THINKING BUSINESS
a blog by Chris Barrow

Bonuses (and an 80-year old Christmas story revisited)



On bonuses - I’ve spoken about this many times over the years and have shared that I’ve never really seen ONE system that works - rather a variety of schemes that people have tried.

There are four questions that always require an answer:

  1. Why are we considering a bonus in the first place?

  2. What are we going to measure?

  3. How much are we going to pay?

  4. Who will get what?

Question 1 - are you trying to buy loyalty or genuinely express your thanks for all the effort that has been put in?

I hope it’s the latter - because, to quote Sarah Buxton “you earn loyalty you don’t buy it” - and the same goes for effort - sticks and carrots rarely work - leadership is about creating environments in which people want to give their best.

Question 2 - if the bonus is target driven (rather than a discretionary "thank you") you can measure whatever you like - sales, profit, number of plan patients, Invisalign cases, implants placed, number of reviews - decide on something and keep it simple.

Question 3 - decide in advance on a pot of money - an amount available in the bonus pool - so that you can budget for that in your cash flow forecast (so plan for this, preferably a year in advance).

Question 4 - pay all PAYE team members - and the easy way to do that is to take the bonus pool and divide it between all team members as an equal percentage of the basic pay.

Attached is an example of a bonus calculator on these lines.


staff bonus calculator
.xlsx
Download XLSX • 74KB

Back in 2020 I wrote an article on this subject - I reread it this week to see if much had changed - judge for yourself..


Staff Bonuses – and a story from the past (about the past)


One of my treasured possessions is a typed letter from 1941, written by my grandfather Albert Mellor.


It’s a letter written to the employer of his only son, William, (my uncle Bill) just after Christmas 1940. Albert worked for the railway company and I imagine that he laboriously cranked out what follows on an old typewriter.


"35 Gorton Road

Openshaw

Manchester 11


Dear Mr. Hall


Do you recall our conversation and agreement regarding my son, William Mellor, on his engagement with Morrell & Co.?


I thought, as you will remember, a little increase on the £1 per week would be better. I suggested 2s 6d, you agreed and then suggested for the better of all concerned, an advance on merit would be better. That was our agreement.


At Christmas William came home all aglow, with two wage packets and good news! He always brings his money home untouched. Bringing the money home untouched was my early teaching and he does now what I did. I always got reasonable pocket money and I see that he does.


However, thanking the firm for the Christmas gift, the real delight came when William told me he was to have an increase of 5s per week in the New Year. He had been given exactly twice as much as I suggested! That conveyed a wonderful message to me. My son, in whom both Mrs. Mellor and myself had confidence, had come through with flying colours.


Despite blackouts and war, Our Christmas, through this very incident, had been a time of wonderful content to us. For that content may I thank you, and secondly, William, whom we have not over-fussed, that would be very unwise, although he is steady to take such a thing.


In conclusion, may I wish you a prosperous New Year; perhaps you would convey those wishes from me to Mr. Morrell also. At the same time I would wish the firm itself those prosperous times. For, as I see it, it is a great concern, run as it is, on humanitarian lines. Again, expressing my thanks, I must not leave out Williams New Year gift.


Yours very sincerely,


Albert Mellor"


So when clients ask me “where do you get the idea for the double wage packet at Christmas?” the answer is that it’s from my grandfather – and from an enlightened employer in the industrial city of Manchester in wartime Britain.


There are multiple messages within this true-life story and interesting metaphors for 21st Century practice management:


  1. Agreements – there was a time when a person’s word was their bond but in these increasingly frenetic and litigious days it is sadly necessary to “document” everything. Which begs a question – do you have written contracts for all of your team members? Do you have written performance criteria? Are they reviewed and measured? Remember Harry Beckwith’s quote “there is no performance without accountability, no accountability without measurement.”

  2. Merit – I have written before that a “pay increase” is made up of three components:

  3. Reward for Knowledge – how well qualified is the individual?

  4. Reward for Skill – how well does the individual put the knowledge into practice and

  5. Reward for Attitude – how well does the individual contribute to team spirit and customer service?

  6. Two wage packets – my own support team recently celebrated Christmas with a double wage packet. That 13th month makes a massive psychological difference and is a just reward for 12 months of loyalty and commitment. It is budgeted into our cash flows at the beginning of the year and paid as a result of achieving agreed performance criteria in the business.

  7. Over-fussed? I sometimes ponder that we take so much time to try and make our teams happy that maybe we over-fuss them? Looking at this from a different perspective, I know for sure that, as business owners, we don’t delegate enough (control freaks) – and maybe that’s a form of over-fussing, not allowing our team members to run the business for us?

  8. Great concerns – is your dental practice a “great concern, run on humanitarian lines”? Do your team believe in what they do, believe that it is a worthwhile occupation and a great firm to work for? That’s all about your personal leadership, of course.


It seems that my Uncle Bill worked for a “great concern” and that legacy has passed down the generations and into another century – just because they took a little trouble to look after a young boy.


I challenge you to think about your business as a great concern, to implement a “13th month” bonus system and to learn the distinction between management and leadership.






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