Help your employees get rich, you will like how it feels
Today I would like to talk about the stupidity of small thinking. While I worked at Radio Shack (1972-1997) our company was run by Charles Tandy. While we had other leaders during that time, and Charles actually passed away halfway through my time there, we were run by his ideas.
Charles was a brilliant man. He realized early on, that if the people working for him participated in the success or failure of the company the company would do well. I know, you are all saying “duh” about now, but that concept is the history in many of our biggest companies. Everyone in the company only did well if there was success. There were some lean years along the way, where we all suffered, but the years that were successful were very successful.
Charles also realized that you couldn’t pay your winners too much and you couldn’t pay your losers too little. He believed that any store could be turned around. I don’t know how many times I heard about the store in Bakersfield that was a loser until it got the right store manager in it, and then it was a big winner. And when that store turned around, the store manager made a bundle - as did the District Manager, the Regional Manager and the Divisional VP.
That passion of recognizing and rewarding the winners survived past Charles Tandy through Lew Kornfeld, Bernie Appel, and John Roach. They never worried about paying people too much or too little. They followed the pay plan that Charles developed that did not pay anyone anything; rather it let people earn what they were worth. You never had to go in and negotiate with your boss for a raise because you knew exactly how to increase your pay, each and every day. The more you sold, the better you protected the assets, the quicker you got rid of old and excess inventory and the more money you made.
We were paid well. In 1980-81 fiscal year I had the opportunity to run the most profitable district in the history of Radio Shack. The average store manager working for me that year made over $50,000…in 1980. And their average salary that year (not total earnings but salary) was less than $20,000 per year. They earned the rest. No one, not the CEO, CFO, Treasurer, not anyone worried about how much we were paying our team because every single one of these people earned their pay. They worked hard, “owned” their business and worked to develop more people just like them. That year we promoted 20% of our Store Managers to District Managers. Many of these people took pay cuts for promotions because they knew that they could earn more in the next job because we had with no limit on what could be earned-either on the high end or on the low end. We loved to pay big money.
Today, that same company is struggling because they let fear and worry invade their business. They worried about the manager of the small volume stores and they feared paying their top managers too much money (I had 5 store managers make over $100,000 running one Radio Shack in 1980 out of 25 total stores). They should not have worried about the small store managers. They should have spent that energy working with the small store manager to become a big manager by improving that small store. And, they should have looked at the criteria they had to build a new store. With the fear of opening a small store hanging over their head, perhaps they would have been more careful in their site selection. Opening a store just for the sake of opening one is not smart business.
And now, worrying about paying people too much money! I can tell you I never had an easier job as a District Manager than running that district in South Florida. Because the people were doing so well, and our smaller store managers saw how well the big store managers were doing, everyone worked very hard. We improved in every single category we measured. In stock, sales gain, gross margin, names and addresses, inventory turns, every single area showed improvement, because we had people that had a taste of success and they liked the flavor.
As a young DM, Marvin Cash told me that everyone who reported directly to Mr. Tandy was a millionaire. Marvin said Mr. Tandy had the best job in the company because everyone working for him knew what success tasted like and knew that hard work and good execution would keep that taste in their mouth.
Don’t be afraid to let your people earn so much money that they will be rich beyond their biggest dream. Give them a reason, encourage the culture and pay for success. You will enjoy the moment.
Guido Pentsy, the most successful manager in the history of Radio Shack, once told me that if all my store managers got wet in the shower of money, that I would take a shower as well. He was very right. I would like to invite all of you to take a look at Axcelora (www.axcelora.com) and come get wet with the rest of us.
Rich Hollander is a retail expert with over 40 years in the industry.