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Increasing Compensation

C

Crusher

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2015 was a crazy year for me. Sales are the highest i’ve ever had, lost 3 key employees (They moved on to careers in their college degrees) I knew they would be leaving this year, and I was very nervous how things would go without them. They’ve been with me for over 6 years and I counted on them for alot. Then in July my wife and I were in a motorcycle accident. She had minor injuries and mine were more severe. I shattered both wrists and needed 3 surgeries, 3 metal plates and 22 screws. I was in the hospital for 8 days and left with a cast on one wrist and the other in an external fixator (Metal frame through skin into bone). It was a month before I stepped back into my restaurant. Employees came together and figured out how to make things work without me. Some former employees came back to help. One employee had worked one shift before my accident and while I was gone she was trained by the other staff to be an assistant manager without me.

So to my point of the post… I learned the value of properly trained staff and having the processes and procedures in place for them to run the store without me.

I’ve always started employees just above minimum wage, most of my employees are high school students when they 1st start with me and usually stay until college or after college depending on where they go. I don’t have a structured raise plan, I just based it off how much I felt the person knew and if I wanted to keep them from moving on to somewhere else. I watched a Ted X talk by Nick Sarillo 0f Nick’s Pizza & Pub, and loved his take on training and compensation. ( Check it out if you haven’t
)

I’m currently working on store two and realize I need a structured training program and want to pay my staff more without having my payroll increase too much. I think if everyone is better trained we can cut back on the amount of payroll hours. I would also like to attract older employees that might stick around longer.

How would you suggest switching to a performance based pay and increasing wages while trying to keep the labor % around the same? I would want things like use of scales, use of checklists and number of mistakes?
 
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Hmm,
I’ve been helping a friend try to get a solid crew together, and to get them to take ownership and pride in their work (supper-club setting with pizza) I suggested that he set a goal for food-cost ratios to be met, and disperse bonuses that way. But his problems were him seeing food costs at 65% and higher due to major waste and I believe he has a theft issue happening too.

the things that immediately pop into me head are punctuality, and food-cost goals.
 
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Thanks for posting this thread Im also curious, no absolutly need to know more about systems and procedures. Our sales have doubled this year 14k now. Its great money wise but my quality of life is going down the tubes. Sorry to hear about your accident, the silver lining is now you have focus on the aspect you yhought you were going to have an issue with (your key guys moving on)
 
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For our cooks we pay an hourly wage. I keep in touch with other employers around town and try to understand what people are paying. In general, in our market pizza cooks make a few dollars an hour less than line cooks at full menu places… so for example pizza cooks around town are mostly $9 - $11 per hour and fully capable line cooks at better full menu places are $13-$16 with rock stars making up to maybe $18. We pay our cooks $10-$12. We occasionally lose them to other jobs that pay better but not to other pizza jobs.

Where we change things up is with our managers. They make $12 per hour plus a bonus on every paycheck. For assistant managers bonus range from $1.00 to $5.00 per hour for the pay period with $2.00 being most common. For the GM bonuses range from $4.00 to $10.00 per hour. Bonuses are based on a combination of our weekly sales and performance in the areas managers are responsible for: cleaning, service levels, quality, food cost, labor, cash handling. When we are in our slow season and if things are running smoothly with goals hit the bonuses might be $2.oo and $5.00. In our high season (but not the biggest weeks) if all is going well they might be $3.00 and $7.00. If things are not smooth or if costs are out of line or the cash is not coming out right bonuses might be less.

Earlier this year I found a measurement that I have really come to like. It is revenue per hour worked. I take gross sales and divide it by the number of hours worked by all employees. Using several years of history to determine reasonable goals based on our best performances in the past I set revenue/hours goals for several brackets of sales. Since the manager and assistant managers have such an impact on labor due to scheduling and sending people home when we are slow $1.00 per hour of the bonus is based on hitting the goal for the bracket the period falls in.
 
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bodegahwy said:
For our cooks we pay an hourly wage. I keep in touch with other employers around town and try to understand what people are paying. In general, in our market pizza cooks make a few dollars an hour less than line cooks at full menu places… so for example pizza cooks around town are mostly $9 - $11 per hour and fully capable line cooks at better full menu places are $13-$16 with rock stars making up to maybe $18. We pay our cooks $10-$12. We occasionally lose them to other jobs that pay better but not to other pizza jobs.

Where we change things up is with our managers. They make $12 per hour plus a bonus on every paycheck. For assistant managers bonus range from $1.00 to $5.00 per hour for the pay period with $2.00 being most common. For the GM bonuses range from $4.00 to $10.00 per hour. Bonuses are based on a combination of our weekly sales and performance in the areas managers are responsible for: cleaning, service levels, quality, food cost, labor, cash handling. When we are in our slow season and if things are running smoothly with goals hit the bonuses might be $2.oo and $5.00. In our high season (but not the biggest weeks) if all is going well they might be $3.00 and $7.00. If things are not smooth or if costs are out of line or the cash is not coming out right bonuses might be less.

Earlier this year I found a measurement that I have really come to like. It is revenue per hour worked. I take gross sales and divide it by the number of hours worked by all employees. Using several years of history to determine reasonable goals based on our best performances in the past I set revenue/hours goals for several brackets of sales. Since the manager and assistant managers have such an impact on labor due to scheduling and sending people home when we are slow $1.00 per hour of the bonus is based on hitting the goal for the bracket the period falls in.
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By doing something like this does it add a considerable amount of time to your payroll to determine the bonus’?
Also, gross sales - before any discounts? Or before taxes?
 
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Money talks… You could try paying them an hourly wage, and then a percentage of the profits as bonus… Go by profits as it will help with both labor and food costs… Granted you may want to adjust here and there on a person by person basis so that the slackers don’t get as much of a bonus as the ones that bust their butts…
 
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bodegahwy said:
Earlier this year I found a measurement that I have really come to like. It is revenue per hour worked. I take gross sales and divide it by the number of hours worked by all employees. Using several years of history to determine reasonable goals based on our best performances in the past I set revenue/hours goals for several brackets of sales. Since the manager and assistant managers have such an impact on labor due to scheduling and sending people home when we are slow $1.00 per hour of the bonus is based on hitting the goal for the bracket the period falls in.
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Do you mind sharing your range of goals to be met based on revenue per labor hour? I have my closing manager email me this every night with the paperwork. I don’t offer a bonus based on it but I talk to the shift managers when it is out of line with sales and delivery times.
 
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In a resort market like ours we have huge swings in revenue and I need flexibility. There are times of the year that I am thrilled with 40% labor. (This week right now is our biggest of the year and it will be 6X the sales of our slowest week of the year). In a market with less swing one might not need as many brackets as I used.

An incentive that can not be hit when you are slow has ZERO effect on the manager once they realize they can’t win… for that reason a flat % labor cost goal is not useful for incentive purposes. I want my managers ESPECIALLY focused on labor cost when we are dead so I set things up so that they can get bonused even when we are dead and labor is high as long as they are getting to what I think are good numbers for that sales bracket.

Setting up the brackets took me a couple of hours. I took four years history by pay periods and made a table of them with sales in one column and labor HOURS for that same period of time in the next column. This was easy to do with our POS. By using hours rather than cost I also washed out changes in compensation over the years. The Third column was calculated as sales/hours. With four years history that gave me about 100 data points relating sales to labor hours. By sorting them small to large by sales it was pretty easy to divide them into five brackets with similar numbers of data points as ranges using round numbers in about the right places to use as the break points for the brackets.

Inside each bracket of about 20 data points there was a clear range of sales/hours ratios. In our history we have done better and worse over the years with different managers etc. Also, it is easier to hit the goals when we are near the top of the bracket. The goals I set were numbers we had hit at least once or twice in the past for sales in that bracket because I wanted all the managers bought in that the goals are reasonable and can be achieved. (Again, an incentive that is perceived as impossible to hit is useless) simply put, as long as we are doing as well as we have ever done for that volume they get paid. Let’s say that the sales/hours data points for a sales bracket were something like $34, 34, 35, 36, 36, 37, 37, 37, 37, 38, 38, 38, 38, 38, 39, 39, 40, 40, 41. By picking $40 as the goal I can show the managers that the number is reasonable. Therefor it has incentive value…

It is also easy for the manager to check were they are at any point in the pay period simply by taking sales for the date range and then running a payroll report for the same date range (about 4 mouse clicks) and grabbing the total hours to divide sales by. That tells the manager where he is in respect to the goal right then. It takes about 1 minute.

Working from my memory (I am not in the store) here is what the brackets look like. When looking at these remember that I pay a GM to run things day to day which makes our payroll hours greater than they would be in a store where the owner works but does not clock in.

In our lowest weeks I want to see at least $24 per labor hour. Yes, we are losing money. Fact of life in a ski resort in May.
When we are slow we are doing OK if we beat $28 revenue per labor hour. Still not lucrative.
At our average weekly volume I want to see better than $34 per labor hour. Profitable but not great.
At high volume I want to see $40 per labor hour. Starts to cash flow very nicely.
At super high volume I want to see $46 per labor hour. Printing money.

Last week we hit $47 per labor hour. This week it should be even higher.

I have found it much easier to get my managers to focus on how many HOURS are being scheduled/worked than the dollars. For example, if the goal on 10K sales is $34 and the team only hits $33 I can show them that that means they missed by about 9 hours total which over a pay period is less than an hour a day… get those guys off the clock when it is slow! Cut down to 4 crew by 8:30. Maybe write that third cook in an hour later each day just before the rush?
 
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I should add that we only pay bonus on based on regular hours. Getting time and half is bonus enough on the overtime.
 
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Crusher said:
want to pay my staff more without having my payroll increase too much. I think if everyone is better trained we can cut back on the amount of payroll hours.
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I agree with this completely. We all know that three rockstars on the line are better and faster than five clowns. If your clowns make $10 per hour that would argue that the rockstars are worth almost $17 if they can do the same work. In general I would rather pay more and get better people. Cheaper in the long run in every way starting with mistakes!
 
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