Drew McLellan from Agency Management Institute talks about eliminating bonuses that are viewed as entitlements by your staff and instituting an AGI based bonus program.
View Video Transcript
Hey everybody, Drew McLellan here from Agency Management Institute. Today I’m coming to you from Orlando, Florida. I’m on Disney property, and I am getting ready to teach our Money Matters workshop tomorrow and the next day. You know, one of the topics that we’ll talk about at the workshop, and it’s also timely from a year-end perspective is employee bonuses. So the way most agencies handle bonuses today is that you get towards the tail end of the year, you’ve had a decent year, there’s some money left over, and you want to share the wealth with your employees, so you dole out bonuses. Often times it’s subjective who gets how much money. Sometimes you give it to department heads and let them decide who gets what amount of the part of the pot that they are given. But the reality is that in all of those scenarios, we’re not really using those bonus dollars to the agency’s full advantage. I believe that agency bonuses should be tied to company performance, and that you should have some sort of a program that your employees understand
throughout the year. So that you can teach them how agencies make money and how they influence whether or not the agency makes money. One of the things I hear agency owners say all the time is I wish my employees made choices like I would make them. In other words, I wish they would behave like an agency owner. What I say to them is: Do they understand agency math well enough to do that? And number two, what’s in it for them? A properly structured bonus program is tied to your adjusted gross income, and where you are setting adjusted gross income goals every month, and you’re paying out part of a bonus on a quarterly basis. So they’re getting a little sliver of their bonus every quarter, and then the lion-share of the bonus is paid out at the end of the year. That kind of a bonus program does a couple of things. Number one, it gets everyone on your team pulling the wagonin the same direction. All of a sudden, your employees care about adjusted gross income. They understand it, and they care about it, because there’s something in it for them. They understand that they’re going to get a bonus, based on how your company does with your adjusted gross income. Number two, you can use that bonus program month after month, quarter after quarter to educate your team on not only how the agency’s doing but the things that impact
an agency’s bottom line. The ways you can save money and put more money on the bottom line, and the ways you can upsell or grow the business to put more money on the bottom line. So now all of a sudden, your employees are better at helping you run your business profitably. The third benefit of that is when you are having a tough year, your employees see it coming. So bonuses are no longer a year-end entitlement that they save and they count on to buy holiday gifts for their family. But now they understand that a bonus is something that we earn together as a team, based on how we do together as a team. So there’s no awkward conversations. There’s no big discussions. They know whether or not a bonus is gonna get paid. So I can hear you already now, I don’t want to freak my employees out. I don’t want them to see if we’re having a tough time. I guarantee you, your employees know when your agency’s having a tough time, and they freak out more with less information. And by the way, the stories they make up and that they tell themselves are far worse than your reality. So you’re far better off to educate them on a monthly basis, share with them your AGI goal, and whether or not you hit that goal, and tie rewards for them to that goal. So if you’re watching this real time, and it’s getting towards the tail end of the year, let 2018 be the last year that you just give out subjective bonuses. Instead, switch to a bonus program that benefits the agency, makes your employees smarter, and helps all of you drive to the same thing, which is a profitable year-end number. That works out better for you as an owner. It works out better for the employees, and in the long run, it works out better for the value of the agency and for your clients. If you are interested in a copy of the bonus program that we teach in the workshop that I’m about to give, shoot me an email at [email protected], and I will send you a copy. I’ll see you next week.