It’s popularity peaked a few years back, but the E-Myth series is popping up in my circles again. In the E-Myth books, Michael Gerber argues that new businesses fail because people who are good at a thing–painting, writing, plumbing, whatever–start a business and figure they can be successful because they’re good at the thing they do. He says these folks need to be good at business if they want to succeed. I won’t dispute that point, but he goes on to argue (and I’m going to over-simplify here) the way to do that is to set up processes and systematized workflows to run the business in such a way that the entrepreneur is freed of responsibility for daily operations.

Which I guess makes sense if you’re running a factory.

Process is Good…

I’m not contra-process. I’m a process guy. Dismantling and rebuilding a proposed policy or process so I can create an exhaustively thorough and detailed flowchart is something I often bemoan having a natural affinity and mental compulsion for doing. Processes make a lot of things easier, but like love, processes cuts both ways.

…But Not Great

If you want to experience first hand why this matters, go to your local downtown and find a locally owned, non-franchise business. Spend 30 minutes asking paying customers why they chose the small business over the chain stores.

They sure as hell won’t say process.

They’ll probably say something like customer service, small town feel, or unique offerings. You know, the things small businesses can do that most big companies can’t.

Processes Work…

Now perform the same experiment at McDonalds and you’ll get process-centric answers: convenience, low cost, speed. You know, the things that make big companies big.

…But Will They Work For You?

If your business is built of processes, you can hire unskilled workers, pay lower wages, have more control and get reliable, measurable output. But you’ll be hiring robots, not people.

If you want people capable of using their judgement, creativity and innovative thinking, then you need to work on your culture and values. Scrap the processes.

So why do managers in small businesses give so little thought to how they reward (and thereby attract) talent? My experience is that these managers think they lack the resources for competitive compensation, but what they really lack is imagination.

Talented employees don’t need a complicated “Compensation and Incentivisation Program.” They need rewards. Done properly, this gives you the tools to attract great talent and to develop your employees. Fortunately for managers in small businesses, one only needs a few kinds of tools:

Salary, Wages, Benefits

This is what you give employees for showing up on time, working as part of the team and not screwing anything up terribly. Sadly, this is the beginning and end of most “Compensation and Incentivisation” packages. Since it’s the baseline, it only encourages baseline behavior.

Performance-based Rewards

Most fast-talking, book selling “management gurus” like to call this “incentivizing” employees. I chose not to call it that because the ideas and culture that have grown up around the term are limiting. Performance-based rewards are useful for any behavior you can measure and track responsibly. Sales Commissions are a good example, but unfortunately most businesses stop there.

Example

A common performance-based metric in service and repair businesses is turnaround or time-to-completion. The faster you repair a customer’s car, computer, or appliance the happier the customer is. In scope-limited, repetitive tasks, employees can be rewarded for getting faster. In variable-scope tasks employees can be rewarded for the degree to which they surpass a productivity baseline.

Warning

Performance-based rewards can be powerful, but consider what you measure very carefully because quantitative metrics will always sacrifice a qualitative human factor. You need to balance this with other rewards or corporate culture.

Warning Example

Because shorter support calls mean shorter wait times, nearly every call center on earth tracks and rewards call times (that is to say, they fire reps with long times). But fast Reps are likely to be terse to the point of curtness and focused on closing the call quickly, not on empathy or customer experience.

Targeted Rewards

Encourage positive behaviors that cannot be easily or responsibly measured. That may seem challenging, but it is by far the easiest reward to implement. Pick out a handful of positive behaviors or positive outcomes and publicly share competitions or rewards for them. You won’t be able to find these behaviors in your timekeeping or business process systems, you have to actually work with your employees and customers to find them. Anything that you’ve had to repeat in staff meetings is a candidate for a targeted reward.

Example

Errors in pricing and informational signage are embarrassing and potentially costly for a retail business. Reward employees for pointing out errors, discrepancies, or out-of-date information. Don’t give away the farm, but make sure your rewards scale with the value of the behavior.

Spontaneous Rewards

Encourage positive behaviors or outcomes that you have not stated–or even decided upon–in advance. This requires constant vigilance on the part of managers, but can pay off in a big way. I’ve noticed that spontaneous rewards are most effective when they’re frequent, small, and non-monetary: two movie tickets are often more appreciated than a $20 bill.

Spontaneous rewards also have a valuable ripple effect: they encourage employees to look for and practice new types of behaviors–often subconsciously–in hopes of earning a reward. To capitalize on this you must recognize behavior regularly, or you’ll lose momentum and instead encourage dissatisfaction among employees: they will think, and rightly so, that your rewards were all lip service.

Example

An employee stops in the parking lot to pick up trash in front of your building on the way in. It demonstrates that the employee cares about the business: that it is clean and well-perceived. A targeted reward for this would be unmanageable or dangerous (encouraging coordinated littering and cleaning) but the positive impact on your culture and business as a whole is worth recognizing and the attitude behind it worth cultivating.