By David Scott Peters
If I had a nickel for every time I am asked about how to properly structure a management bonus program, I could start thinking about retirement. No really, this has got to be one of the most-asked questions.
The truth is that structuring a bonus program is actually not that difficult. Often the bigger challenge is having the right systems in place to build it properly. Without the right systems, many management bonus programs are what I call management “entitlement” programs, where managers expect a bonus just for showing up.
To help you avoid this profit-sucking mistake, I am going to share with you the six systems you need to have in place to write a useful management bonus program that will encourage your managers to earn their bonus:
This is a no brainer, yet often overlooked when we talk about management. Without a detailed job description for each level of management in place, you have managers on the floor who have no real clue of what their job is or how well you expect them to do it.
This becomes your paint-by-numbers outline when you start to write your bonus program because your minimum expectations are already outlined in black and white.
Budgets give you, the operator, the ability to set targets, measure progress, evaluate performance and ensure you run profitably. Honestly, without a budget and targets in place there is no structure for any reasonable bonus program.
Prime Cost Control Systems
When you have budgets in place for your restaurant, you have cost of goods sold and labor targets (together they make up what is called your prime cost), but do you have systems in place to help management achieve those targets? You must give them a road map of how to control those numbers and achieve their goal, or you might as well not even bother implementing a bonus program. They will never hit their goals, which ultimately translates to lost profits for you.
When I refer to scoring systems, I am referring to both those that you impose and those that are imposed on you, such as the health department for the former and customer comment cards for the latter. Profitability alone should never be your sole focus. Implement, utilize and evaluate your scores. They will tell you a lot about how well you are doing and should be included when evaluating managers’ performances.
The concept of MBOs was originated by Peter Drucker at The Harvard Business Review. He is called the Father of Modern Management, and he outlines MBOs in his 1954 book, The Practice of Management. There are five basic steps to the MBO Process, which are: 1) Review the objectives the company would like to accomplish, 2) Set objectives for your management team, 3) Continually monitor progress, 4) Continually evaluate progress, and 5) Reward the achievers. When you’ve done all that, you then start the process over again.
Last but not least, you have to have timely reporting. It’s not good enough to have all of these systems in place if you can’t gather, analyze and distribute your results to your team on a timely basis. Taking too long can de-motivate your management team and even worse yet, cause you to lose money.
With the right program, your managers will work harder than ever to earn that bonus and won’t blame you if they miss their targets. My goal with this article is to get you thinking about how important systems are in your restaurant and how they relate to rewarding your management team. Go down the list and take an inventory of what you have in place and if something is missing, add it to your I MUST IMPLEMENT LIST.
David Scott Peters is a restaurant expert, speaker, coach and trainer for independent restaurant owners. He is the developer of SMART Systems Pro, an online restaurant management software program helping the independent restaurant owner remain competitive and profitable in an industry boxed in by the big chain restaurants. He is best known as the SMART Systems guy who can walk into any restaurant and find $10,000 in undiscovered cash before he hits the back door… Guaranteed! Learn more at www.TheRestaurantExpert.com.