Nick Bock, CEO of Five Nines Technology Group, is opening his financial books to his employees. And at the same time, Five Nines has shifted from traditional bonus plans to a company profit sharing plan. The results sound promising. And Bock sounds pretty upbeat about his managed services business for 2011. Here’s why.
By shifting from a traditional bonus plan to a profit sharing plan, all employees are now trying to influence company sales and profits in the right direction, says Bock. A prime example: Technology engineers motivate the sales team to pursue higher-margin IT projects and business engagements, rather than competing all the time on price.
At the same time, an open book policy gives employees a better feel for the company’s performance — and the impact travel, IT investments and other expenses can have on a company’s profit margins. The net result: All of Five Nines’ employees play a role in company profits — and it sounds like company profits set a record in 2010.
I certainly hearing from more and more MSPs that use an open book financial policy. The topic also generated healthy discussion on MSPmentor about a year ago.
Despite the promise of open book financial policies and company profit sharing, I can see some potential downsides. In particular, if you’ve got a true rain maker on your staff I’m not sure why that person would want to potentially work in a cross-company profit sharing model. Or to put it more bluntly: Sometimes stars want to earn top dollar. Period.
Still, a company-wide profit sharing model sounds like it’s working quite well over at Five Nines.
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Posted In: Finance | North America | Sales
Tags: Five Nines Technology Group | Nick Bock | Open Book Finances | Open Book Financials
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Joe, in many organizations that I’ve worked in, the non-sales people participate in the profit-sharing program. Sales continues to be paid commissions/bonuses based on their sales performance. This allows the rainmakers to continue to operate in an environment that motivates them to excel.
In some other organizations, sales also participates in the profit-sharing, but at a lower rate than other employees, as they will continue to have a commission plan. This allows their commissions to be a main driver in their motivation and behaviour, but also makes them part of the organization with a view and motivation to ensure maximum profitability.
Ryck: Thanks for describing some of the additional carrots you can use to inspire/motivate sales. I’ll be checking in with MSPs in the days ahead to see what other motivational and compensation steps they’re taking.
-jp
We have been using such an open-book profit-sharing scheme for 6 years. Although the scheme is doing wonders for openness and communication, there are some potential downfalls, e.g: if the company is not doing so well in a certain period (for whatever reason), some employees can get very demotivated and (unnecessarily) fear for their jobs. Also, even though the theory is that everyone will work towards having a greater profit share, it still doesn’t take the requirement away for strong company leadership and a focus for all efforts (as many people really struggle to understand what efforts would truly make a difference to the profit share and become disillusioned if they work very hard, but because of a lack of focus the company doesn’t really achieve its profit targets and the hard work is not rewarded).
Having said all of this, however, I still wouldn’t want to change it for any other incentive scheme!
Regards
Mark
Space Age Technologies
Does anyone know of a good reference for determining profit sharing percentages. I am most interested in what people are paying Senior Engineers and the position of a Director of Engineering.