The grand compensation experiment at our first store.

[haarvik]

Actually, I met some people at the AC expo who run theirs very similar. They have 5 stores now and are expected to top $12mil this year. With the right people and right management it can work, they are proof.

 

[NicksPizza]

This sort of plan I find interesting and something I’d like to hear more about as implementation goes into effect. There will need to be a paradigm shift with the employees you are hiring and the management philosophy. I will look forward to hearing how many people you find willing to take the plunge on this somewhat risky proposition . . . I got to trust those other folks a WHOLE lot to play in that world, and there aren’t so many strangers I would trust to put all the tips in the jar and not cheat me . . . then the taxes.

BTW, I will NEVER open my financial records to the staff as a whole as it will make the information public and on the streets. I hope NEVER is strong enough. there is a boundary I believe I need to maintain with the employees who are not owners in the business. When the first new employee heres we had a 30% increase in sales and dumps that on the street without explaining what the whole picture is . . . . or that we got fined by the State Revenue department for paying sales tax late this month, or whatever. I have nothing to hide . . . but I also have nothing I want to post on the wall at City Hall, either.

 

[j_r0kk]

dewar,

I think you’ve got an excellent idea… for a perfect world. A great many people thought Karl Marx had great ideas as well (which this somewhat reminds me of). How you run your store is your own business and if it works… awesome. I think what the guys in here are trying to tell you is that this isn’t the perfect world and there are a great many holes in your theory because it’s based on every employee having the same values as you, which we all know is next to impossible.

I do understand where you’re coming from though, because you are going to have a problem and you need a solid game plan. The reason I say you’re going to have a problem is because you stated you were going into an area with an average household income of $100k/year. Chances are, these residents aren’t in need of a second job delivering pizzas, so staffing is going to be tough to say the least (unless you hire a bunch of young ones… and we all know how bad that works out). With that being said, a formula for employee retention is imperative. Also, like you said, you plan on paying your employees premium wages once they’re cross trained. Although you plan for your store to be efficient, you should also plan for your store to run a higher than average labor % based on these higher wages. <~~ Just another thing to watch out for. Don’t forget to calculate the payroll taxes when you’re going over your mock P&L’s. They add up fast. Hope this helps.

-J_r0kk

 

[Wizzle_Wassell]

NicksPizza:

BTW, I will NEVER open my financial records to the staff as a whole as it will make the information public and on the streets. I hope NEVER is strong enough. there is a boundary I believe I need to maintain with the employees who are not owners in the business. When the first new employee heres we had a 30% increase in sales and dumps that on the street without explaining what the whole picture is . . . . or that we got fined by the State Revenue department for paying sales tax late this month, or whatever. I have nothing to hide . . . but I also have nothing I want to post on the wall at City Hall, either.

I had a very interesting conversation with one of my assistant managers last night just after closing. He works in my second store (been open for around 10 months) and is just about breaking even. Whilst this is what I expected financially he made a small remark about how much we were making which really got me thinking. we spent around 30 minutes talking about the costs of the business. He genuinely thought we were making a fortune - he’s worked for em for nearly 2 years and whilst we talked about finances in general I’ve never sat down and listed - these are the costs (in general) of being in business. You know he was looking at weekly sales less labour and food cost and immediately coming up with - whats left is profit.

Now he’s no stupid in any way but the penny just never dropped of what exactly it entailed to be in business. Now if he’s got that impression you can guess that pretty much everyone else in the business thinks that we’re making a fortune.

Whilst I will not open up my books for anyone - I certainly do think its a pretty good lesson for me - that I need to sit down with my junior managers and go through the costs to the business and the bigger picture financial stuff - next time they are faced with some wise guy driver/crew saying how the owner makes they can at least put it in perspective?

 

[Piper]

Well, add me to the developing list of people who think this isn’t such a hot idea. But you know what they say: “The person that says it can’t be done is usually interrupted by somebody doing it.”

That said, I think the concept of everybody knowing what everybody else makes it pretty strange. At our store, we tell employees that if they get caught talking about how much they make they’ll be fired. We have employees with seniority that make less than newer guys. Why? They may be better employees, or have better availability, or are willing to work more hours per week. You’ll NEVER get employees to understand that. Most of them expect wages to be tied to how long they’ve been there, not merit.

I had a manager once that was with us for about 2 years. I invited him to my house for a little party with some of me and my wife’s friends. We’re certainly not rich, but we have dual incomes and no kids yet… we have a fairly nice house. It wasn’t a week later that he started complaining about how much money he made. He figured that if I had the money to build a nice house, I should certainly be paying him more. He’d say stuff like “I need some work on my car, but can’t afford it on what YOU pay me.” It got to the point that I would have to hear something about his wage (or lack thereof) every single day. I eventually told him it was time to part ways. I think he had some communistic ideas… like it wasn’t fair for me to be making more than him. Of course he didn’t put up the 200k to open the place, but good luck getting an employee to understand risk/return. That the number one reason I would advice AGAINST financial transparency. What you make is nobody else’s business.

And if my hourly employees knew what my GM makes now, they’d probably cr*p themselves… and then they’d all think they should get a raise. You may decide to try this thing out, but I would really advise against letting your employees know what you or the managers make.

 

[Charles]

Registered Guest:

So if I clock out early and reduce labor, I will get paid more? (bonus)

You would get paid more per hour, but not overall. In other words, you would not make more had you stayed the full shift, but your hourly average would be higher.

This is a rough example only:
So instead of $10.00 an hour for 5 hours = $50
You would get $11.00 for 4 hours = $44
You got a dollar raise for the hours you worked, you worked one less hour, and the business saves $6.

I have never had a problem finding part-time people who wanted to get off early. The problem is getting people to keep up the pace after the rush in order to clean up and clock out. I want there to be some incentive for them to do so. And the incentive is team-based, so that as a group they encourage each other to get the work done and clock out. All those extra 15 minutes of slacking add up quickly. Either a manager must ride herd or the employees must be motivated.

I always prefer self-managed employees and have been successful in the past in developing the needed culture for it.

 

[Charles]

thepassionofthecrust:

That was the next one I was going to adress.

I actually had a boss (my first pizza boss) say to me…

“Umm Mat why don’t ya clock out and come straight back to the line, you know we are still busy but as a manager you need to be watching that labor”

Not gona happen.

Not to mention that is illegal.

 

[Charles]

haarvik:

Actually, I met some people at the AC expo who run theirs very similar. They have 5 stores now and are expected to top $12mil this year. With the right people and right management it can work, they are proof.

This is not as radical a plan as people are making it out to be. There are many companies that run more efficiently because the employees’ interests are aligned with the business’ strategy.

 

[Charles]

NicksPizza:

This sort of plan I find interesting and something I’d like to hear more about as implementation goes into effect. There will need to be a paradigm shift with the employees you are hiring and the management philosophy.

It would be difficult to change an existing culture, but we are starting from scratch. In addition, we have the core group of initial employees that buy into the paradigm to start the culture. Instead of trying to change minds, new employees who join us will strive to “fit in” or will leave if the culture does not fit there own values.

NicksPizza:

I will look forward to hearing how many people you find willing to take the plunge on this somewhat risky proposition . . . I got to trust those other folks a WHOLE lot to play in that world, and there aren’t so many strangers I would trust to put all the tips in the jar and not cheat me . . . then the taxes.

I am not sure I understand about the taxes.

I trust but verify. I do not watch like a hawk or assume you will cheat me. But I do audit. If I catch you stealing even a dollar, though, you are gone. You can’t be “mostly honest”. You either are or you are not.

If the person who delivers the order pockets the tip, that means they are willing to steal from their friends to get $2-3. That person is gone.

NicksPizza:

BTW, I will NEVER open my financial records to the staff as a whole as it will make the information public and on the streets. I hope NEVER is strong enough. there is a boundary I believe I need to maintain with the employees who are not owners in the business. When the first new employee heres we had a 30% increase in sales and dumps that on the street without explaining what the whole picture is . . . . or that we got fined by the State Revenue department for paying sales tax late this month, or whatever. I have nothing to hide . . . but I also have nothing I want to post on the wall at City Hall, either.

I don’t mean that they all have direct access to the books. Most would have no interest. But I will post and they will understand the basic financial metrics of our success and those aspects that they can control and receive bonuses.

I did not want to mention this for fear of really freaking out some folks, but I plan to offer free business education to my employees. I am teach management and strategy at the local university. Some of the initial employees are former star students of mine and are interested in learning the practical aspects of business. These are my future managers, partners, and for you cynical folks, competitors. My motivations for this business are on many levels other than just making a living.

 

[Charles]

Wizzle Wassell:

I had a very interesting conversation with one of my assistant managers last night just after closing. He works in my second store (been open for around 10 months) and is just about breaking even. Whilst this is what I expected financially he made a small remark about how much we were making which really got me thinking. we spent around 30 minutes talking about the costs of the business. He genuinely thought we were making a fortune - he’s worked for em for nearly 2 years and whilst we talked about finances in general I’ve never sat down and listed - these are the costs (in general) of being in business. You know he was looking at weekly sales less labour and food cost and immediately coming up with - whats left is profit.

I think financial transparency would alleviate this. My employees will all go through an orientation so that they understand how our business works and to make sure they buy into the concept. Part of that will be to explain simply how business works and where the money goes.

For instance, employees rarely realize their actual hourly cost to the business. They only see half the FICA, none of the workers comp, etc. Our checks will also include those items in the memo under “Other payments made on your behalf” along with the true hourly pay they received. Hey, I am libertarian enough to want them to know how much the government is taxing them without their knowledge.

 

[Charles]

Piper:

But you know what they say: “The person that says it can’t be done is usually interrupted by somebody doing it.”

I like that. If I wanted to just have a successful little business and not try anything new, I would franchise something. I have the financial means to implement some of the successful practices of other companies and test my own managerial thoughts with this business. Who knows how long I will live. Might as well give it a shot. GO LONG!

Piper:

And if my hourly employees knew what my GM makes now, they’d probably cr*p themselves… and then they’d all think they should get a raise. You may decide to try this thing out, but I would really advise against letting your employees know what you or the managers make.

See, I want employees to question what they are getting paid. I want them to understand why and what they can do to be paid more. I think you risk more resentment by folks wondering what others are making or finding out and being surprised. It also eliminates perceived favoritism. And forget seniority pay. I don’t care how long you have been there. Just how good you are. They should go hand-in-hand, but if you cannot learn and grow, you will not be paid more just for breathing the air longer than others. If they wonder why the GM is paid so much, I will be happy to explain.

 

[PizzaDiva]

dewar:

Financial Transparency:
We believe in open books. Every employee will know and understand the finances of the business, including what every employee, manager, and owner is earning. They will feel that they are fairly and equitably compensated. They will understand that this business and their jobs will only last as long as we work together. [/list]

Many may consider this unrealistic. But we will give it a real try and can modify it if it does not produce the talented, long-term employees we are looking for.

Any comments? (Be gentle)

Confidentiality is what comes to mind when dealing with employees. Be careful with this one. While I appreciate the approach you are taking, I would be cautious of bringing big business policies and procedures into small business - under 10 million. Even big business does not post or share wages.

Good Luck.

 

[ResortPizza]

bodegahwy:

I have to pay drivers $6 an hour plus tips to get people. Tips here are good. Our driver average about $15 an hour and up to $25 an hour when we are slammed. That is driving my car and burning my gas. If they drive their own car they get mileage on top of that.

Otis is right, all markets are different.

Wow, my drivers get a flat rate of $2.50 per delivery/stop and thats it, they supply there own car and gas. They do make amazing tips though, on average they get about 12$ per delivery and get about 15 deliveries per night in the busy ski season, I am fortunate I guess.

 

[Napoli_Pizza]

Couple of notes, as I run a similar system…

Note #1: Not all employees understand that information you disclose to them, is not to be disclosed to customers…

My pizza maker was tossing a dough in our open kitchen, with a customer standing 3 feet away. He dropped the dough, so he tossed it into the trash. Customer said “wow, what a waste, that sucks”. Pizza maker says, “aw, no problem, its only 35 cents!” Is the customer thinking, “wow, i pay $18 for a large deluxe pizza that only costs 35 cents?”

Same pizza maker at his table, talking to a customer who’s watching him. She says, “Man you guys are busy tonight!” Pizza maker says “Yeah, we broke $2000 for the first time last night!”

Note #2: I’ve got myself into a situation where I have shifts that my $9.00 assistant manager is the driver, where I could be using someone at $6.50. But now he’s counting on the tip $, so I don’t want to move him.

 

[Registered_Guest]

dewar:

Registered Guest:

So if I clock out early and reduce labor, I will get paid more? (bonus)

You would get paid more per hour, but not overall. In other words, you would not make more had you stayed the full shift, but your hourly average would be higher.

This is a rough example only:
So instead of $10.00 an hour for 5 hours = $50
You would get $11.00 for 4 hours = $44
You got a dollar raise for the hours you worked, you worked one less hour, and the business saves $6.

I have never had a problem finding part-time people who wanted to get off early. The problem is getting people to keep up the pace after the rush in order to clean up and clock out. I want there to be some incentive for them to do so. And the incentive is team-based, so that as a group they encourage each other to get the work done and clock out. All those extra 15 minutes of slacking add up quickly. Either a manager must ride herd or the employees must be motivated.

I always prefer self-managed employees and have been successful in the past in developing the needed culture for it.

So, if I work longer I’ll get more money?

Sorry, I’m trying to figure out how I make more money at your shop. Why would I want to clock out early if I’m going to lose money - even if I make more money per hour for the hours I did work?

 

[bodegahwy]

Napoli, my assistant managers sometimes take a driving shift too. When they do, they are paid as a driver. They make $12 per hour as assistant manager and $6 as driver. It might be tough to move backwards, but we have always done it that way. The pay rate is for the job not the person.

 

[Wizzle_Wassell]

My that’s really harsh - Do you pay them less if they do the washing up, mop the floor or answer the phone?? I’m no employment expert but you employ and pay (i.e. have contracts) with individual people and not a series of roles for which people fit into. Unless your contract stipulates the different levels of pay from outset and clearly defines when they are doing each task I don’t think you can vary pay to that extent.

If as an assistant manager I was asked to go out on the road to ‘help out’ when it was busy, but btw you’ll get paid less, - let me think… perhaps not.

With regards to the bigger question of letting everyone know each others pay - yep theres definitely a privacy thing there unless they sign to say they are happy for it to be disclosed.

In addition you can bet that as soon as one person gets a rise everyone else will want one. Regardless of the reasons why YOU think they are better all the other guys will no doubt feel they are equally deserving of a rise (who ever feels they aren’t as good as they guy the stand next to in a shop??) - so all you do is demotivate the non-risers. Once you’ve bigged up the first guy with how good he is and then give the others a rise you can bet he’ll be back in with ‘if I’m so good how comes they are all paid the same’ then you end up in a vicious circle!!

 

[Registered_Guest]

Wizzle Wassell:

My that’s really harsh - Do you pay them less if they do the washing up, mop the floor or answer the phone?? I’m no employment expert but you employ and pay (i.e. have contracts) with individual people and not a series of roles for which people fit into. Unless your contract stipulates the different levels of pay from outset and clearly defines when they are doing each task I don’t think you can vary pay to that extent.

If as an assistant manager I was asked to go out on the road to ‘help out’ when it was busy, but btw you’ll get paid less, - let me think… perhaps not.

Did you really read what he said? He said if a manager chooses to take a driving shift he gets paid as a driver. He didn’t say if a manager takes deliveries while working as a manager. He is talking about a manager who wants extra hours/money and wants to drive. Why in the world would be want (or be required to) pay the “driver” managers wages?

I have a manager that drives one shift a week. He get paid just like any other driver when he is driving.

 

[Wizzle_Wassell]

Sorry mis-read it; yes agreed if he comes in purely to do a driver shift then yes pay as a driver.

 

[NicksPizza]

[Psych MS background]

This is a very interesting concept. I am also interested to hear how you are accounting for and balancing “outside” influences on the system. A self-managed culture generally requires a self-actualized culture of some level. Any group dynamic has various stages of development that are always shifting, and require different interventions of leadership and management.

“norming-forming-storming-transforming”

Storming is the phase in which I am most interested in your game-plan. A very normal and natural stage of functioning includes a period where there is resistance to open rebellion against the structure of the group. There will be manipulation, power struggles, and even borderline criminal behaviors (see adolescents). The first time your group gets to this stage will be a profound paradigm crisis . . . meaning the leadership will have to adjust the system to manage the stage, or collapse. Unsophisticated and/or untrained leaders (regardless of business acumen) have the increased potential of imploding instead of moving them to “transforming”.

Then there is the application of Maslow’s Hierarchy of Needs as applies here . . . . the guy whose family utility bill is overdue is more likely to pocket tips. BTW, what controls are built into your plan to identify tip skimmers? That part gnaws at me as I cannot come up with them for my own world, let alone this new one you are building your innovation could help us here.

[/Psych MS background]

I see potential success for your experiment, if your leaders are strong enough to overcome the entirety of the outside influences of people’s loves. Vince Lombardi was a man of phenomenal character and will, and was able to create and drive a completely new and different culture. It can be done . . . and has been done in many discrete examples. The financial compensation part is not as rife with examples, but I am sure there are both success and failure stories to be had. Strong and very clear written advancement standards do make a difference in satisfaction stability of employees.

Innovation is provided by people who do things differently than they have ever been done before.