Hug Your People Excerpt: But Don’t Forget Money

Building an environment where employees feel appreciated and are loyal to your company involves many different components. How much you pay your people may not be the main factor that determines their job satisfaction, but your business will surely suffer if you don’t adequately compensate them. Read more in this excerpt from Hug Your People by Jack Mitchell.

Excerpt from Chapter 28 of the book Hug Your People
Published by Hyperion; March 2008;$19.95US/$23.50CAN;
978-1-4013-2237-3  Copyright © 2008 Jack Mitchell

If people are Nice, Trusted, Proud, and Included, then the Recognition will certainly follow. And that doesn’t mean strictly dollars and cents.

Our strong feeling is that money is not the main reason people choose where they work for life — for a career. After all, money can’t compensate for your boss’s ignoring you and it surely can’t cancel out having to work beside boorish and ill-mannered colleagues. That’s why people say of an offensive boss, “I wouldn’t work with him for a million bucks.” And so we don’t believe in a money-rules-the-day mentality.

At the same time, however, if the money and the fringe benefits are not commensurate with the job performance — and then some — in the context of the local market and the living standards in the community, then associates feel “used” or that the owners and management are “chintzy” and just raking in the bucks for themselves.

We believe that if you don’t pay people enough, it negates everything else — all the other four principles. So money is sort of a wild card. I insist that I don’t work only for the money — and I do believe this — yet if I were not recognized or rewarded fairly within our business, I wouldn’t have the passion that I have to do what I do.

When people go home to share with their families, at the end of the day they want to arrive with a smile and with a good feeling and with a wallet that is filled with enough, or in many cases more than enough, to make them believe that the investment that they have made of their time, energy, and talent has been recognized and recognized a lot. Especially when the associates can see that the business — in our case, the stores — currently are doing so well.

Therefore you can’t forget money.

My feeling has always been very straightforward. I like to pay our people very well — extremely well. Of course, you have to be realistic and stick within the financial parameters and playing field of your business and industry. The expectations have to be set accordingly. I believe all associates should feel that they have the opportunity to earn more if they hit their goals and the stores hit their goals, and if they are constantly raising the bar and becoming better.

Related content: Guide to Holiday Bonuses

The way we operate most of the time is we pay associates more to start than they were earning elsewhere. That immediately makes them feel great. Since we have fewer people than our competitors of equivalent size — but great people — they produce more, and that enables us to pay them more each year. So far this has worked well. Every time I’ve compared our numbers to the few industry studies I’ve seen of sales divided by total associates, we have the most productive ratio by far.

At performance review time, most of our associates are extremely satisfied, which naturally makes us feel pleased. Now and then, a few are disappointed, and so we listen and explain and reset goals and expectations.

We’ve had only one really tough time, from 1989 to 1991, when we were forced to freeze wages and eliminate bonuses. I remember during a tailor shop meeting explaining why no one was getting raises or bonuses. Vicki Batsu, one of our valued tailors, spoke up with conviction and emotion: “Jack, we all understand. We’re lucky to have a job. We trust you and your family. We recognize that when times get better we’ll not only have a job but we will move forward again.” When I think back on those years, our associates understood and they applauded our prudent moves because we had invested in them. We strongly believe that if we have a downturn tomorrow, the vast majority of our team will be just as supportive as they were during that turbulent period.

Besides salary, you ought to incorporate occasional incentive programs and consider giving people discretionary bonuses from time to time. We sometimes bestow a certificate for a dinner or a round of golf, or else tickets to a sports events or Broadway show — again, we make a concerted effort to be sure these are rewards aligned to the beneficiary’s passions.

In addition, we have a defined bonus plan for some areas within the store, such as the buying team. A certain portion of their bonus is based on measurable factors like gross profit and turn rate.

We have created programs like the 2-4-6-8 bonus program, which includes everyone from the stores (except the family). We started it after 9/11, when people were understandably feeling gloomy and full of uncertainty. It works like this: from November 10 to Christmas, if there’s a 2 percent increase in sales over a year ago, everyone gets a bonus of “x” amount — say $250. If sales rise 4 percent, they get double that, or $500, and so on up the ladder. Everyone gets the bonus. Tailors get it, buyers get it, receptionists get it, parking attendants get it, everyone. That way, it inspires teamwork throughout the entire organization.

Sophia at Richards has been known to jump up onto the counter and belt out exuberant cheers like “Let’s go, let’s go — two, four, six, eight, who do we appreciate . . . Rickee, Nadia, Nina, yeahhhh!”

We find that when all of our associates “work for the customer,” they work with one another even better. It’s fabulous because it creates a level playing field where everybody wins when the store wins, not just the sellers.

I call it a company-wide associate-and-customer-centric hugging culture.

This magic does indeed pay off. In a study of more than two thousand businesses, the Gallup Organization found that sales were 3.4 times higher when engaged associates sold to engaged customers.

These bonus periods are marvelous things to behold. And remember we do them during the busiest and most profitable time of the year.

We also really like short-term contests. For instance, we might hold one where the purpose is for our sellers to focus for a prescribed period of time on one product or collection, such as the number of made-to-measure men’s orders for a Zegna or Brioni weekend trunk show. We also engage in slightly lengthier contests — if we sell 70 percent of our Armani Collezioni stock for the season, incentives will be awarded.

Because we don’t have assigned parking spots, one piece of recognition we sometimes give for contest winners at Mitchells is the right to park in “choice” parking spots close to the associates’ entrance for a defined time. Goodness, is that a treasured benefit when it’s five below outside.

A valuable by-product of contests is that associates learn a lot about a product or department, which helps them perform not only in the short run but also in the long run once the contest ends. We try hard to set up these events so at least everyone has an opportunity to win, which means you sometimes have to handicap people just like you do in golf, so you don’t constantly have the same winners. What happens, of course, is that even if you handicap a Frank Gallagi or an Amy Jarman, they’re so extraordinary that they just sell more! So you have to keep giving everyone else more strokes.

As we are all aware, one of the dangers of contests is that associates might sell a product only when there’s a contest going. This scenario happens infrequently, but it does happen. When we detect this behavior, we remind everyone that we need to focus on what’s best for the customer, not what’s best to win the contest.

If you’re not careful, a contest can sometimes drift into a non-hugging situation if the attitude prevails that there are only winners and losers. Therefore, when we introduce a new contest we always emphasize how the individual members all win by competing against their own goals and not one another. Our huggers usually seem to understand that.

One other interesting way to recognize people is to have the associates do some of the recognizing. I’ve heard of a people-friendly engineering consultant business where any associate who thinks a colleague has performed exceptionally can award a $50 bonus to the individual right on the spot, without higher approval. Hey, you can bet you’re going to like the guy in the next cubicle even better if he puts some extra cash in your pocket!

So try to find a way to pay your people well, and then some.

However, as you will see, we believe associates need a lot more than compensation to motivate them to remain loyal for life.

From Hug Your People: The Proven Way to Hire, Inspire, and Recognize Your Employees and Achieve Remarkable Results by Jack Mitchell. Copyright (c) 2008. To be published in March, 2008 by Hyperion. Available wherever books are sold. All Rights Reserved.