How SurveyGizmo Does Employee Profit Sharing

Incentives are an important part of anything you do in business, and employee profit sharing is an obvious example. We’ve spent a lot of time thinking about our profit sharing plan and struck on something that seems to be working for both employees and customers. We thought we’d share it with the world.

We asked ourselves, what kind of outcome do we want for the company overall? The obvious answer is revenues and profits, but we took it down a level and looked at the key drivers of those metrics. The short answer: customers, but more specifically happy customers.

So that led us to decide that our profit sharing program should have five key features:

1. Incent employees to grow the customer base
2. Incent them equally to keep existing customers happy
3. Incent them to help the organization run efficiently
4. Be transparent and engender teamwork
5. Reward should be on-going and immediate

Growing the customer base, while satisfying existing customers

Second, we asked ourselves what we value as customers of other companies. Is it good service? An awesome product? All of the above? Obviously, it varies, but we felt that for a service like ours, both product and customer service are critical to success. The thing we valued least was salesmanship. So that means at a core level we value not just making the sale, but building a great product, and offering fantastic support to go along with it.

Each role inside SurveyGizmo contributes to the whole and we wanted to respect that. Our sales people aren’t commissioned and the wall between support and sales is a pretty small one — easily jumped over. It’s fun explaining this when we hire to either side. We wanted a plan that got everyone involved.

Efficient and Team Oriented

Finally, one of our core values is teamwork. As a small company we need to pull together and pitch-in without regard for who gets the credit. So we wanted our profit sharing plan to reward all employees, not just star performers. Based on those principles, co-founder Scott McDaniel came up with a simple, yet effective structure. So simple we can say it in one sentence. Here it is:

For every active customer we have at the end of every month, we place $2 into a pool to be shared equally by all employees.

And that’s it. New employees must be with the company for 60 days before they can participate, but that’s the only string attached. There are no complicated formulas or hidden agendas. We don’t hold back until the end of the year and hand out checks disconnected from the day to day effort. And most important, we are equally incented to delight existing customers as much as we are to get new ones.

Employee Feedback

Last week at our book club meeting we asked employees to give us their feedback on the profit sharing structure and it was overwhelmingly positive. Here are some of the reasons we like it:

• It’s very simple to understand.
• It’s transparent. Our admin console keeps a running tally of the number of customers, so all employees know at a glance roughly what to expect in their next paycheck.
• It rewards retention as well as new business. A lost existing customer is just as painful, perhaps more so, than a lost new customer.
• It serves as a natural break on hiring too far ahead of growth. Every new employee decreases everyone’s percentage slightly. So if we bring on new people and don’t gross up the difference in 60 days (when the new hire’s share kicks in), it affects everyone’s share. This forces us to ask, “How will bringing this person on help us grow our customer base?”
• It’s a terrific recruiting tool, particularly in this economy.

Of course, no bonus system is perfect. For example, you could argue that this one is flawed because it has a short-term bias. But this has worked well for us, so we’ll continue to let it ride.

How do profit sharing or bonus programs work in your companies?

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