June 1, 2012 |

Tip The Scale

By Daniel P. Smith

Setting a payscale and integrating incentives

With four Blue Moon Pizza stores spread about the Atlanta area, Kelvin Slater cannot make every pizza and touch every table. It’s why Slater feels so compelled to draw and hold on to first-rate employees.

“I need to make sure quality is coming across to the customer every time,” says Slater, who oversees about 150 employees amid the Blue Moon enterprise.

Slater surely knows that part of attracting –– and retaining –– skilled and qualified employees is offering competitive wages and an enticing array of bonuses, promotions, incentives and perks.

“It’s beneficial to reward employees because the employee who knows my business and its nuances is invaluable,” Slater says, adding that employee retention generally breeds customer retention as well.

For many operators, competitive pay as well as bonus and promotion opportunities not only drive talent management but expense management as well. By building a strategy around pay, both base pay and variable components, operators address their single largest cost –– people.

So how does one build a competitive payscale, especially when the practice relies on factors as diverse as regulations, geography, tasks, job skills, and even certifications, such as TIPS or ServSafe?

First, Stacey Carroll, director of professional services for PayScale, a Seattle-based firm that tracks compensation data, urges operators to make payscale decisions based on credible, current data about market rates and job responsibilities.

“You need to ask: is this data relevant and does it provide a good benchmark from which to build a payscale?” Carroll says.

In some cases, operators may decide to offer lower base pay and bolster the overall compensation package with tempting incentives. Others may elect to ignore bonuses and pay $1 more per hour beyond competitors to build a perception of higher pay.

“There are no right or wrong answers, but you want to make sure you’re where you want to be relative to the competition,” Carroll says. “It’s about gathering the right data and setting a strategy to make sound decisions.”

Jeff Mease, who runs five pizza shops in Bloomington, Indiana, including the delivery-dominant Pizza X and the pizza brew pub Lennie’s, monitors the general state of competitors’ hourly fees, while also reviewing his own pricing and revenue to determine what he can afford.

“The higher the ticket, the more room there is to heighten compensation,” says Mease, who directs a staff of 100.

With a mix of knowledge of the competitive landscape and years of trial and error since opening his first Blue Moon in 2003, Slater maintains a set minimum for all new managers and operating partners, shifting that rate if the new hire possesses proven experience and know-how. Later, when it comes to raises, he does not cap pay bumps.

“If the employee is good for the company and helping us perform, there’s no reason to put a limit in place,” he contends.

While Carroll understands that few operators will unveil a published salary scale to employees, lest they risk relinquishing flexibility and discretion, she urges operators to be as transparent as possible with employees, letting them know about salary ranges for specific jobs as well as how pay increases and promotions are determined. “Give employees a sense of things, so they can see the opportunities,” she suggests.

For Mease, a 30-year industry veteran, compensation is a tool to spark extra motivation and attention to detail, particularly when it comes to compensation beyond the base rate.

At Pizza X and Lenny’s, Mease returns 20 percent of each store’s income to its GM, while another five percent of company profit is spread among the five GMs equally. Mease says his compensation plan fosters positive peer pressure among the managers and inspires them all to perform their best. He says that the simple nature of his plan –– rooted in the basic P&L statement and devoid of any complicated metrics –– puts ownership and management on the same page.

“If you set the compensation structure just right, then you don’t have to manage the staff,” he says, adding that his assistant managers receive bonuses tied to labor costs and efficient commodities usage in addition to their hourly rate.

In fact, many operators turn to incentive programs to boost base pay and heighten employee performance, particularly for those in the managerial, kitchen, and support staff ranks who are not naturally motivated by tips.

Carroll says the most productive incentive programs feature attainable results, reward on results not activity, and include measurable metrics that allow an operator to assess ROI.

“A properly designed incentive plan should pay for itself because it boosts profitability,” Carroll says.

While some contend that an employee should not be rewarded for filling the job’s requirements, Slater actively seeks opportunities to recognize those who exceed expectations. He’ll frequently run daily contests for salesmanship at each of his four stores as well as regular contests between the stores for gift cards, event tickets, or staff adventures.

“If nobody was getting rewarded, it would certainly change the culture of the restaurant,” Slater says, adding that employees enthusiastically share news of their rewards with colleagues, which heightens the overall level of performance throughout the Blue Moon ranks.

Inside the Kitchen: Using incentives to drive high performance

At his five-store, Indiana-based pizza empire, Jeff Mease has tried to tie incentive compensation throughout the system. While servers and drivers are naturally motivated by tip income, Mease explored adapting the incentive idea for other hourly staff, specifically those in the kitchen.

At his commissary operation, Mease performed a time study to baseline production of specific elements, such as making dough balls and slicing green peppers. He posts a goal time each week. When achieved, the staff receives 70 percent of the saved money.

“The message is clear: ‘When you’re more efficient and the company saves, you’ll get back the bulk of those savings,’” Mease says.

As a result of his incentive-laden plan, Mease doesn’t need to ride his kitchen staff or worry about being overbudget.

“These guys get into the kitchen and it hums along,” Mease says. “They’re empowered to be productive and get a sense of accomplishment from the bonus.”

Chicago-based writer Daniel P. Smith has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.