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How to Implement a Compensation Plan Based on Productivity AND Customer Satisfaction

It’s the holy grail of service-based small businesses. But it’s never quite that simple, is it?

If you pay for productivity or performance, customer service suffers because everyone just tries to fix as many widgets as fast as possible to make more money… Or pay based on customer satisfaction and now it takes your technicians 3x as long as normal so they can “take care of the customer.” Plus it adds a whole new dimension of work for your payroll department.

Upset Customer

Not the happy customer we're looking for...

However, what if you COULD do both?

And without adding a mountain of paperwork to your payroll department each payday…

Here’s my experience with companies paying their team based on productivity and customer happiness

In 2006 I had cable internet installed at my home in Pennsylvania and had a few issues along the way. And true to the stereotype for that industry, service was less than stellar. Around that time I had a good friend who worked for them and confirmed for me that they paid a straight hourly wage. A very high hourly wage in fact. However, for some reason, paying more than the average hourly wage didn’t translate directly to better employees or better customer service.

In January 2012 I had cable internet installed in my home in New Mexico. Here’s how it went down:

  1. When I called to schedule the install, they gave me an option of times for service from 7-8am, 8-10am, 10am-12pm, 12-2pm, or 2-4pm and guaranteed they would be here within that time frame or I’d get a $25 credit applied to my account. They also said he’d call me 30 minutes before arrival.
  2. 7:26 am my doorbell rings. Right on time.
  3. The technician tests everything, runs the lines necessary, and even shows me what he’s doing in a very friendly and professional manner.
  4. I let him know the modem and router I ordered online haven’t arrived yet so I’ll have to wait to install those. He informs me that he can leave his modem there for me and when mine arrives I can return it to the office a few blocks away at no additional charge. He then tells me he only gets paid if he finishes the job and everything is working properly when he leaves.
  5. He installs the modem. He has to wait for the office to configure it and test it. It doesn’t work. He installs another one and we’re up and running. Then he hands me a 5.5″x8″ piece of paper with a giant happy face on it, a big #5, and a web address and explains that if I was happy with his service he’d really appreciate it if I could go to that website and give him all 5’s. He further points out that he’s the highest rated technician in the area and he’s paid based on high scores for customer satisfaction so it’s important to him.

So as a small business owner, what can we learn from this program?

  1. First off, other than not calling me 30 minutes ahead of time, I got excellent service. A small business owner who I relayed this story to told me she experienced a very similar thing from a satellite TV service man and felt he went way above and beyond the call of duty for her.
  2. The technician is only paid for COMPLETED jobs and he’s paid per job, not hourly. Think that minimizes call-backs?
  3. The amount per job that the technician is paid is based on the results of customer satisfaction surveys. Literally the customer defines how much the technician gets paid.
  4. The technicians all know how their customer satisfaction results compare to other service technicians. That’s how my technician knew he was the highest rated installer in the area.
  5. He successfully re-framed the whole experience from me buying a service from a huge, impersonal, corporate, oligopoly to a personal interaction with one of my neighbors – him.

That last part may be the most important and why I think this program will work better than straight hourly pay. He, in essence, asked me to help him, another hard-working, honest, friendly neighbor. He took the multi-billion dollar corporation almost entirely out of the equation.

That is IMMENSELY powerful because we all want to do business with other people! And we know customer loyalty is about your people.

Honestly none of that crossed my mind at the time… But looking back, it seems to me that step #5 above is the key.

When I asked the technician if he liked getting paid that way he didn’t really have a response. Almost like he never really thought about it since that’s just the way it was. He volunteered to me how much he made per week and that he felt that was good money. His income was a bit lower than the median income for the area so I didn’t think it was either too high or too low for the type of work.

So how do you implement a Compensation Plan based on productivity and customer satisfaction in your small business?

  1. Before you change a single pay rate or start discussing the idea of a new pay structure with your team, implement the customer satisfaction surveys. The key to this is utilizing simple, yet powerful web technology to aggregate the results to minimize your office work. If you need help creating online customer satisfaction surveys, please contact me and my team will be glad to put this strategy in place for you for as little as $50/month. We’ll create the site and help you develop the questions. All you have to do is get your technicians to direct people to the website and read the results. This will give us the opportunity to work out any bugs and also formulate the questions that are most pertinent to your customers’ happiness.
  2. Start tracking employee productivity. Whether that’s how many work orders are completed, cars are fixed, hours are billed (a metric I hate), or units delivered, there needs to be a productivity portion to your pay structure and you need a way to track it.
  3. Once you’ve been tracking Customer Satisfaction and Employee Productivity for a few months, determine what combination of performance pay and customer satisfaction over the last few months would result in roughly the same pay for your team members. In other words, for most employees, implementing this new compensation plan won’t result in them making less money.
  4. Hold a Team Meeting and ASK your team members what they think their performance benchmarks AND customer satisfaction scores should be. In my experience, the majority of the time your people will over-state what they are capable of doing. Most people think they get a lot more work done than they actually do.
  5. Take the information from that meeting and from step #3 and formulate your new pay structure.
  6. Hold another team meeting to implement.
  7. Continue to hold regular team meetings to get feedback on the new program.
  8. Utilize the 12-Questions Survey to touch base with your key team members individually each quarter.
  9. Improve the new compensation plan if necessary! Don’t just keep doing something that doesn’t work. Admit it when you are wrong.

Have you had a different experience with companies that have similar performance-pay plans in place? Have you tried to do something similar in your business with mixed results? Let me know in the comments below!

To your success with a productivity-increasing compensation plan, Bryan

About Bryan Trilli

Entrepreneurial Junky is probably the best way to describe me. I've bought, run and sold 3 businesses in 3 different states and started a 4th. The first 3 were brick-and-mortar service-based businesses and the 4th does internet marketing for service businesses. My team at Optimized Marketing guarantees to double your business' internet contacts in just 90 Days.

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