Serving People Serving Coffee Since 2005
Issue link: http://baristamagazine.epubxp.com/i/804825
Profit Sharing: Is It Worth It? By Tracy Allen THE OPPORTUNITY TO MAKE A DIFFERENCE, to contrib- ute, and to do something signifi cant, is a great motivator. Money can be a motivator as well, but it has more power when it's earned rather than bestowed. Employees will go the extra mile and perform above and beyond what's expected when they know they'll be rewarded—or so the theory goes. Bonuses and profi t sharing are typical ways to dole out these rewards, and they can be a great way to retain valuable staff and even increase company value. If they're not structured correctly, however, they will backfi re. Profi t-sharing recipients should know how they helped generate those profi ts, beyond just doing their jobs. No doubt, they enjoy getting the money, and they may even be grateful for it. But they aren't likely to be motivated or act differently if they don't know how they got it—how they personally affected the company's bottom line. Further, if they keep getting a profi t-sharing check without under- standing what they did to deserve it, they will come to expect it as part of their regular compensation. At that point, the profi t-sharing is a bonus in name only, no matter how much the amount may vary from month to month or year to year. A good profi t-sharing program includes employees in the process. You need clear goals that people understand and accept because they've had a voice in setting them—goals that affect the health and the wealth of the entire company. Melissa and Matt Myer, owners of Espresso Parts in Lacey, Wash., dedicate 1 percent of annual revenue (total sales), based on a net-profi t goal, to profi t sharing. "We call them 'big, hairy, audacious goals,'" says Melissa. "But we designed the profi t sharing to be simple—no loopholes to jump through. As our sales grow, the bonus grows." Anyone who has worked at the company for six months or more is eligible, and the longer their tenure, the more of that 1 percent they get. Matt and Melissa are also fully transparent with staff about company fi nances. "We want to foster high performance and self-management. Sharing the bottom line with our staff shows them how they have an impact, and how they can be rewarded for it," Melissa says. At Espresso Parts' monthly staff meeting, they talk birthdays and anniversaries, employee of the month, and employee of the quarter, as well as fi nances and operations, including sales and revenue goals and how they may need to pivot to achieve them. Santa Cruz, Calif.–based coffee consultancy Cat & Cloud recently spread its retail wings in 2017 with the opening of a roaster and café. Owners Chris Baca, Jared Truby, and Charles Jack are transparent with staff about fi nances, and opened the business with a profi t-shar- ing model where 10 percent of retail profi ts are divided evenly among staff, right out of the gate. "Anything employees want to know is on the table—they can see all fi nancials," says Chris. "If we're wasting a lot of milk, they can see that in the numbers. And if you're a seasoned barista and you're throwing out milk, shame on you," he laughs (but only half jokingly, because seriously, folks, no good barista wastes milk). Employees need to see the connection between their actions and the company's bottom line, on a regular basis. You need to provide frequent feedback. The business owner's role is to give the bottom line and profi t sharing high visibility. No bonus program will work if you don't work at it; people won't believe in it or care about it. You have to sell the program all year long. It's a proven fact that people do more and learn faster when they're trying to solve problems. They even teach themselves. Part of a partic- ipatory profi t-sharing program is talking about things that need to be strengthened and seen as opportunities. "We have a lot of natural leaders on our team," says Jared of Cat & Cloud. "We want them to reap the benefi ts of the hard work they put in, and we want to show them that their direct work impacts the bottom line. Not wasting supplies, managing cost of goods—it all adds up. We'll obviously help manage these things, but the whole point is to teach people to run a good coffee business." Melissa of Espresso Parts adds, "The whole idea is that we have to Pros: • Brings employees together to work toward a common goal. Their sole aim will be the success of the company. • Motivation levels will be high. • The employee focus will be on profi tability. • Increases commitment to the organization among the employees. • Employee can identify with the company. He or she will feel part of it. • Bridges the gap between the employee and employer. • Promotes the well-being of the employee. • Additional income for the employee to lead a comfortable life. If he or she is comfortable in personal life, then his or her performance at work will also be good. Cons: • The salaries of the individual employees go up equally, not on the basis of merit or promotion. • In the case of smaller companies, drastic fl uctuations in the earnings of the company's may affect the personal earnings of the employees. • The focus of the employee may be on the profi t rather than on quality. 94 barista magazine