Performance Related Pay: Motivating Your Team

Using pay bonuses as a strategic incentive heightens salon productivity and motivates your team.

Performance related pay is meant to directly correlate efficiency/productivity and wage level and is typically based on a percentage of total turnover as opposed to a fixed salary. With a performance related pay system staff members' motivation and teamwork will also benefit if it is also linked to the productivity of the salon.

Such a productivity based pay system will not only stimulate better individual performance but results in fairer wage compensation in the salon for everyone.

Note:
No one system of remuneration alone can bring a company that is not economically sound back on track. Efficiency/productivity payment should not be the only mechanism used to increase an employee's performance.

Performance related pay could be linked to turnover-percentage as well as to a number of units (i.e. number of sold products or number of services).

Based on Turnover
This requires clear and above all transparent controlling in the salon. Therefore statistical data is necessary on:

  • Turnover and types of services, haircuts, colors, retail
  • Numbers of services rendered

This must be analyzed at the end of a week/ month/ quarter/ year and will lead to an employee getting a share which is (mostly) calculated in per cent.

Based on Unit Number
The advantage of productivity pay geared to the number of units is to simply concentrate on single campaigns in the salon. The records on, for instance, shampoos sold or personal care products are relatively easy and can be ascertained by the cash receipts. The competition aspect among the employees is noticeable as results can be checked almost daily.

The question as to the level of remuneration is difficult to answer and is down to the individual salon. Moreover, it probably makes sense to ask oneself from what level onwards a short term percentage increase of the monthly remuneration would be an incentive.

Incentives via Target Dialogue
Another form of variable pay is the target dialogue (TD) which achievement leads to incentives. A TD usually takes place annually and is based on concrete targets, which the employee has to achieve.
 

Regardless of the approach you choose and the name you give it, you should always ensure the targets conform to the SMART principal. An acronym that means that the written targets have to be:

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Time Bound

A TD is a perfect instrument to involve employees in the entire business process and a medium term development of your business. It’s the same if you commit a fixed sum of money, if the employee achieves his/her targets or a percentage of the annual salary. Definitely it makes sense to commit levels of achievement, i.e.

  • Target more or less achieved (i.e. 80%) = 80% of the committed incentive
  • Target achieved (i.e. 100%) = 100% of the committed incentive
  • Target over achieved (i.e.110%) = 130% of the committed incentive