I recently got a text from a member of my peer group community, asking how to incentivize a new Operations Manager.
The same question could be asked about any Second In Command (2IC) position, e.g. how to set up an incentive for your Ops Mgr, GM or COO?
Incentives are meant to create motivation to pursue and achieve specific metrics.
Therefore, to answer this question we should start with the end in mind: What metrics do you want your 2IC or Operations Manager to pursue?
Typical results include:
- Profit
- Revenue
- Growth
- Efficiency
- Billable Hours
- Safety
- Employee retention
- Client retention
- Bench strength
Interestingly, some of these are not “end” results.
For example, you can achieve intermediary goals like efficiency and employee retention, but still miss profit and revenue targets.
The question to ask yourself: Should you use any of these “intermediate” metrics as part of your incentive, or just the actual end results like net profit?
When a company employs Profit Sharing as their main incentive, they assume their intermediate results are already being achieved (staffing, efficiency, etc.) and so they focus on hitting their end goal.
Is Profit Sharing enough?
2IC’s are often hired or promoted with the goal of making sure the trains run on time and budget goals are met.
Their challenge however is more complex than that.
As your company grows, it needs to be reorganized along the way.
For example: I just met with a 4.5M company from the west coast (Washington) that had grown quickly and had out stripped its organizational set up.
- It had 7 people on its leadership team but it was still strangling the owner (like roots girdling a newly planted tree tree.) He was performing 2 and 1/2 roles working over 6 days a week.
- We decided to make shifts in how the firm was being run, moving people into different roles and deciding on two key hires. These changes will set up the firm for another growth run (5 to 10M) while giving the owner room to breathe, network, and enjoy life.
- We also nominated the main salesperson to become the full time 2IC. With her skills and proclivities the company will take off!
As the expression goes, the org chart that got you here won’t “get you there” to the next growth level.
The Second In Command’s (2IC) job is never done.
This brings us to the second incentive beyond net profit, namely: Growth.
The role of a strong 2IC is to achieve strong profits today, while growing the revenue and profit goals for tomorrow.
Hence a second success metric for the 2IC is growth!
How about all those new ideas?
2IC’s are also tasked with implementing the owner’s big new ideas: new divisions, new innovations, new software, etc.
Should a third incentive be tied to successful implementation of these new ideas?
That’s a debate for another day, but I will say that “combat pay” can always be applied to someone who goes above and beyond to implement a big project.
The counter intuitive bonus
Some incentives actually work by giving them ahead of time, like a tip you give to the waiter at the beginning of your meal to ask for extra service.
This may not work for large incentives, but certainly works for non-cash bonuses.
For example, buying your crews lunch and spending time with them creates a reciprocal feeling where they feel obliged to go the extra mile.
To learn more about “reciprocity”, read the seminal book Influence, by Robert Cialdini.
Your Challenge: Finding the right people who can lead your business forward and are worthy of the incentive.
Incentives don’t change long-term behavior. You can’t fix someone by throwing money at them.
You need people who are inclined to work hard and want to be part of a winning team.
The incentive is icing on the cake, a way to keep score, and a way to “share in the wins” and show your team that you are all in this together!
Regards, Jeffrey!
P.S. Should you focus more on Revenue or Profit Growth next year? Find out as we discuss strategies for 2023 in our Financial Master Class.
The early bird for this event ends this month
