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Throw A Pool Party

Written by: Brian Scudamore

Article Overview: IF YOU WANT TO INCREASE YOUR PROFITS, START BY GIVING THEM AWAY—IT DID WONDERS FOR MY COMPANY

Throw A Pool Party

IF YOU WANT TO INCREASE YOUR PROFITS, START BY GIVING THEM AWAY—IT DID WONDERS FOR MY COMPANY

THERE ARE TWO THINGS to take care of in building a business:
your people and your bottom line. I think I’ve found an exciting
strategy that considers both.
Toward the end of 2003, I tossed around the idea of creating
a company-wide profit-sharing program. My reason was
simple: I wanted to retain the great people we have worked so
hard to develop, and I felt that sharing the wealth among
stakeholders would help accomplish that. When I announced
the program to everyone at 1-800-GOT-JUNK?, our
employees were excited by the possibilities. I fully expected
that. What I didn’t anticipate was just how beneficial profitsharing
would be to our bottom line.
Here’s how it came together. I wanted the profit-sharing
pool to be significant. Having determined that we needed
75% of our profits to maintain our annual growth rate of nearly
100%, I committed the remaining 25% to a profit-sharing
program that followed a simple distribution formula: employees
would receive a share of the pool proportionate to their
respective salaries.
Like most business owners, I thought that profit-sharing
would increase the company’s overall profits, but not enough
to cover the profit-sharing payout; thus, 1-800-GOT-JUNK?
would recoup less of its net earnings. Was I ever wrong! In fiscal
2004, the program’s first year, our bottom line after profitsharing
payouts increased by almost
800%. This year, our annual profit is
trending 50% higher than it was in
2004. To me, that’s a clear sign the program
is working.
How did we achieve such a huge
increase in profits? We found that the
profit-sharing program compelled every
employee to take real ownership in
everything they did for the business.
People became obsessed with driving
revenue and saving money, knowing that
they could significantly increase their annual earnings. People
started watching everything from the macro, including company-
wide revenue and profit, to the micro, such as the entertainment
or telephone expenses of individual departments.
One employee took the initiative to replace our expensive bottled-
water service with a filtered-water system, cutting our
drinking-water costs by a third and inspiring the rest of the
team to find wins of their own.
Today, employees hold one another accountable for reducing
any kind of waste. If someone prints too many photocopies,
for example, you might hear a friendly “GGOB”
reminder from one of their teammates. GGOB is the acronym
for our program, which we call the Great Game of Business.
The name is borrowed from the book of the same name by
Jack Stack, a legendary entrepreneur and one of the great proponents
of open-book management.
Which brings me to an important point: bonusing out your
profits alone is not guaranteed to cause employees to act in the
best interests of the business. They have to know which of
their actions matter. So we spent a tremendous amount of
time educating our people on our financials: what they mean
and how each member of the team impacts the bottom line.
Now, opening the books to facilitate a profit-sharing program
isn’t all roses. Imagine two employees with competing
ideas on improving profitability: one says to print the sales flyers
on cheaper paper; the other argues that better paper will
close more sales. Who’s right? I am a big believer in letting
people or departments duke it out within a limited time frame,
ultimately choosing the option that is believed to be the
biggest win for the company. It causes friction, but it’s a
healthy friction that helps the company learn to make better
decisions and, more important to the employees, maximizes
the profit-sharing pool that belongs to them.
Our open-book management process is simple. We gather
the entire staff of 55 people every month to review our income
statement. A different person is SPA (single-point accountable)
for each line item. With 17 line items, that’s 17 people—
some of whom don’t have a financial background—who
become intimately involved in a particular financial area of the
business. It’s that person’s job to report publicly to the team
why they hit or missed on their revenue or expense target. No
one likes to miss a goal and let the team down, especially in
public, so people work hard to make their numbers. We share
everything except salaries, which prompts questions and
healthy debate.
Financials can be dry, so at every step in our GGOB process
we try to add an element of fun. When it comes time for the
semi-annual Profit Pool Pay-Out Party, for instance, the
theme from The Apprentice is played as everyone applauds
their colleagues as they collect their cheques.
An additional benefit of GGOB has been cultural—it has
made us a tighter team. Employees tell me how much they
appreciate being involved in the financial management of 1-
800-GOT-JUNK?, and it has given everyone much greater
confidence in our financial health. I think a huge opportunity
awaits any business that opens its books, as secrecy in the
workplace only limits growth and creativity. When employees
are in the know, the result is better alignment, communication
and co-operation.
What have you got to lose by sharing your profits? In my
opinion, you can only gain.

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