In Favor of Pay for Performance By Dan Snyder


I


t has probably been 25 years since I first heard of “pay for performance” as it was applied to our industry. It is entirely possible that this concept had been tried previous to this and it may have even been in use at the time, but regardless of that, it was a brand new concept to me and my brother Andy. Our new family business – Snyder’s Certified Auto & Truck Parts – had been open for about six to seven years in the mid 90s. We had succeeded in building it into a fledgling orga- nization from scratch, but my (new to join the business) brother and I knew that there had to be something more. In search of that “more” we flew to Atlanta, Georgia to attend our first industry conference. Once there, I distinctly remember a conversation that we had while meeting in a common area, after we had split up to cover two different sessions. Andy had just returned from a session hosted by Jim Counts where he unveiled the unbelievable concept of “pay for performance.” My brother excitedly relayed the facts as he had notated them. While he fired off his volleys, I just as quickly returned them with all of the reasons why this concept would not work in our organization.


your intention to move in this direction, it is important that you accurately measure productivity that is currently occurring in your business. This measurement should be done over a large enough timeframe so that you get a really good cross section of all activities that are accom- plished by this particular position. Since I referred to “parts pulled” previously, let’s continue down that road for the rest of this example.


Getting a Baseline Let’s determine that both of my part pullers pulled 800 parts in four weeks. During that time period these same two part pullers earned $6,400 in gross wages. Also, for simplicity sake we will assume that all they did was pull parts during this timeframe. Simple math of $6,400 paid out, divided by 800 parts pulled calculates that you paid $8 per part pulled. Next, you will have to make an educated guess on how


So, when thinking about rules, be sure you are not micro- managing every move that your employee must make.


Shortly after our return to the business, we committed to the radical concept. Since that time we have instituted the “pay for performance” model in a majority of the positions inside our full-service business, and have even successfully imple- mented it in some of the positions at our self-service loca- tions, as well. Creating a “pay for performance” program will require an open mind and a tenacity to see it through even when it doesn’t feel like it will work. As with any business plan, it takes upfront planning to successfully create a program that will withstand time and help your business be more successful. As part of this planning, it is important to determine what your goals are. These goals should be something like: 1) Decrease the cost per part pulled 2) Increase the gross pay of top part pullers At first glance, you may ask yourself, “How can both of these happen at the same time?” Well folks, hang on! Here is where the magic happens.


Before you make any public announcements regarding Automotive Recycling


Just keep him from doing the job completely wrong.


much “wasted time” (as a percentage) that these two part pullers typically spend playing on their phone, extra time in the bathroom, missing time when you cannot find them, etc. This is not an exact science, but experience through the years has shown for us that 15% to 20% is approximately the number. Now that you have this number, multiply that % times the $8 per part that you calculated earlier. Using 20%, this calculated cost per part pulled now is $6.40. This will be your starting pay amount for parts pulled. This educated guess and the following calculation are


extremely important. If this step is ignored or not calcu- lated correctly, your transition to “pay for performance” will not accomplish the goals that you set forth above.


Setting the Rules No good “pay for performance” program is instituted without rules, penalties, and expectations of quality. All of these must be well thought out and documented before you roll out the program. Rules are the “rumble strips” at the side of the highway that keep people from wan- dering off into the ditch. These “rumble strips” don’t keep you from wandering around between the ditches, they just keep you out of the ditches. So, when thinking about rules, be sure you are not micro-managing every move that your employee must make. Just keep him from doing the job completely wrong. These rules are the way that you will set your expectations and bring them back to the “middle of the road” when they begin to wander.


May-June 2021 //43


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