service or managing people than their current boss.  The born entrepreneur is a rare breed.  Once in a while there is the example of the kid who started mowing lawns at the age of 13 and twenty years later owns a successful landscaping company.  No matter the reason or situation that spawned the business idea, the concept or conception phase always has to take place before the wheels of action toward making the business become a reality can start turning.  The mind is the safest place for a business to exist.  There are no liability issues, regulatory controls, employee problems or taxes to pay on a business that is merely a thought.  The challenge for entrepreneurs starts the minute they relate the business idea to someone else… anyone else.  Similar to the response new couples get when they announce that they are trying to get pregnant, the future business owner experiences supporters, doubters and a whole lot of unsolicited suggestions as to how to start the business, what to call the business and how to run the business.  Going from business concept to grand opening happens in a similar time frame as the conception of a baby to its actual birth- nine months.  The reason this length of time makes sense is simple.  The business idea has to be processed and turned into a formal plan.  It needs financing, a location from which to operate, staff, inventory, etc.  Those things all take time.  If the idea continuously runs into brick walls, it fades and goes away after nine months and the business never happens.  

The birth of a business is also an exciting time just like the birth of a baby, and it marks the beginning of the realities of business ownership, both positive and negative.  Even the greatest business ideas had to be fed, changed and nurtured through their early months and years in order to become viable and self-sustaining.  Long days and sleepless nights often become the pattern of new business owners.  The danger of getting stuck in this phase of business development is real.  There is an unspoken question that will be asked of a new business owner in the first two years of operation.  Are you going to direct, control and change the business or is the business going to direct, change and control you?  Understanding the start-up phase and the requirements of a new business allows the new owner to have a specific plan and timeline for getting the business to the next level, which is self-sufficiency.

 

Once self-sufficiency has been achieved, the business is usually in the adolescent stage where it can function for the most part on its own, but can still not be left alone for extended periods of time.  This is followed by the rebellious teen years where the business has reached a level of success that affords the owners a decent lifestyle and excess profits.  The rebellion comes from employees who may feel like the owner is getting rich off of their hard work and dedication at an unfair rate.  This is a time when businesses run the risk of having employees leave to become direct competitors.  Like a teenager, they know how to do things better than the business owner and they want to test that theory.  Following the teen years comes adulthood where the business operates for a period of time with relatively few problems.  The final stage is the retirement of the founder/owner and the transition of the business to the next generation or the next owner.

 

Businesses that fail generally happen in the early stages before the business ever really gets off the ground and creates a culture.  The second most dangerous time is when the founder/owner wants to retire, but has not fully transitioned power to the next generation of owners.  This is why statistically less than 25% of businesses survive the second generation.  Each life stage of a business has unique characteristics that can be managed and leveraged to help the business achieve everlasting performance.  But, each stage also has pitfalls that can be the beginning of the end for the business.  What stage is your business in?

 

 

 

 

Why Any Business Can Benefit From A Comprehensive Analysis?

The human brain signals us to feel thirsty when our body is dehydrated.  It is a mechanism that keeps us from becoming dangerously dehydrated and experiencing serious health problems.  Business owners typically do not ask for outside help unless their business is in trouble or in transition.  Like feeling thirsty, when problems get to a point where they are noticed by employees or owners, they may have progressed to where they have damaged other parts of the business.  Sometimes in a way that is unrecoverable.  This is common in businesses where the owners "semi-retire" and still have ownership, but have taken their eyes off of the day to day operations of the business.

A comprehensive analysis of the business's current situation reveals things that have been negatively effecting the business for a long period of time, as well as things that will likely have negative effects in the future.  The current condition of the business becomes very clear and understandable once all of the facts are on the table.  Trying to solve problems or develop solutions for a business without having a comprehensive understanding of the condition of the business is like a doctor who is not all that interested in your history or your future, but prescribes medication, surgery or rehab to "fix your problems".  If your doctor does not have an interest in learning those things about you, or if you do not trust your doctor enough to be totally honest, you can expect a less than successful result. 

Some people simply do not want an honest assessment of their business, while others are rightfully skeptical as to what an "outsider" can tell them that they do not already know.  If someone avoids conversations about their own mortality, does that mean that they will live forever?  If you never go to the doctor or have regular physicals, does this mean that you must not be sick?  The other side of this equation is the business owner who listens to everyone and takes all of their advice.  I have two rules.  1.) If you are listening to everyone, then you are not really listening to anyone.  2.) If you have people that you trust, and they are able to be open and honest with you, then keep them.  The fact of the matter is that many business owner become an island, where they really have no one in their life who they either trust to be fully honest or who really understands their situation. 

Our comprehensive business analysis is specifically designed to gather vital information about the business in order for our Business Specialists to truly be an objective third party.  Although it works every time we take a business through the process, it is not for everyone.   I often get comments from business owners like "why didn't I meet you ten years ago?" or "I wish I would have done this sooner".  The reality is that the comprehensive business analysis is very powerful, but not every business owner is prepared to hear what we have to say once the analysis is complete.  Again, businesses in trouble or transition become our typical clients.  Those businesses are forced to do something different.

The Legacy Alpha program has three distinctly different services, analysis, planning and education.  We don't require long term commitments, retainers or contracts.  Instead, you don't write us a check until you can honestly say that you got the benefit that you were expecting from our services.  We are that confident in what we do and the impact of our process on your business. 

Be a Student of Your Own Performance

For fifteen years I coached high school wrestling while working as a Senior Business Analyst for three different management consulting firms, analyzing more than 700 small businesses in that time.  The combination of working with moldable, eager and energetic high school kids and then analyzing adult performance in the workplace was an incredible learning experience.  Last night I went to a high school football game.  By the end of the night it was 38 degrees with winds gusting up to 25 miles per hour.  Just two weeks ago, we were sitting at a football game in shorts and fighting off the mosquitos.  That is Minnesota. The football game featured two teams with identical 1-4 records.  As the line-ups were announced, my wife noticed that the opposing team had virtually all juniors and seniors playing, while our hometown team had a great deal of sophomores starting.  As the night went on, and the elements became more of a factor, you could see the urgency and immediacy of the game coming through in the team made up of juniors and seniors.  Psychologically sophomores tend to believe that there is a lot of time left in their career and this is just one game.  Seniors hear the clock ticking and feel the need to make the most of the opportunity that is in front of them.  The game was a virtual tie until the end of the third quarter, with each team having scored two touchdowns at that point.  The opposing team, the one with mostly juniors and seniors, pulled away at the end as our hometown team faded.  Coincidence?

The dynamic of urgency is one that is incorporated into every aspect of the Legacy Alpha program, including our unique employee incentive programs.  Becoming a student of your own performance is half of the battle.  Having the ability to be honest with yourself as to what you learn when you take a discerning look at your business is the other half.  Having a 27 year perspective on the sports teams of our hometown, I have noticed that there is always talk of the class or the group that is coming up.  "Look how good we are going to be" is the mantra.  Those teams never seem to achieve the success when they get their shot, but there is always a class coming behind them that will be "the class".  Lesson: if you can't perform with the team you have, it is unlikely that you will achieve success with the team you wish you had, or may have in the future.

In business, it very easy to wish for the past or look to the future, but the bottom line of today will be enhanced by leveraging the tools and people you have to work with today.  Are you energizing every member of your team to do the best job possible today?  If they are failing, is it their failure or the failure of management? Being a student of your business's performance starts by establishing benchmarks or a series of "should be's".  Performance is relative and very specific to your situation.  If you want the most out of your employees, they need to know what is expected of them, where they are in relation to those expectations and what's in it for them when they exceed those expectations.  Notice I did not say "if they exceed those expectations".  They always do when expected to and incented properly.  When you put an ordinary employee into a structured, goal oriented environment, you will get extraordinary employees.  If you are waiting for that "better employee" to come along, chances are they will never arrive.  If you treat your current employees like they are the ones you have always waited for, chances are they won't disappoint you. 

Formal Education vs Traditional Education

We never stop learning.  From the taste of new foods to seeing new places that we have never seen before, our brains are wired to separate new stimulus from old.  That is the essence of learning.  Education is the act of learning that comes in many forms, most of which we don't even recognize as being education.  Most commonly education is viewed in the traditional sense, which utilizes the classroom setting to structure lessons that are designed to develop a thought process to help us understand concepts and solve problems.  The act of structuring information in a way that results in a higher level of knowledge that can be used in a specific way is considered formal education.  Formal education is a part of traditional education, but traditional education is not the only place formal education can occur.  In business, learning takes place every day and is a key component to long term success.  We hear terms like "you have to know your customer", and "you need to understand the marketplace".  These are examples of things that are learned by every successful business owner over the course of time.

In one of the most basic learned equations, two plus two equals four, the traditional and formal education process is to assign a value to numbers and add them together.  If not for traditional education, would a child not eventually figure out this equation?  If the child is sent to pick apples for herself and her brother, she would figure out that one apple per person becomes two apples.  If asked to also bring apples back for mom and dad, the child would naturally determine that two more people will require the addition of two more apples.  She has just solved two plus two equals four in a practical way without the benefit of the classroom.  The classroom was not necessarily needed in that situation, but the formal part of the education process was the request to pick apples for two people, then add two more apples for two more people.  Had the child not been presented with this situation or this request, the realization that two plus two equals four may have been delayed to a later point in her life. 

I use this childishly simplistic example for a reason.  Every problem that needs to be solved and every question that needs to be answered in a business setting begins with a simple math equation.  Every business exists to produce a positive benefit for its owner.  Every activity that occurs within the business, by definition, needs to be controlled to result in that benefit or enhance it.  The science of the business is the most straightforward and definable part.  The art of the business is what you do with the mathematic and financial certainties of the business to leverage them for their greatest benefit. 

In a restaurant setting, not knowing your plate costs in a very specific way can result in decisions that may take the business in a negative direction.  If your plate cost (the actual direct cost of each and every dish that you serve) is greater than what you are charging the dining customer, then eventually you will sell yourself out of business.  If you have a gut instinct, but no real math to back it up, you may make the decision to raise your price to a level that is much higher than necessary.  In that scenario, you run the risk of losing your customers because your food is too expensive.  If you assume that your price is just fine, you may advertise and run specials on that dish, which costs you more, which means that the business loses even more money due to your "solution" to the problem.  The art comes into play when the restaurant owner comes up with different portion sizes, plate configurations or pricing models to solve the problem.  Those solutions present themselves only after a clear understanding of the financial metrics of the problem are known. 

Traditional business education presents theoretic examples of situations that occur in business, leaving the learner to adapt those examples to real word situations once they graduate and leave the classroom.  Often times, the teachers in that model only know theoretical problems and solutions because they have never operated in an actual business setting where they have had to make those solutions work.  All education is more meaningful when it relates to actual problems in actual situations.  The Legacy Alpha program creates a formal education setting within each business by defining and structuring the important and necessary business information in a simplistic, but very specific way.  This puts the business owner and key employees in the best position possible to learn what needs to happen to make the business successful.  There is no business problem that is too complex or outside of the control limits of the Legacy Alpha program.  The program has been successful when used with owners who have a Master's in Business Administration (MBA) degree just as it has been successful with owners who have an eighth grade traditional education.  Each business that we work with becomes the classroom, we provide you with the tools to get an MBA in YOUR business.

The Birth of a Business

The birth of a business is an exciting time, just like the birth of a baby.  It marks the beginning of the realities of business ownership, both positive and negative.  Even the greatest business ideas had to be fed, changed and nurtured through their early months and years in order to become viable and self-sustaining.  Long days and sleepless nights often become the pattern of new business owners.  The danger of getting stuck in this phase of business development is real.  There is an unspoken question that will be asked of a new business owner in the first two years of operation.  Are you going to direct, control and change the business or is the business going to direct, change and control you?  Understanding the start-up phase and the requirements of a new business allows the new owner to have a specific plan and timeline for getting the business to the next level, which is self-sufficiency.

 

Self-sufficiency rarely just happens for a business, it is planned, designed and managed.  There are several things that can get in the way of business development and keep it from reaching this level, many of which have to do directly with the owner or entrepreneur.  Ego is the most glaring.  If a business owner truly does not believe that anyone else can do what he/she can do, or is doing then the business will be limited in its ability to grow and reach self-sufficiency.  The fact of the matter is that the skillset required to grow a business is very different than the skillset needed to technically run a business.  The two rarely exist within the same person at a high level.  Self analysis, or self measurement tools, like the ones offered by the Kolbe Corp., can give the new entrepreneur insight into strengths and weaknesses that they may not have identified for themselves.  The key is having the ability to be honest with yourself about your strengths, and more importantly your weaknesses, and hiring to compliment and/or augment those abilities.