Retire "Pay For Performance"?

A columnist thinks the phrase "pay for performance" needs to be retired. Here's his explanation....

"With trillions of dollars disappearing from stock markets and economies worldwide, it’s a gross understatement to call 2008 a bad year. It was a year that slashed our savings, threatened our jobs and rocked our confidence. Yet, at the very same time banks were “borrowing” billions of dollars from our nation’s treasury, their executives were also larding on themselves huge bonuses. Over $18 billion worth, according to President Obama. I think it is time to officially retire the phrase “pay for performance.” The phrase to use now is “pay in spite of performance,” because clearly for today’s corner office crowd this escalator only knows how to go up."

Pay for performance works. But it only works when performance is measured effectively. In our business, a customer provides feedback. That feedback is THE ONLY factor used to determine our employees' paycheck. That's a powerful, motivating tool - money does indeed talk.

Of course, pay for performance doesn't work when the reward is already set in stone. Pay for performance also doesn't work when the reward is less than rewarding. And most importantly, pay for performance doesn't work if the measuring system is flawed.

The success of a maid service is directly based on the satisfaction of its customers. And since our employees' paycheck is 100% dependent on our customers satisfaction - we think that our "pay for performance" plan can be safe from any early retirement.

The TwoMaids Pay For Performance Plan Explained

From Across The Pond

Gettin'a little love from across the big pond.

"We have found a way to empower our valued clients and maintained Quality, Excellence and Pride. The client will determine how much the maid earns during your regular scheduled clean. This idea was inspired by a recording we heard from the owner of “Two Maids and a Mop,” a maid service in the U.S.A. He made the same mistakes and to our joy, has found a win, win solution. Thank You Two Maids and a Mop! Brilliant idea!!"

Good ideas spread. Even when there's a big ocean between people. And ideas spread even faster when there's only a fence between neighbors.

You Have To Define Performance In Order To Reward Performance

A new pay system for some employees in Columbia, Missouri is facing criticism. Since October, salaries for garbage collectors have been based on a pay for performance strategy. Under the new pay for performance system, the city garbage collectors get a one percent increase for doing their job, and a three percent increase for going above and beyond.

Garbage collector Jason Norman says the new system is unfair to all the workers. "We all work hard. We are out here in the snow, ice, rain, heat. We all deserve a certain percentage, but when they said some guys work harder than others, that's not true because it's a team effort."

The plan works by first letting the workers evaluate themselves. Then they are evaluated by their supervisors. Both employees and supervisors go through training on how evaluations will be performed, and the supervisors follow guidelines to help them grade the employees.

This system will never work. It won't work because the worker's performance has no direct measurement. You can't reward performance if the performance isn't defined.

A pay for performance plan works as long as two conditions are met:

1. The performance must correspond to a defined metric
2. The reward must be worthy. In other words, there needs to be a pot at the end of the rainbow.

And yes, we have an example for you. The Ultimate Pay For Performance Plan

Money Talks

It turns out that some elementary school students are motivated by the same thing that motivates a lot of adults: cash.

A pay for performance experiment that began in 2006 promised up to $100 each to third through sixth graders if they passed state standardized tests. The students significantly boosted their math scores and slightly improved in science and social studies.

Rewarding students gives them something to strive for, whether it be a skateboard, a video game or new sneakers, said Francie Berg, principal of two local elementary schools.

Pay for performance works. But it only works when the reward is worthy. And in this case, $100 is like a million dollars to a sixth grader. So they create goals. And they meet them because they care.

The TwoMaids Pay For Performance Plan works the same way. Your satisfaction level is our only measuring stick. Your opinion is the only factor used in determining our employees' paycheck. And when our employees meet your expectations, we make sure that their reward is worthy.

The fact is that we pay our employees more than any other cleaning service in our area. But the fact still remains that our employees must earn every single dollar. Because our employees know that their only job is to make you happy. And if they don't, their pay stinks. But if they do, their pay rocks!

The Cleaning Service Debate

The presidential race is in high gear right now. It seems as if there is at least one debate per week. A debate is a powerful tool. It gives you insight on how a person will react under pressure. And of course, the answers from the debate help you determine which candidate supports your most important issues. A debate is truly democratic. You get to listen and make decisions on your personal beliefs.

So that leads me to a proposition.....

What if the cleaning industry had a debate? What if all competitors in our field stood up and fielded questions from potential customers? How amazing would that be? And how easy would it be for Two Maids & A Mop to win!!

It would be a slam dunk. Nobody would be able to compete against us. Nobody could compete us because all we would have to do is explain our pay for performance plan. After each question, we would end our argument like this....

"We pay our employees based on our customer's overall satisfaction level. We do this by letting our customers rate each housecleaning on a scale from 1-10. The rating provided by the customer is the only tool used when determining the pay rate for our employees. The happier our customers are; the more our employees are able to earn with our company."

And the debate would be over. Just like that. Because nobody we compete against can even get close to matching our commitment to customer service.

Of course, there won't ever be a cleaning service debate. It may be that no one would even care enough to watch the debate. But it's more probable that none of our competition would want to show up. They'd have no chance.

Which leads me to my final thought....

If it's so obvious that we would win a cleaning service debate, why don't we win every customer battle? The reason is simple. Because most people don't understand that hiring a cleaning service has nothing to with cleaning. And there's no way to figure this out until you've hired the wrong cleaning service. Cheap sells. And it will continue to sell. But cheap only lasts for a little while. At some point, you want quality. Because cheap still means that you're using your hard earned money. And if you're going to use your money, you might as well use a little more of it in order to receive higher quality.

The cycle always repeats itself. You hire the cheap cleaner-then you call us because you're not satisfied. We can't change the cycle. It's all part of the education.

So Why Are You Here?

You probably navigated your way here via Google. You came here simply looking for a reliable housecleaner. You came here wondering what we charge. You came here wondering what we clean. And then we didn't talk about housecleaning. We didn't even talk about what we charge. Nope. All we wanted to talk about was how we pay our employees.

We talk about our pay for performance plan so much because that's what makes us different. Yes, we clean your bathrooms. Yes, we clean your kitchen. And yes, we'll even clean your baseboards.

But of course, so does everybody else. Everybody vacuums your floor. Everybody cleans the inside of your microwave. But nobody else allows customer feedback determine employee compensation.

And that's why we talk about it so much. Because you need to know it. You need to know why you should pick up the phone and dial our number.

And when you do call, we'll be glad to talk about cleaning as much as you want.

How The Pay For Performance Plan Benefits You, Me, And Everybody Else

If you've made it this far, then you should have a good idea as to how our pay for performance plan works. Here's how it benefits all three segments of our business.

Benefits to the Customer
Your satisfaction level determines our employees' paycheck. Just about every cleaning company states that customer service is their top priority. We say it too. But we prove it everyday by letting you tell us what to pay our employees. Your feedback is the only thing that matters. Your feedback makes or break a paycheck. Your feedback even determines when an employee is eligible for a promotion. Without your feedback, we're just like everybody else.

Benefits to the Employee
Your satisfaction level determines our employees' paycheck. A pay for performance program can only work if there is a pot at the end of the rainbow. In other words, an employee needs to care about your satisfaction level enough to raise her level of productivity. Our pot at the end of the rainbow is money. Each of our employees knows that their pay can change very quickly. And only one person can control the situation. The formula is simple.

Work hard-->Make customers happy-->Earn more money.

Benefits to the Business
Your satisfaction level determines our employees' paycheck. The fact is that our pay for performance plan is a tremendous marketing tool. And it's obvious why it makes our service sell so easily. We're different. We don't say the same, old tired stuff. We prove to you why we're better. And if quality is important to you, then we're the obvious choice.

The Pay For Performance Plan - Explained

If you are one of our customers, then you get this little reminder every time we clean your home. But you're probably not one of our customers. That's why you're reading this in the first place. So why not read this and then maybe you'll understand why someone would decide to hire us.......

One of the most common questions that we receive is the question, “Why do you think you’re better than all the other cleaning services in town?” It’s a valid question because the fact is most cleaning companies say that they are better than everybody else. What makes Two Maids & A Mop so different?

It all boils down to three little words: pay for performance. That’s what makes us different. We pay our employees based on our customers feedback. The happier our employees make you; the more money they’re able to make with our company. It’s a simple concept. But the funny thing is that we’re still the only cleaning company around that does business in this manner.

Most cleaning companies pay their employees on a commission basis. A commission is defined as payment received as a result of a sale. The more sales you make; the more money you make. So what does that tell you about most of the cleaning industry? It’s in the employees best interest to clean as many homes as possible so that they can earn more money. Now there’s nothing wrong with that idea. People should want to earn more money.

The problem is that the speed of the cleaning directly affects the quality of the cleaning. Our employees get paid like every other job. They clock in for their day’s work in the morning and they clock out when they are finished for the day. However, our employees hourly rate is determined by you - the customer. You rate each cleaning on a scale from 1-10. The rating that you provide is applied to a pay scale. And that’s how our employees get paid.

Just think of it this way. The pace of our cleaning doesn’t really matter. It’s the quality of our cleaning that matters the most. Now get ready to get impressed by our professionalism. You’ve never encountered another cleaning service like Two Maids & Mop.

That’s why we get to call ourselves “The Most Customer Friendly Housecleaning Company In The World”. And that’s why we think that we’re better than any other cleaning service in town.

Fighting Crime Using Pay For Performance

"Police Chief Terry Lewis said he has yet to see a pay-for-performance system that works best for law enforcement."

That's what was said in this article in a Florida newspaper recently.

His argument, "If police officers were paid for performance, which one would get a raise -- the one who patrolled the streets and wrote 30 speeding tickets, the one who caught a car burglar, the one who handed out anti-drug certificates to students, or the one who helped an elderly woman check her home after she heard a suspicious noise?"

The answer is staring at you in the face. Pick a job - any job. Find out what benefit that job provides and then reward that employee when the benefit is reached.

For a cop, the benefit is reduced crime and increased safety. One cop doesn't make a police department. So make the whole department accountable. From the guy sitting at his desk to the guy working the streets.

If a cleaning service can make something as subjective as your opinion work, I'm pretty sure that a police department can make it work too.

Quack Quack

Check out Aflac's new pay for performance plan.

Pay For Performance

The Rise Of Pay For Performance Programs

No need to explain this article. This quote says it all....

"The majority of companies have realized that only through performance-based awards can an organization effectively motivate and reward employees for helping achieve their goals," says Ken Abosch, a consulting business leader for Hewitt Associates. Variable pay plans, as opposed to holiday bonuses, clearly connect employees to company performance."

Click Here To Read The Article

'Tis The Season

To lose business. Yep, we lost business this week. Six customers in all. And they all had the same reason for canceling our service. Simply put, they weren't satisfied.

Not being satisfied is a dirty phrase at Two Maids & A Mop. Nothing else triggers a bigger reaction. So our reaction was to conduct an investigation into each of the six cases. The investigation didn't take long to conclude because there was one common theme.

Our customers weren't satisfied because we kept making the same mistakes over and over again. Fair enough. So went dove into each of the customers files. And we found another common theme. Only one of the six customers had ever contributed feedback. And the one customer that did contribute feedback provided nothing but positive feedback. In fact, her most recent cleaning was rated a 10. In other words, we thought that she was completely satisfied. Her response, "I didn't want to get anybody in trouble".

But you did. We lost your business. Which means we have less work for our employees. Which means that our employees make less money.

The moral of the story. We desperately need your feedback. Your feedback is what makes us different. Your feedback is what makes us better. Without it, we're just like everybody else.

If you don't plan on providing feedback, you should cancel our service. Because we're not worth what you're paying us. Because we can't provide a better service without your help.

I know it's hard. I know you don't have time. But you're paying a premium for our services. There's only one way to make sure that we provide a value for that premium.

Feedback. Feedback. Feedback.

Keep us informed. Let us know what we're doing wrong. Let us show you why we are better than other cleaning services. Let us show you that we care more than anybody else that you'll ever hire.

Please. Because losing your business stinks.

The Opposite Of Pay For Performance

The opposite of a pay for performance program is to simply just pay. Paying for performance means that you get rewarded when you perform. Of course, the metrics for performance must correspond to your overall productivity. Today's CEO is simply getting paid.

This isn't paying for performance. Just saying it doesn't mean a thing.

Today's CEO is making real pay for performance programs look bad.

P.S. This may be a little too biznussee....but what if today's CEO got paid based on their cash flow stream? You can manipulate earnings, but you can't hide dollars and cents. You either got one dollar going in or one dollar going out? Wouldn't that solve everything?

Pay For Performance Catching On

The Transportation Security Administration has just launched a new pay for performance compensation plan for baggage screeners. The goal of the program is to reduce staff turnover and improve employee morale.

According to the article, TSA screeners have had little chance to advance in their jobs, and many have quit because they did not see a way to qualify for promotions. For a time, one in five full-time screeners were leaving, driving up hiring and training costs.

The housecleaning industry isn't alone. Turnover is high any business that doesn't present challenges. You can't just pay someone an hourly wage and them tell them to go do their job. Not even if your job is to save lives. Those days are over.

People need goals. People need incentives. People need a reason to work.

Don't believe me? Listen to what this current baggage screener has to say about her new job.

Hotel Maids

The person that cleaned your hotel room probably makes minimum wage. The person that cleaned your hotel room has cleaned that same hotel room forever. The person that cleaned your hotel room hates that job.

Hotel maids have no incentive to deliver customer satisfaction. Hotel maids are expected to clean fast, not good. And that's exactly what happens.

It's safe to say that you get what you pay for. A $35 room probably should be dirtier than a $200 room. But, even the $35 room could provide better service and quality. Here's a profound approach to providing incentives to an employee: pay for performance.

Pay the hotel maid based on customer feedback. Pay the hotel maid for quality instead of quantity. The same goes to every other cleaning company out there.

Wake up. You're making us look bad.

Bashing Pay For Performance

The pay for performance compensation plan is bashed everyday. Executives at public companies are reportedly making more money today because of new pay for performance guidelines. In Minnesota, pay for high level executives rose last year despite stock market declines for nearly half of the public companies. Here's a comment from the article.

"People who want to make the pay-for-performance argument are finding it harder and harder," said Robert Kennedy, professor of ethics and business law at the University of St. Thomas College of Business."

In order for pay for performance to work, you need to know how performance is measured. There is no mention of a measurement system. A measurement system for a CEO should be simple. Profits or cash flow. The more money the company makes, the more money the CEO makes.

In addition, pay for performance is at its best when 100% of your salary is dependent on your performance. Minnesota executives typical compensation structure includes a set salary, bonus, restricted stock grants and gains from previously issued stock options. The assumption is that the pay for performance plan determines the bonus and possibly the stock option grants. One CEO in Minnesota reported a set salary of $2.2 million. Is there any real reason to work hard when you know that you're guaranteed more than $2 million? (In fairness, this company earned more than $3 billion last year. The article, of course, didn't mention that.)

People could make an argument for the pay for performance system if executives were actually paid for performance.

Microsoft's Pay For Performance Plan

Microsoft changed their pay for performance compensation plan yesterday. The old plan created employee resentment. You would resent it too if this is true.

"The existing system doles out bonuses and promotions based largely on a controversial numerical rating scale. The number of employees who can receive a top score is fixed, sometimes forcing managers to give a lower score to a worker even though he or she might have performed at the same level as a peer."

That system didn't reward performance. Here's the new system.

"This ranking will still have a forced distribution or curve, with 20 percent of employees in a peer group classified as "outstanding," 70 percent as "strong" and 10 percent as "limited."

This system won't work either. You can't put limitations on your employees. If you do, they will limit themselves.

What if every employee had the same right to a top score? Here's an example of a true pay for performance plan. You guessed it. It's the pay for performance plan for Two Maids & A Mop.

CEO Pay Versus The Working Man's Pay

You've got to read this article about the escalating rate of pay for today's CEO.

Leaders lead by example. Leaders lead because that's their job. A CEO is a leader. At least, a CEO is supposed to be a leader. Earning 430 times more than your average employee is not the sign of a good leader. Here's an example of the greed.

"Lee Raymond of ExxonMobil is CEO Public Enemy No. 1 these days since his astonishing retirement and pay packages are coming to light at the same time the nation is struggling with gasoline prices heading north of $3 a gallon. Are we paying for the high price of oil or simply digging deeper to cover Raymond's $144,000-a-day paycheck?"

For those counting at home, that's more than $52 million per year. What did he do to earn $52 million? We'll never know.

I've said it too many times already, but it's never enough. Pay for performance. Make the man earn it. Make him become a leader.

By contrast, over the last five years.....the three lowest paid CEO's for all Fortune 500 companies earned just over $1.5 million COMBINED during that period. The CEO's; Warren Buffett of Berkshire Hathaway, Jeff Bezos of Amazon, and Eric Schmidt of Google. Three of the most successful companies in the world. They're rich, but they're worth is tied to the success of the company. They own lots of shares in the business. If the business prospers, they prosper.

That's what I call leader.

The Marketing Of Pay For Performance

Pay for performance is a good thing. It's self explanatory. Just saying it conveys the meaning. Or does it?

I've noticed that many pay for performance programs aren't really paying for performance. Here's a great example.

I think what I'm seeing is that marketers have sensed that consumers like the pay for performance plan. However, employees aren't always as receptive to the idea. So, employers are attempting to make both sides happy. Offer guaranteed money with a fraction of your salary determined by your performance. This strategy allows the employer the opportunity to market its "pay for performance" program.

Investors usually applaud when the press release announces its new pay for performance program. New customers line up; eager to see a difference from their current provider. Meanwhile, nothing changes. Nothing changes because nothing changed.

Pay for performance works. It works when it is implemented properly. Our employees are paid based on one factor. Customer satisfaction. We're not the ideal job for everyone. We demand a lot from our employees. Our employees know that their paycheck is determined by our customers. They know that their pay can be terrible if they simply "go through the motions". And they know that their pay can be well above the industry average if they satisfy every customer.

Our pay for performance program is integrated into our marketing program. We use it to our advantage. But, our pay for performance program is different than most pay for performance programs. The difference.

We don't just say it. We do it.

America's CEO

The CEO for a Fortune 500 company makes about $10 million on average. That's a lot of money. A recent news article discussed the pay package for The Bank of America CEO.

It reports that he received $22 million last year to run the company, which included $83,000 for personal use of the company jet. Personal use! When did the guy actually work in the home office? When did he get something done? Using my crude calculations, that's about 100 trips a year assuming that each fare was at least $750 (first class of course). Keep in mind that these are personal trips. Don't forget there's probably an equal amount of work-related trips.

Apparently, investors don't think he did much of anything last year either. The share price for the company remained stagnant from year end 2004 to 2005. In my opinion, a leader leads by example. What if this guy was paid based on his performance? Would he be traveling 100 times per year? Or, would he be working?

Corporate America would be wise to start utilizing more pay for performance programs for its executives. The article briefly states that more corporations are moving in that direction. The movement needs to speed up.

Pay for performance works. It works for the Fortune 500 CEO and for the TwoMaids housecleaner. Positive energies are created because the person has the ability to write their own paycheck. Low pay or benefits is the result of one person: that person is you.

Pay For Satisfaction

The most common question that we hear regarding our pay for performance plan concerns the rating system. Many people don't understand how to rate their cleaning service. I always respond by telling the customer to rate their service based on their satisfaction level. In some cases, the person is still a little confused. It takes several explanations for them to understand that your rating is 100% dependent on your satisfaction level.

There is no formal rating structure. There is no questionnaire. There's only one requirement: your opinion.

The confusion is a direct result of the terrible state of customer service. People aren't accustomed to businesses letting them express their personal opinions so candidly. Yeah, opinions are subjective. Your opinion of a dirty home could be drastically different than your neighbors. People are different.

So, why should we create a standardized questionnaire to fit everybody? There is no everybody. There's only you. Our job is to make you happy. You determine your satisfaction.

Relying so heavily on personal opinion means that we must customize each and every home. Providing a generic cleaning program for all our customers would disrupt the pay for performance plan. It wouldn't be fair to our employees. Their pay is solely based on one thing: customer satisfaction.

Look around you and find another company that lets you express your opinion in the same manner as Two Maids & A Mop. My opinion is that we're the only the company in your life that cares so much about your opinion.

Affecting Your Doctor's Wallet

The pay for performance movement is slowly gaining strength in many industries. I was excited to see that the state of California has recently started its own pay for performance plan for doctors.

The plan still needs some improvement since only 10% of the doctor's salary is determined by performance. A true pay for performance plan determines 100% of an employee's salary. Kind of like a little maid service company in Florida.

Pay For Performance

The pay for performance compensation structure is gaining strength. The Houston school board recently voted to pay a bonus to teachers based solely on student test scores.

Houston's Pay For Performance Plan

Pay for performance tells your employees and customers a lot about your business.

1. Your employees have the elusive ownership mentality.
2. Your employees sense discipline in your business.
3. Your employees know that you’re serious about customer satisfaction.
4. Your customers know that you’re serious about customer satisfaction.

You can call it marketing. You can even call it a blatant sales pitch. But, the reality is that it works. And its better than the alternative.

The alternative is plentiful. Give the alternative a call and ask them why their business is better than the business with the pay for performance plan. They’ll have to say a lot to convince you. Meanwhile, the pay for performance business doesn’t need to say a word.

It’s compensation plan does all the talking.

The Problem With Everybody Else

A manufacturing job work environment is designed to have a hierarchy that detects and minimizes errors. This traditional work environment works for the most part because whatever is being manufactured gets reviewed before it leaves the plant. The problem with our country is that all workplaces use this structure for their business. That's the problem with everybody else.

Most businesses don't make widgets, so why do they all run their business that way? Because nobody told them any differently. Their parents worked this way, their business professors taught this way, and their competitors runs this way. Don't rock the boat.

The housecleaning industry is no different. 100% of our competitors run their business the same way. Either the employee is paid on commission or the employee is paid a set hourly rate. It doesn't work. I know it doesn't work because I used to do it. I've tried it and it stinks.

Housecleaning has a lot working against it. First, it's hard work. It's much easier sitting behind a desk or cash register. Second, it's not very glamorous. Most people don't respect the maid. Third, it's typically low-paying. Who wants to make $7 per hour when Burger King pays the same hourly rate? Finally, your customers are the first person to see your mistakes. There is no quality control department. It's a tough business to the say the least.

Enter TwoMaids and the revolutionary pay-for-performance compensation plan. It works because it defeats each of the four points. First, it makes the hard work more enjoyable. The job still requires you to sweat, but making someone happy now means more money for you. Second, it glamorizes the position because your hourly pay is probably higher than many of your friends. Third, it allows an employee to earn a good living, assuming he/she satisfies the customer. Finally, it also ensures that mistakes are minimal since the employee's compensation is entirely dependent on customer satisfaction.

Your not working in a manufacturing plant. Quit acting like it. Your employees want you to change and your customers want you to change. The only person that doesn't want you to change is your competitor. Quit acting like everybody else.