Tag Archives: commissions

Management Improvement Blog Carnival #178

The Curious Cat management blog carnival is published twice a month: with hand picked recent management blog posts. I also collect management improvement articles for the Curious Cat Management Articles site.

Disruptive Management by Bill Waddell – “The professional management experts break the fundamental rule of lean – they miss Dr Deming’s essential point. Failure is ascribed to personal failing, rather than flawed processes.”
Amazon’s Play by John Gruber – “What he’s [Bezos] done that is Jobs-like is doggedly pursue, year after year, iteration after iteration, a vision unlike that of any other company — all in the name of making customers happy.”

photo of stupas at Borobudur Buddhist temple with mountains in the background

Stupas at Borobudur Buddhist temple in Java, Indonesia. Photo by John Hunter. See a video and more photos of the Borobudur temple.

The absurdity of the 40 hour workweek by Dan Markovitz – “Even if you’re not a plumber or a lawyer, there’s a tendency to focus on the amount of time you spend on a project and what the output is.”
Metrics in Lean – Deming versus Drucker by Michel Baudin – Deming “thought MBO was a bad idea and he would not pussyfoot. 15 years later, Drucker himself came around to the same point of view and recognized that MBO had failed.” [also many comments on the post are interesting – John]

Continue reading →

Restaurant Eliminates Tipping to Improve System Performance

Why Tip? by Paul Wachter

When he opened the Linkery [the broken link was removed], Porter said, he hoped his employees would become as emotionally invested in the venture as he was, sharing a sense of purpose and joy in their work.
…
Porter instead proposed a service fee of 18 percent, to be pooled and split roughly 3 to 1 between the restaurant’s front of the house and its kitchen.
…
Porter, like the anti-tippers of yore, was persuaded tipping itself was pernicious. “If you have a fixed gratuity, but people are still tipping, then you’re back to Square 1 in terms of the money dynamic,” he says.
…
The restaurant was already paying 65 percent of its employees’ health-insurance premiums, and Porter was working on a scheme to give long-term employees ownership stakes in the business.
…
But Chelsea Boyd told me that eliminating tipping had made her work as a waiter at the Linkery more meaningful than any other restaurant job she has had in the previous 10 years. “For the first time, I get to concentrate on the job, and I’m looking at the guests without seeing dollar signs or worried about what anyone else is making,” she says. Under the old system, waiters earned between $25 and $35 an hour, much of which was untaxed. “Now, waiters make about $25 an hour, which is fully taxed,” Boyd says.

Renee Lorion, a former waitress at the Linkery who now works in publishing in New York, liked the new anti-tipping policy too. “As servers, we all took a pay cut, but we knew it was for the general health of the restaurant,” she told me. “What made it work is that Jay was very transparent about the restaurant’s finances.”

Obviously, the kitchen appreciates the new policy. “Earning three or four extra bucks an hour makes a difference,” Matthew Somerville, a cook, says. “In most restaurants, there’s not a close relationship between the front and the kitchen. But here you don’t have that tension, where waiters are trying to accommodate customers’ special requests, while the cooks doing the extra work don’t see any of the tips.” Today, Porter’s employees appear almost as fervent in their opposition to tipping as their boss.
…
The single most important factor in determining the amount of a tip is the size of the bill. Diners generally tip the same percentage no matter the quality of the service and no matter the setting.
…
In his one concession to big tippers, Porter offers them the option of donating money to charity. The Linkery’s charity of the month is printed on the menu, and in two years more than $10,000 has been raised for various causes.

This is an interesting article discussing some of the psychological and systems thinking aspects of managing a system made up of people.

Out of the Crisis

Entrepreneur.com has named their 9 best classic business books of the past 30 years including Out of the Crisis by W. Edwards Deming:

Deming’s teachings challenged American business practice at almost every point. Among his most revolutionary ideas were the notions that poor management–not slacker workers–was responsible for most quality problems, and the way to boost quality was to carefully measure defects and the effects of changing processes.

The article includes a section on what to ignore from each book, including for Out of the Crisis – “he was strenuously opposed to incentive pay plans of all types.” Incentive pay plays havoc with teamwork, systems improvement (encouraging sub-optimization), long term thinking, sales volumes (commissions increase variation in sales creating problems for production), shedding light on problems… Ignoring that is not a good idea. Other books they mention include: Innovation and Entrepreneurship by Peter Drucker and The Seven Habits of Highly Effective People by Stephen Covey.

via: MIT Press Log

Making Changes and Taking Risks

Sales Force by Curtis Hartman, 1996 explores Ron Rodin’s use of Deming’s ideas at Marshall Industries. Ron Rodin’s book, Free Perfect and Now, is excellent.

The system had to change. “We eliminated commissions, incentives, promotions, contests, P&Ls, forecasts, budgets, the entire functional organization chart,” Rodin says. It was a radical move. Contests and commissions — internal competition — were a way of life in the industry, the universal motivational tool. Rodin was hammered when he unveiled the plan in an open letter to the industry. One competitor accused him “of kissing Deming’s ring.” Another called the system “communistic.” Electronic Buyers News, the industry bible, published a biting editorial.

Yes the article is 10 years old by as I have stated numerous times I don’t believe only things written in the last week have value. Going back to the great stuff (even if you have read it before) is often much better than reading whatever is new.

Deming’s Ideas at Markey’s Audio Visual

Last week at the Deming Institute seminar: How to Create Unethical, Ineffective Organizations That Go Out of Business, Mark Miller, General Manager, Markey’s Audio Visual spoke on Markey’s experience adopting Deming’s ideas.

It was a great presentation. He did a great job of explaining what it was like to work at a company focused on applying Deming’s management philosophy. I capture some of the points he talked about below.

1986 Markey’s started providing Audio Visual support to all Deming’s seminars. The technicians came back after 3 sessions to encourage Mark Miller (employee number 16 at Markey’s) to attend, himself. He went to a Deming 4 day and decided the owners should attend. They did and then Markey’s sent employees to attend future Deming 4 day seminars.

He recommended, The Team Handbook and The Leader’s Handbook by Peter Scholtes.

Points:

Constancy of Purpose
Their business has greatly changed. Customers used to need a service provider to project onto a screen, now they all own projectors for laptops, Markey’s needs to anticipate the changing needs of customers and anticipate those needs
Page 141 of Out of the Crisis: “Profit in business comes from repeat customers, customers that boast about your product of service” (Markey’s uses Deming’s books in the training for staff)

Continue reading →