#76 CHOOSING THE MANAGER “the formula for compensation”
“Our store managers make more than our office people. Some of our office people, especially some with MBA degrees or CPA certificates sometimes wonder about this. But I have warned them, don’t bitch to me because this is the way that I want it. If you want to go out, start at the bottom changing tires and work into a manager job, then hop right to it. If it weren’t for those men in the stores working their butts off in all kinds of weather, missing meals. God awful hours, etc, you would not even have a job.
Les Schwab
Les Schwab Tire Centers
From his book
“Pride in Performance”
We believe, at green garden gates, that our store managers are the most valuable employees of our company. We just would not have a business if it were not for their hard work and commitment. Here is the compensation package that we have developed for them.
1. Base Pay
The base pay for a store manager is 32,000.00 per year, regardless of whether the store is in operation or has closed for the season for that year. After three years, the base compensation moves to 40,000.00
This base never changes, after three years, no matter how long the manager is with the company. We believe that as the store develops and becomes more profitable, other compensations will increase dramatically.
2. Residential compensation
The store manager is required to occupy the residence at the site for three consecutive garden seasons. The furnished residence is provided to them rent free for this period. In addition, water, garbage service, internet access is provided free of charge. The manager is only required to pay for gas, electric utilities, and television cable at the residence. The value of this package is estimated at 12,000.00 per year. When the manager leaves the residence after the three seasons, moves elsewhere, but still is manager of the store, a sum of 10,000.00 per year will be added to the compensation package. The furnishings of the residence provided by green garden gates will stay with the residence
This 10,000.00 allowance is only fair to the manager, since an other residence will have to be purchased or rented that would drain the base salary if it were not in place.
3. Moving Allowance
A moving allowance (which includes all related on the road expenses) is provided for the manager. If the distance is less than 500 miles, the allowance is 1000.00, If the allowance is greater than 500 miles, the allowance is 1500.00. If the manager does not use all the allowance, 50% of the retained money is returned to green garden gates. The remaining 50% can be retained by the manager for personal income. If the moved is from out of the country, an amount will be determined on each individual circumstance. All receipts for the move are the property of green garden gates. Estimated value of this compensation is 1200.00
We encourage the manager to economize on the moving expenses and we reward the manager for doing so.
4. Vacation Pay
The manager is given two weeks vacation pay starting at the beginning of the employment. The two week vacation is never increased no matter how long the manager is with green garden gates. The vacation days can only be taken from July 4th to March 1st of the next year. Estimated compensation: 1200.00.
This store manager cannot be away for vacation and absent from the store during the gardening season. We know that some companies increase vacation pay with length of service. Since our manager is compensated during a long off season and her hours of service required by us is reduced, she is able to vacation during this period.
5. Medical, Dental, Vision, Prescription Compensation.
A single comprehensive policy is provided to the manager, of which 80% or a determined amount of money is paid by green garden gates. Direct family dependents are allowed on the policy but that part of the premium is the responsibility of the manager. Children under 18 years if age and under the direct care of the manager must have health insurance while the manager is employed with the company. Green garden gates will compensate for these dependants by paying 50% or a determined amount of money of their premiums. After three years with the company in the capacity of manager of a larger position, that 80% contribution is reduced to 40% of the premium. The dependent premiums remain at 50% or a determined amount of money paid by green garden gates. The policy provided for the manager and dependants is the general policy of all green garden gates employees. If the manager chooses other health insurance program outside the company program, the premium contribution by the company is a matter for negotiation. Estimated compensation: 6000.00
It is vital that our managers and their direct children dependents have a good health insurance program. The worry over paying for illnesses and accidents causes undue stress on the manager and will interfere with his or her focus on the success of the store.
Why do we reduce our percentage of compensation to the manager as the years progress? We believe that the manager, as she receives more compensation, is in a better position to contribute more to her health insurance. We need to use this money for the other employees who are not so fortunate as the manager.
Note on insurance compensation: This is a financial trap for owners of all businesses. The rising costs of health care makes it difficult to predict. It may happen that a company is not able to afford a fixed percentage of the premium. Give yourself some wiggle room here. DON'T OFFER JUST PERCENTAGES! Always leave the option of contributing a dollar amount to health insurance.
6. Personal Time Days
We give to the manager a bank of 10 personal time days each year that can be used for any reason; illness, death in the family, required personal events or other emergencies. If there are any unused days after December 31st of each year, 50% of those days are paid directly to the manager and 50% of the days are relinquished back to green garden gates. The time is not accumulated each year. Estimated compensation: 1100.00
We encourage of managers to attend to necessary personal issues if the need arises. We do not, however, want these days to be “banked” and accumulated year after year. We invite our managers to be vigilant with these personal days and reward the manager if the days are not used.
7. Use of a company vehicle.
The manager has the use of the company vehicle for personal use for a reasonable period during the three year period while the manager is in residence at the site. Care must be taken to avoid overuse of this privilege. Fuel for personal use must be compensated back to green garden gates. All licensing and insurance and upkeep will be paid by the company. Estimated compensation: 1000.00
There are just some times when the company van will be quite helpful to the manager in his or her personal chores or travel. We want the manager to use this vehicle in a reasonable fashion. Commuting the child back and forth continuously to a soccer game is not reasonable. Using the van to move furniture is reasonable. A ten day trip to
8. Product Discounts
The manager is allowed a 40% discount from the regular retail price of all products in the store or cost plus freight whichever is the lesser amount. The discount is for the manager but can be for others. However this privilege is limited to immediate family members, brothers, sisters, mothers and fathers. Estimated compensation: 500.00
9. Bonus Fund
There is a bonus to all employees if the store is profitable. The bonus is paid to all employees in two installments. The first is 60% of the earned bonus during the third week after the closing of the store at the end of the season, usually in mid November depending on the geographical location of the store. The remaining 40% is held and paid out in July of the following season. This bonus compensation is about 25% of the remaining net profits of the store after all other employee programs have been funded and the retained earnings for the company. ( see entry # 120 for details) The estimated compensation for the store manager each year for the first three years is estimated at about 10,000.00 per year. A breakdown on this formula is in entry #119.
This bonus can make a huge difference in the morale of the manager and the employees. The tough times of springtime gardening selling just don’t seem so bad with that big July check for their remaining previous season bonus is in their pockets.
We hold out 40% of the bonus for a couple of reasons. First, if the employee decides not to return the next season, the premiums the company has paid during the months the store is closed, will be deducted from their final bonus check.
Second, employees are required to notify green garden gates if they are not returning the next season by January 31st following the season closure in November. If the employee does not notify ggg on or before that date, The employee forfeits all claims to the remaining bonus from the previous season. We have a firm date on notification because we need to recruit early for the upcoming season.
Under no circumstances will the employee be denied the remaining bonus dollars if they our employment. The money belongs to them, they earned it for their work the previous season. We will deduct the medical premiums we have paid during the down time and award them the bonus money regardless if they left our employment.
A. Long term retirement/ investment compensation.
The ggg trust fund
Green garden gates contributes to a trust fund for each employee and the manager of the store at the rate of about 15% of the employee’s monthly salary. The employees and manager are not required to match any money given by the company. This fund, called the ggg fund, is the property of the employees. However, no draws can be taken by the manager from his or her contribution to the fund until the value of the fund exceeds the yearly operational costs of that store. Owners of green garden gates use the fund money for property investment in store expansion. Upon retirement and resignation from green garden gates, the company pays the fund balance to the manager in yearly payments over a five year period. For the first 10 years of employment, there is a substantial penalty in the amount of the accumulated fund if the manager or employee has been found to be dishonest in his or her position with green garden gates. Potential compensation: 5000.00 per year, first three years
“The most forgotten man in any business is the man who works, does his job day after day, doesn’t cause any problems, seldom misses work, and doesn’t demand or ask for unreasonable things. He is not only the most forgotten man. He is the most abused. We are going to make it possible for a man to work 30 years on the hourly job, and still be a successful man. We need these men; they are often times the backbone of our company”
Les Schwab
“Pride in Performance”
B. Elective Compensation
B1. Christmas business ownership
We, at green garden gates, are not interested in developing a Christmas business. It is our intention to close the store in the late fall and resume operations in the early spring to prepare for the gardening season.
The manager has the opportunity to sell Christmas related products and services at our store. We will charge the manager a reasonable fee for the use of the facilities during that period of time. The manager is responsible for all other expenses and financial exposures related to this Christmas business, purchase of inventory and equipment, employee hiring, taxes and payroll expenses, advertising, any lines of credit, insurance for that period, and clean up of the facility. The salary of the manager continues during this period of time. The business is to have a separate federal and state tax numbers. All billing is to be tied to those tax numbers. All of the profits from the Christmas business belong to the manager. We have an understanding with the manager that customer service and customer relations are to have the same standard as green garden gates. The manager is allowed to use the “green garden gates” logo for this Christmas business. The manager cannot expand the Christmas business in other locations and cannot be a party in any way to a Christmas business other than at the store location. Green garden gates management has the right to inspect the business operation to insure that the company standard is in keeping with green garden gates formula. Potential compensation: 10,000.00 to 20,000.00 annually.
We believe that this is the opportunity for the manager to earn additional income during the off season of the store. It is a great learning experience for the manager in understanding the challenges of business ownership that will give them more skills in managing green garden gates.
B2. Off season part time employment
The manager of green garden gates has the opportunity, when the store is closed for the season, to be employed in an outside part time job to gain further income. The part time work can be a maximum of 20 hours per week or 4 hours per day. We, at green garden gates, expect the remaining work day or work week, a minimum of 20 hours per week, to be devoted to preparation of the store for the upcoming season. Under no circumstances can this part time work interfere with the operations of green garden gates and cannot conflict with the interests of green garden gates. Potential additional income: 2000.00
B3. Educational advancement
The manager has the option to pursue educational advancement that directly relates to skills needed for his or her position at green garden gates. This may include seminars, college courses, and special programs offered by the industry and approved by green garden gates. The company will reimburse the manager for expenses for this training, travel, tuition, meals, and lodging. Potential compensation: 3000.00
We believe that there is personal and professional value to the manager for this training while employed by the company and after his or her career with green garden gates.
First 3 years of employment
Immediate estimated yearly compensation 63,000.00
Elective yearly compensation 15,000.00
Total compensation package per year 83,000.00
Estimated yearly long term accumulated ggg fund 5,000.00
Total Compensation package 87,000.00
After 3 years of employment
Immediate estimated yearly compensation 75,000.00
Elective yearly compensation 25,000.00
Total compensation package per year 100,000.00
Estimated yearly long term accumulated ggg fund 15,000.00
Total Compensation Package 115,000.00
Future Compensation
The manager may elect to have a long term 20 year career with green garden gates. He or she may be chosen to move to a larger higher volume, higher profit store in the network or expand the present store to a much higher level or performance. Here are some estimated numbers for future compensation of that manager.
Long term employment with green garden gates
Immediate estimated yearly compensation 86,800.00
Elective yearly compensation 25,000.00
Total compensation package per year 111,800.00
Estimated yearly long term accumulated ggg fund 100,000.00
Total Compensation Package 211,000.00
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