Money Matters

Is Your Pay Structure The Problem?

How a salon chooses to pay its staff can make all the difference in employee retention, quality of service, profitability, and your ability to compete. After payroll, salon owners are often left only with their own tip money and revenue from services they've performed. Should you abandon the traditional commission structure for a pay system that rewards behaviors that are key to the salon's overall success?

Straight commission also allows new employees to burn through clients without any concern for quality of client care, retention, or the type of service promoted and performed. Commission pay further reduces the likelihood of package sales and can de-emphasize the importance of cross-selling to technicians within the salon offering other services.

A sound pay structure will emphasize and reward those behaviors that are best for the overall health of the business.

Customer Satisfaction: The bottom line in a customer service industry is the customer. Consequently the client’s approval of the quality of the service as well as the quality of the overall service experience is paramount not only in terms of measurement but also in terms of reward. Methods of client satisfaction measurement include tip tracking, customer surveys, and brief exit questions at the check-out desk.

Client Retention: How soon after an initial appointment a client re-books, if her pre-booked appointment is kept, and if the client returns to the facility and to the same technician are all important facts to track. Sure, if a client is lost it may be due to uncontrollable circumstances like moving, death, or another form of common attrition. However, retention of clients as a fundamental concern should be paramount when justifying marketing, advertising, and other costs involved in attracting a new client to a salon or spa.

Teamwork and Attitude: The functioning of a well-run salon has much more to do with the big picture and the effort put forth by a friendly team than the productivity of one technician among many. Rewarding professionalism, appearance, punctuality, and teamwork is crucial to the overall success of the business.

Goods Sold: If a business could choose between a service that generates $5 per minute over a service that generates $1 per minute, which service would be the better choice? A straight commission method of pay turns a blind eye to the type of goods sold and simply rewards the technician based on gross dollar amount. Similarly, a service that sells more home care, promotes a package of services, or results in future salon sales would be preferred over a service that would be only performed once and would lend itself to low retail returns.

Referrals: Attracting new clients through traditional methods such as advertising and general marketing efforts can be costly and slow to take effect. Rewarding employees on successfully generating client referrals, therefore, makes sense because it benefits the immediate bottom line of the business and most likely contributes to future sales.

Methods of Pay

Creating a new system of pay doesn’t need to be overly tedious or confusing. Go about the project as if creating a wonderfully delicious casserole. The main ingredient needs to be some fundamental base pay. A low hourly rate of pay is a good place to start. An hourly base reinforces the fact that an employee is technically “working” even when not with a client. Cleaning up, answering the phones, greeting clients, and helping fellow team members are all general duties that are always expected when a technician is at work, or “on the clock.”

After the base ingredient has been determined, add the spices and complementary items that make for a fuller flavor. Make a list of behaviors that your spa would like to reinforce to employees as important and necessary to the success of the spa. A standard method of pay might go something like this for a nail technician:

• Base pay of $7 for hours worked or “on the clock.”

• Commission pay of 20% for services performed.

• Additional commission pay of 10% for add-on services that are a client after-thought and not a part of the original appointment. For example, a paraffin dip added on to a basic manicure.

• Retail sales commission that varies from a base sales amount rewarded at 5% all the way up to a 20% commission rate for private label items or those products for which the spa enjoys a higher profit margin.

• A quarterly review process that examines subjective matters, like leadership skills and attitude, alongside objective performance, like average ticket and retention rates, to give the employee an overall assessment of where she stands (as measured against regional and national averages and as measured against her teammates).

• A group review of accomplished goals for the entire salon that each department or the staff as a whole is responsible for measuring and improving. Allowing the team to set future goals and the means by which they are measured is a wise empowerment tool that allows for increased ownership of responsibility and enhanced overall performance.

This overall review must take place on a quarterly basis and be clearly communicated to each staff member. Mini-reviews and weekly or monthly coaching sessions are also helpful in determining where each employee stands.

No matter the specifics of the pay system chosen, including variables that measure specific skill sets, behaviors, and tracked goals will help keep employees moving forward. Additionally, the more employees feel responsible for the success and failures experienced in the business as a whole, the more thought and effort they will invest in the business, their team members, and their individual performance on an everyday basis. ■

Melinda Minton is an industry consultant, president of Minton Business Solutions (Fort Collins, Colo.), and founder of The Spa Association.

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Keywords:   business     keeping your business competitive     money     service pricing     staff management  



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