Keys to a Great Management Bonus Program
By David Scott Peters
Structuring a bonus program in your independent restaurant is actually not that difficult. 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.
Here are 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:
- Job Description: This is 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. The beautiful part about a well-laid out manager job description is it 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: Budgets give you, the operator, the ability to set targets, measure progress, evaluate performance and ensure you run profitably. As a part of the budgetary process you have to create realistic targets such as food cost, pour cost and labor cost percentages you want management to achieve. Honestly, without a budget and targets in place there is no structure for any reasonable bonus program. You might as well run a charity.
- 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? For example, just giving your management team a 30 percent labor cost percentage to shoot for isn’t enough. 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 potential profits for you.
- Scoring Systems: When I refer to scoring systems, I am referring to both those that you impose and those that are imposed on you. For instance, your health department inspections scores and customer complaints are imposed on you. You should also be utilizing secret shopping services, customer comment cards and internal inspection forms to make sure your restaurant is working in all areas. Profitability alone should never be your sole focus. While scores are not something you can put a hard dollar cost to, in many instances, low scores can kill your business. So 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.
- MBOs: I successfully used Management by Objectives (MBOs) early on in my career and it remains a staple in my business planning to this day. 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. MBOs is a systematic process that helps management focus on company goals and reach the best results possible. 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.
- Timely Reporting: 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.
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. You have to hold them accountable before you can reward them. 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 IMMPLEMENT LIST. With these systems you can begin structuring your management bonus program.
David Scott Peters is a restaurant expert, coach, trainer and speaker, specializing in teaching independent restaurant owners how to use systems for increased sales and increased profits. He is the nationally acclaimed restaurant coach whose unique “SMART Systems” approach to boosting profits has earned him the title of, “The man who can walk into any restaurant in America and find $10,000 in undiscovered cash before he hits the back door – Guaranteed!” Visit www.TheRestaurantExpert.com for more. Learn more tips, tricks and secrets in David’s free five-part e-course, “How to Explode Your Restaurant Profits NOW!” Simply sign up to receive the e-course at TheRestaurantExpert.com.