“How in the hell could a man enjoy being awakened at 6:30 a.m. by an alarm clock, leap out of bed, dress, force-feed, brush teeth and hair, and fight traffic to get to a place where essentially you made lots of money for somebody else and were asked to be grateful for the opportunity to do so?”—Charles Bukowski, “Factotum”
We get a lot of pushback on our use of revenue-based bonuses. Don’t get me wrong: they do work to solve the problem that Bukowski so graphically described in his 1975 novel. We know this from our experience with our own advisor clients, and from feedback that we get from other advisors as well.
Still, there seem to be many owners-advisors out there who are adamantly against sharing their revenues with their employees. While the emotional level of their responses makes us wonder if their real motivation isn’t rooted in plain old greed, they also tend to offer the same objections, which usually lack a basis in either logic or experience.
I recently had a “spirited” discussion with one such advisor, who acquired one of our client firms. At our suggestion, our client had used revenue-based bonuses for years: the employee motivation this created has enabled the firm to grow consistently at double-digit rates, with a much higher level of client service. But the senior partner had decided to retire in the next couple of years, and the junior partner didn’t want the responsibility of running the firm. So we had begun looking for a suitable merger partner.
One firm we have been taking with appeared to be good fit, based on corporate culture, approach to client service, services offered and client niche. With one exception: the revenue-based bonuses. Now don’t get me wrong: this firm’s owner isn’t a bad guy. In fact, he consistently pays his employees substantially higher salaries than most other advisory firms. (Actually, too high salaries, in our view.)
Still, the idea of annual bonuses tied to the firm’s revenue just seemed to rub him the wrong way. He couldn’t really articulate his objections, until the other day when he told me he’d been researching HR publications on compensation structures, and learned that “money doesn’t motivate.” Therefore, he concluded, the concept of revenue-based bonuses is flawed.