Thursday, June 20, 2013

Acknowledging Everyone's Contributions Through Revenue Sharing

When I was a senior in college I worked in the kitchen at a pizza place called Lennie's in Bloomington, Indiana to make a little extra money. I made pizzas, sandwiches, pasta, and salads. I washed dishes, I coordinated the food going out to the tables, and I helped clean up at the end of the night. Typically I worked with 3 or 4 other people in the kitchen, along with 4 or 5 wait staff and a manager. Friday and Saturday nights during the school year were always incredibly hectic as Lennie's was, and still is, one of the more popular destinations in town. Needless to say, everyone was bone tired by the end of the night.

One of the lessons you learn working in the kitchen of a restaurant is the symbiotic relationship between the kitchen and the front of the house. Unless you've actually worked at a restaurant, I don't think you can appreciate the level of team work, dependency, and coordination that are involved in delivering a quality experience to the customer.

Management at Lennie's seemed to understand this and structured payment to their workers accordingly. On top of everyone's base hourly wage, the wait staff earned tips. But at the end of the night they left a percentage of their tips to the kitchen, who then divided them evenly. Sometimes if the kitchen had bailed a waitperson out in some way, say they had mis-entered a ticket and we had to remake a customer's food, that waitperson would give us a little extra to say thanks.

Fast forward 5 years to when I became a manager at a global consulting firm. They had a profit sharing plan too, but the profit target was arbitrarily set by the CFO and no one really knew how close or far away we were from hitting that target. It also felt very abstract to the point that if I saw some of that money at the end of the year, great, but I certainly wasn't banking on it. More troubling to me however was when I began selling work on behalf of the company. I wasn't a "salesman" per se, but in the course of doing business with a client, I would certainly be responsible for "inside sales" and grow the account over time. Yet I continued to make my monthly salary. I sold projects worth 6 and 7 figures, but saw no direct benefit monetarily.

The natural answer most companies go to then is a commission model. But commissions are usually reserved for sales people. Sales people are on the front lines doing the work to find new business and closing deals and they should be rewarded for that. But they would have nothing to sell if it weren't for the hard work of the teams behind the scenes. Stock options are also a tool companies use to reward employees and do technically give them ownership, but at startups and smaller companies like ours, those are far riskier than options in publicly traded companies. Options could indeed end up being worth a lot of money, or more likely, end up being worth very little.

At Inkling, we've been doing well enough that in the past few months we've hired 3 new people to join our team. In doing so, we had to think about new compensation packages and what they should entail. One of the things we're going to try is a revenue sharing and commission structure that applies to anyone in the company. Any revenue we bring in in the future, each employee gets a cut. If they are instrumental in a new sale, they get an additional cut on top of that. These cuts will be paid out the month the sale happens, not at the end of the year.

Sales matter and keep the company in existence. But sales wouldn't occur without a team behind the scenes working on a quality product. We're going to try and openly acknowledge this relationship just like it existed at the pizza place. As the guy primarily responsible for selling however, I'll try not to screw up too many orders.

1 comment:

Unknown said...

Great stuff Adam. Was revisiting your site again - y'all are on to something great. I kept wondering when you were going to circle in the prediction market to the divvying of sales commissions. Hope you are doing great! Rich R. Birmingham AL