Episode 96

9/15/22

Topic: Build an Effective Leadership Incentive Plan

Guest: Dan Gordon + Donnie Shelton

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In this episode we discuss:

  • Why you should consult an attorney and HR professional before implementing a leadership compensation plan

  • How building your business depends on your ability to attract and retain great leaders and why management compensation plans are part of that

  • Dan's/Donnie's list of 6 things to think about when building an effective leadership incentive plan:

  1. Make sure your plan is designed to retain competent managers who will help you achieve your goals

  2. Ensure your plan is competitive both inside and outside the industry

  3. Plans should be easy to calculate, including base salary, commission and bonuses

  4. Dan recommends incentivizing gross margin, not net profit

  5. Donnie recommends ensuring you're incentivizing the right things that are not leading to unintended consequences

  6. Make sure your plan provides secure year-round employment and compensation

  7. Why your plan should be self-funding

  8. Consider a plan that rewards loyalty, competence and performance

  9. Ensure your plan accounts for the company's goals, including financial indicators that lead to profitability

  • How management labor expenses should be 5-12% of revenue (compensation only, not benefits or payroll tax), according to the PCO Bookkeepers Pest Control Industry Cost Study

  • Why it's vital that your managers have complete control over the factors they're being incentivized on

  • How and why Triangle Home Services shows employees their Total Compensation Statement, including salary and benefits

Resources mentioned:


Notable: "The plan needs to be aligned with where you're going as a business. That sounds so obvious, but it's easy as you're growing really fast to get down the road and realize 'we're not quite as aligned as I thought we were.'" —Donnie Shelton

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