The Mason Duchatschek Show - Full Length Podcasts by Workforce Alchemy - Dailymotion

Workforce Alchemy

See full length episodes of The Mason Duchatschek Show (podcast) here! Follow and subscribe to the Mason Duchatschek Show (Podcast) here: https://podcasts.apple.com/us/podcast/the-mason-duchatschek-show/id1266736989 * Apply to participate in the challenge, gain expert knowledge (for FREE) and earn up to $1000 worth of tools to help your business or department run better and faster without unnecessary drama or expense. Apply for the Workforce Alchemy Challenge: https://workforcealchemy.com/ Follow us on social: Facebook: https://www.facebook.com/ReverseRiskConsulting Instagram: https://www.instagram.com/workforcealchemy/ YouTube: https://www.youtube.com/@WorkforceAlchemist Rumble: https://rumble.com/user/WorkforceAlchemy Dailymotion: https://www.dailymotion.com/WorkforceAlchemy Twitter / X: https://x.com/WorkAlchemist #WorkforceAlchemy #WorkforceAlchemyChallenge #MasonDuchatschek #Leadership #LeadershipDevelopment #HumanCapital #SHRM #HR #humanresources #business #recruiting #humanresourcesmanagement #businessstrategy #businessmanagement #businesssuccess #ceo #LaborRelations

Transcript

00:00What if the secret to explosive business growth isn't found in better marketing,

00:04tighter budgets, or even smarter strategy, but in how you share the rewards of success

00:09with your team? Today's guest, Rob Gallagher, literally wrote the book on this topic,

00:14and I'm glad he's here with us today to talk about it. Over the past decade,

00:18he's been refining a system that transforms workplaces by aligning the interests of employees

00:23and employers through profit sharing. His book, Profit Sharing, The Power of Shared Success,

00:29is part roadmap, part revelation, and 100% relevant for leaders who want to build cultures

00:35of trust, performance, and loyalty. Rob is here to challenge the way you think about compensation,

00:41motivation, and long-term business success, and to share stories of companies that got it right

00:45and others that didn't. If you're wondering how to engage your workforce more deeply,

00:51reduce turnover, and unlock discretionary effort you didn't know was possible,

00:55then this conversation's for you. Rob, super glad to have you. Welcome to the show.

00:59Thank you, Mason. I'm excited to talk about profit sharing and alchemy and how we can

01:03turn lead into gold.

01:05Amen, brother. So, hey, take us back to the moment that you first realized that traditional

01:09compensation models are broken. And what happened and what did it make, I guess,

01:15basically how'd that start? What kind of questions did it make you start asking?

01:17Well, when I was a construction superintendent working for someone else,

01:21it was a large company. I was running 35 guys myself. We had a painting division that was like

01:27three times that size. And so there's all kinds of project managers and estimators and superintendents

01:33working together every day. And I was frustrated daily by people just not caring. You know, they

01:40were there, the clock in, and they cared about that check on Friday. But when it really came down

01:45to the details and going the extra mile, I didn't see a lot of urgency when things would pop up.

01:51And so that's when it first started, right? And then when I started my own company, I was seeing

01:57the same things. And then that's when I started down that journey of searching for a better way

02:03or there has to be another way. I didn't know what it was. I had no idea. But there just had to be a

02:08better way to where I wasn't going to be that business owner like my previous employer was, which

02:13is always cracking the whip, always micromanaging, always double checking everything. My boss at that

02:19job would always say, double check, triple check. And that was just his way of just pounding in our

02:25heads that to check in the details and following through on everything. And it's a great saying.

02:30I still use it to this day. But the question I asked myself was, how do we get this as a culture

02:35where we don't have to say stuff like that to make sure the details and that urgency is always there?

02:42Because it's been my experience that part of my core business has been around employee selection

02:47and the use of tools that can measure things like work ethic and reliability. And parents don't teach

02:52selective values. Parents who took the time to teach their child that honesty is the best policy

02:56typically teach them things like an honest age work, an honest age pay, and so on and so forth.

03:00And I strive to help clients identify those folks that have work ethic and are reliable and also

03:06identify high risk ones as well. Obviously, avoid the high risks and welcome the folks that have the

03:12traits and characteristics and work ethic. But even if you have, and that's half of the battle,

03:17but the other half is to have a culture that nourishes that and doesn't discourage or drive

03:22those people away. If you've got someone who's got a work ethic and they're reliable and they're

03:25honest and they're hardworking, they come and they want to bring it every day and they're surrounded

03:28by a bunch of people who are cutting corners and taking shortcuts and going half speed, it's not

03:33typically the guy that comes in. There's a hard charger that at a peer level gets everyone to

03:37elevate. It's the rest of the guys going, well, why are you working so hard? You're making us look

03:40bad. And they drag everyone else down with them. So I'm very interested in hearing about your

03:45experiences with how to engage a culture so that it isn't toxic and it is productive. What are some of

03:54the biggest misconceptions that business leaders have about profit sharing and why is it holding them

04:01back? There's a lot of fear out there about, you know, business is hard, right? And as a business

04:06owner, there's a lot of worry and fear about making the next payroll and sales maintaining and what are

04:12they doing to have a consistency in the cashflow of the business. And that's one of the first questions

04:17I get is when they hear about profit sharing and they hire me to help them set it up or they read the

04:23book and we start that discussion is how much is this going to cost me, right? What's the ROI on this?

04:29Business owners always go, if I'm going to buy this $10,000 worth of lumber, what can I charge

04:35to put it in? Or what do I make on it when I sell this product or whatever the situation is?

04:40And so they don't, and you know, a lot of business owners, by the time they get to this point,

04:45they've been to leadership training. They've read a book about culture. They may have hired

04:49consultants over the years. And so they've already tried some things throughout their history of a

04:54business owner to improve sales and culture and all these things. And sometimes they didn't see

04:59results, right? A lot of times it's badly implemented or they weren't looking or measuring

05:04the right things. It was communicated poorly, whatever the reason may be. So now they become

05:09this fearful, what's the ROI on this? Is this going to even work? Maybe I've tried some stuff

05:15like this before. Or the classic one is I give bonuses out and nothing happens. I don't see it

05:21change, right? And so that's a huge fear and a huge concern that they have. And I address all those

05:27and I have ways. And if you follow the rules in my profit sharing program that fix that.

05:32Because I look at it in terms of business owners saying, what is this going to cost me? I'm going,

05:37what's it going to cost you if you don't? It's, it's, it's interesting to me that if you look at

05:40the Gallup surveys about employee engagement, it's, it's not a glowing report on the American

05:46workforce. What a 16.5% of the population is actively disengaged and hostile, trying to cause damage

05:52to the employer, roughly 52% of the people are at best sleepwalking through the day, hoping not to

05:57get fired. And companies are looking at paying higher and higher wages. And they're sitting there

06:01saying, Hey, I got to, they may have a hundred employees and they're thinking, man, we got double

06:05the work coming in. We need 200 employees. Maybe they don't, maybe they got a hundred employees

06:09that are operating at 50% effort and could get the work done if they were engaged. But then that's,

06:16that's, that's the crux of the issue is how do you get these employees engaged? And that's,

06:21and that's why I'm very, very curious about the story of profit sharing. I would argue that,

06:25that whatever you think you're going to lose in learning how to share profit is a fraction of

06:31what you would save by increasing engagement of your workforce. Is that been your experience?

06:36Absolutely. So when I started my company, you know, I lost my job from the 08, 09 housing crisis.

06:42My employer was in the real, the retail construction industry. And once people started losing homes,

06:48they weren't spending any money. And so a lot of our customers started tightening up their budgets.

06:52Long story short, I found myself, my wife was pregnant with our second child. We lost our home.

06:57We were part of the problem and the housing crisis. And I had, I had to feed my kids and I had to be

07:02moved into a rental and I had to pay rent. And I started this company and we were successful

07:08financially right off the bat. Like I just started, you know, I was lean and mean and a lot of companies

07:14were getting out of the way. They were closing their doors. So it kind of created opportunity

07:18for whatever work was out there. So fast forward three years, I wake up one day or I look around

07:23one day and I have 30 employees. We're making money and everything looks and feels pretty good,

07:29but I'm working 70 hours a week. My second year in business, I decided to start a 24 hour plumbing

07:37service company and did not realize the impact of hours, seven days a week on the emergency services stuff.

07:44That I had to do and contribute to get that company off the ground. So I didn't see my kids that much.

07:50My, my wife was extremely supportive, but our marriage was stagnant, right? There was not a lot

07:54of time spent together. And so I thought to myself, there's gotta be a better way. You know,

08:00I knew a lot of business owners, you know, subcontractors or my customers, and I didn't like

08:05what I saw. You know, you see a man or woman in their fifties and sixties, they've been doing it 30 plus

08:11years. Yes. They have a nice car and nice house and some zeros, you know, in their bank account,

08:16but they're on their third or fourth marriage. They don't have a great relationship with their

08:21kids. They don't have, they don't look peaceful, right? They just look stressed. Their health is

08:26suffering. Most of them were alcoholics. And I thought to myself, that's not a road that I want

08:31to go down. And there has to be, the question I asked myself was there has to be a business owner

08:37path that didn't destroy the individual along the way where the business became the identity

08:42of that person and their life. So I started reading Mason and I read everything, you know,

08:48I just Googled one day business books. I read books on operation, culture, marketing, sales,

08:55whatever I could get my hands on. And I started implementing these little things in my business

08:58that I was learning. And one day I stumbled across this idea of profit sharing, which is a fascinating

09:05buzzword, right? Everyone loves to hear about profit sharing. If you're an employee,

09:10you want to know about it because you instantly think I'm going to get more money. When you're a

09:15business owner, the theory of an engaged team and a unified team all going one direction is a very

09:22appealing thought because most business owners struggle with that. Well, not only that, but I think

09:27that you've got business owners that, especially if they're entrepreneurial, I think no one cares as much

09:32as I do. No one can do this as well as I can do it. And what happens if I turn this loose to,

09:38but if they're, if they find a way to make their employees owners and share in, in the rewards,

09:43then all of a sudden that takes away a lot of that fear that you might've been talking about earlier.

09:47We're like, well, what's this going to cost me? Well, you just laid it out. If you don't do it,

09:51it's your marriage, it's your health, it's all these other things, your reputation versus being able

09:56to let go a little bit of that fear of the unknown and say, you know what? I would work harder for a

09:59share of the profit. These people will too. And maybe they will care as much about this as I do,

10:04or almost as much as I do. And that's got to be a tough shift for some folks mentally, but I bet

10:09once they do it, the pressure comes off their shoulders. What's been your experience with

10:13business owners and getting them to make that leap? Yeah. It's a, it's an interesting one because

10:17if you asked a hundred business owners, what's your number one problem in running your business?

10:2399 of them are going to have an answer that's somewhere along the line. My team, my employees,

10:29don't think care or work like I do. That's exactly what popped into my head.

10:34Right. A hundred percent, you know, probably a hundred percent of them are going to say some

10:37answer with the variation of those, those three things. So I had the same issue, right? I was

10:42micromanaging the copier paper, how much we bought and what brand and what the cost of it was.

10:47I was worried about the coffee, like just these stupid little things. I'm supposed to be running 30

10:53people and increasing sales and making the budgets and getting the financials done and making sure

10:58everyone's doing their job. And I'm worried about the toilet paper in the bathroom, right? Because

11:03no one else seemed to care. So profit sharing feels like that it can bridge that gap, right?

11:10Every business owner is going to be over here. They're going to have a team, their team, their

11:14employees at first over here. And it's, it's like two teams fighting and profit sharing bridges that

11:20gap, right? If why is a business owner motivated is the next, is the next question I'd like to throw

11:25out there is because we get paid when we win, right? That's true.

11:29We don't get paid for showing up. We don't get paid for clocking in. We don't get paid for

11:33making that one sell. We get paid when the company wins.

11:39And you pay when you lose.

11:40Right. So, and also there's a negative, right? So if you lose, you pay, you have to pay out,

11:45right? So we're obviously business owners are extremely motivated people. They know what's at stake.

11:50A lot of times their house, everything that they own is on the line. And so unifying your team,

11:55with profit sharing changes that dynamic. You can stop calling employees and calling team members.

12:02And we might be getting a little off track here, but the, one of the biggest personal rewards that

12:06I've gotten for profit sharing has nothing to do with financial is I didn't feel alone when I was

12:12in at work and on the job site. And a lot of business owners do because there's that you versus

12:16them feeling, right? You're pulling, you're cracking the whip, you're pushing, you're, you're crawling

12:23along your day. And you just feel like you're by yourself. You have a completely different

12:28mentality than they do. They get fired and go get another job in a week, right? It doesn't seem

12:34like it's, it's not the end of the world. Your business is your world, your success as a business

12:38owner. That's your identity. You get wrapped up into that and nobody wants to go bankrupt.

12:42Nobody wants to be the guy that went out of business. So that was one huge thing. So I would

12:46tell business owners that for number one, the money that you're not going to make if you don't

12:52figure this out is probably the biggest number. You'll never really even want to know how big that

12:56number is. If you, if you refuse or don't, don't agree that this is going to be a way to unite your

13:01team. Yeah. What kind of business metrics or behavior changes should a company expect after

13:06implementing a well-designed, I mean, those are the keywords, a well-designed profit sharing model.

13:11Yeah. So in one of my companies, I saw 300% increase in profit within 18 months. It's just

13:19one of the metrics that I saw. We had a company, you know, I have four different ones and I've

13:26implemented profit sharing in all, all of them into multiple different industries. And so I've seen

13:31a company making $30,000 a month, making 90 to a hundred thousand dollars a month just by implementing

13:39profit sharing. And there's a lot that goes into that, right? People are, you know, you can't just

13:44break out a spreadsheet one day and be like, this is what we're going to do. And, and if you work

13:49harder and you're smarter, you'll make more money. You know, it takes a leader, right? The business

13:52owner has to be a leader, has to be somebody that they're expected. You have to get the donkeys away

13:58from the stallions, right? We talked earlier about these high performers don't want to work with these

14:03people just checking in for a job site. So you have to put the right people and the right bus and the

14:08right seat and those buses and let the stallions do what they do and get the donkeys down the road

14:13to be free to work somewhere else. I once worked for a gentleman who was my first professional job

14:20sales manager, and he was an ex IBM executive. And he always talked about, he said, how would you treat

14:25a garden that was your only source of food? Would you pull the weeds? Would you water the soil? Would

14:29you fertilize it? Would you give people time to grow? And when you're talking about creating a culture

14:34that you have to, like, that it is as a business owner that your group of employees or team members,

14:40that is your garden, that is your only source of food. And to take the extra caution and extra steps

14:45in sharing that profit, I'm a fan of it. Can you, have you seen a case where profit sharing helped

14:51really maybe even shift a toxic culture? Because I mean, I think that's, I mean, you get some weeds out,

14:56you keep the good people, or worse, you leave the weeds in there and they drive the good people away.

15:01Right. I was just going to say that. So one thing about that, what's been your experience?

15:05So I've seen when you, when, when a profit sharing check, a monthly profit sharing check is on the

15:10line for a team, they will hold each other accountable, you know, and it's not like a rat

15:16you out or snitches all of a sudden everywhere. But when somebody is struggling or someone is just not

15:21up to par, my favorite thing about it is new hires, right? So I'm a pretty patient guy. And I've been

15:28called an impasse before where I hire somebody in, I like them and they're sweet and they're nice or

15:34good people. Right. And you get them in a role. And of course it's my fault. They're in the wrong

15:39role. Usually typically from the beginning, but I can help with. Yes. And they all of a sudden,

15:44you know, we're training there are 30 days comes by. We do it. We do a, you know, performance review

15:48and then it's okay. We're going to make some changes. They get a little bit better. 90 days go by.

15:53It's the same story. They're a little bit better, but we used to like drag this on for a year and

15:58then 18 months goes by. And then finally we're like, okay, it's just not working out. Right.

16:03And we've been kind of getting our butts kicked the whole time. When you have a team on profit

16:07sharing, your team helps you make that decision faster because you bring somebody new in that's

16:13cost to the P&L. Your team understands that, that this person has to carry their own weight,

16:18not be a cost to the P&L where it could potentially bring you out of the profit sharing threshold.

16:25And so they will help you and they will help them get there faster. So it's, it's a win-win.

16:30They want that person to win. So they, your new team member walks into a culture of, Hey,

16:34we're going to win whatever you need to do, whatever training you need to do. I'm going to help you get

16:38there as fast as possible. So you can add to our profit sharing, not take away. It's been one of the,

16:43one of the huge things that I see. And then as the owner, I can have a meeting, you know,

16:49at that 30 day with the team of that new team member and be like, what do you guys think?

16:53What's your gut feeling? You spend more time with this person than I do. You know, you're motivated

16:57just as much as I do that this person works out and is a, you know, positive contribution to the

17:03team and you'll get real answers. Before I had a profit sharing, people would just, because they had

17:08no skin in the game besides their, their paycheck was, Oh yeah. You know, if they liked them too,

17:13then they would bury something or cover it up or not speak up. They don't want to see anyone get

17:17fired and which is destructive, right? It kind of becomes this protected thing. And then the profits

17:23go down and they want to know why. Well, before there was profit sharing and then the company

17:27numbers would go down and then I'm banging the table and what's going on here. What do we got to

17:32do? And they're just, well, I don't know. Our overhead's too high. Well, why, who, you know,

17:36what did we do wrong here? What do we need to fix? You touched, you touched on something that I want

17:40to ask you to expound on. And you mentioned that the team is aware of what this person costs because

17:48it, we're talking about a cost here on our P&L and just, is this person bringing more value

17:53than what they're costing the company? What's been your experience or what are your thoughts

17:57on business owners who might be hesitant to share numbers, certain things that business owners aren't

18:03comfortable sharing initially that they should be? And if so, why?

18:08Yeah. I talk about this a lot in my book. This is going to depend on the business owner. And the

18:12guideline that I give them is the problem with sharing financials and the caution that business

18:18owners need to have is that people don't understand what they're seeing, right?

18:22That's true.

18:23And that's the first problem, right? Are you going to take a construction superintendent or a car wash

18:29assistant manager and put them through the hours of training to understand what a P&L means and what

18:35the line items mean, the taxes, the depreciation, all these things that maybe are non-cash expenses

18:40to the business? Or what about the things on the balance sheet? We're not talking about the training

18:45and education needed to understand that, that are non-P&L cash expenses for a business.

18:51So there's a lot of people on my companies, I have four of them, and we have leadership teams that do

18:58see the actual P&L, but they get training to understand what they're actually looking at.

19:04And then the ones that, and the way that I, my asset test to kind of figure out who that's going

19:09to be is, does understanding the P&L actually help them perform in their role, right? So for example,

19:15my plumbing service managers do not see the P&L because that doesn't help them in their role.

19:20They see gross profit percentages on jobs. They see labor costs, material costs. They see how much

19:27the gas bills are when we fill up a van. They see those things because that information is vital to

19:32their role. And so that's what I encourage business owners to do. If you're a small,

19:37small business owner, say you have a flower shop and you have four employees, you probably don't

19:42need to share a P&L unless you have a manager and you're kind of absentee business owner that you're

19:47doing something else all the time. But that's, that's the asset test that I use and to create

19:52transparency. So that's a challenge, right? You're not sharing the P&L, but you're communicating about

19:56numbers because you have a profit sharing threshold that you're paying out every month on. And I

20:00encourage them that they can use percentages. I encourage them to share the total revenue of,

20:06so that kind of gives everyone a metric. You know, if you're a million dollars in sales,

20:09and then we do 1.2, that's a, that's a 20% increase. So you can talk about 20% increase in sales

20:16that's contributed to the profit sharing, or maybe a 20% decrease in sales pushed us out of the profit

20:23sharing threshold. And so they understand that sales was the problem, right? Or we botched a job

20:29that cost us money to do. And then I would expand on the mistakes that were made. And then the lessons

20:36learned so that we can prevent this in the future as a team and get everybody's heads wrapped around

20:41this idea of, all right, we screwed up. Maybe it was a bad estimate. Maybe it was a bad weather

20:46thing out of our control. What can we do internally to prevent this problem from happening continuously?

20:51Is there ever an issue? And if there is, how have you advised companies handle it? And I'm guessing

20:56some of the answer has to do with education, but when you start talking about what people feel they

21:00deserve, well, why is the owner getting rich off of all of our work and our sweat? And obviously as a

21:06business owner, I can say, because my house is on the line. If this doesn't work, my family's on the line.

21:10If this doesn't work, you can just go get another job. So there's rewards associated with that risk.

21:15There's got to be a balance there in educating and communicating that with key employees or the

21:20general workforce. How have you handled that in the past? How do you encourage business owners to handle

21:24that?

21:25Yeah. So I'll be honest. I'll tell you how I handle it. And some people find this maybe snarky or

21:32extremely direct, but I'm just going to be honest here. Two things. There is a reward versus risk factor,

21:37right? That I think in general, most people understand, right? If we don't do well, I'm renting an apartment

21:43with my four kids again, right? So you can go get another job. I'm probably unemployable. Most

21:48business owners I feel are unemployable at some point.

21:51Because everybody thinks they're going to just doing that long enough to go get another job

21:54and they don't want to invest in them. Sure.

21:56Right. And a lot of business owners maybe don't want to hire another business owner because of the

22:00personality issues or their ideas and the highway type things. I don't know. There's that,

22:06the whole risk versus reward thing. The other thing that I say, and I'm very blunt about it,

22:11is would you rather work for a broke guy? Do you want to work for somebody that is struggling to

22:17make payroll that is not financially successful to where they can handle the stress, handle the

22:23issues? Maybe they need to be able to take off half days on Wednesdays to go to the gym and do some

22:29self-care stuff with their family or stuff because of the price that they paid four years before you

22:34got here to build this opportunity for you. So some people don't like that answer.

22:39I love that answer. I love that answer. And you're also demonstrating that, hey,

22:44we're not living hand to mouth here. We need to build a war chest because you think it's not that

22:49long ago. There's a whole bunch of business owners that would have loved to have had a war

22:53chest when COVID hit and their businesses were shut down. And if they were living, I'm not going to say

22:57paycheck to paycheck, maybe they were living paycheck to paycheck, trying to make ends meet,

23:00build their business, scrimp, bootstrap, whatever they had to do. And all of a sudden,

23:04government comes in and says, hey, you can't be open anymore. And yes,

23:08the PPP helped some of the businesses with their payroll, but that didn't mean that they weren't

23:11able to, you know, how are these businesses going to pay their rent? How are they going to pay their,

23:14their, their loans on their restaurant equipment? How are they going to pay for their loans on their

23:19vehicles? I personally know business owners who were doing very well and all of a sudden

23:25out of business and life changed completely and it wasn't their fault, but they were still had to deal

23:31with it. And, and to, to have that conversation about, would you rather work for broke or someone

23:36who's actually setting aside a rainy day fund to weather any storm so that if unexpected, anything

23:42happens, you still have an opportunity. And I still have an opportunity down the road that

23:46wouldn't exist otherwise.

23:48Well, there's two things there. You still have a job, number one, but also what about who is being

23:53thinking about the opportunities down the future, right? I've had guys that have been here since day

23:58one that, you know, I have one guy, I tell him the story. He didn't even speak English when I hired

24:03him. And now he runs a whole department making an extremely well, good living. And so there's

24:09stories like that is like, if I was broke or eking every dollar out of the company and wasting it,

24:16these opportunities wouldn't have been created. Growth is extremely expensive too. And employees don't,

24:21you know, don't understand that. They don't see what it takes. If you're doing a, you know,

24:25a million dollars a year, what is it going to take to do $1.2 million next year? Who pays for

24:31the materials and labor to create that extra $200,000 of revenue, right? They don't understand

24:37that. So there's, it's an education thing, like you said, for sure. And it's a, it's a trust

24:43transparency thing. You have to be a leader that they respect and that they trust in, in what you're

24:49doing. I call it, you have to have some kind of, some level of belief in me that I'm making

24:55decisions. You're not going to understand them all. I'm not asking you to understand them all,

24:58but you need to understand that overall, you have a belief in everything that I'm doing

25:02because I'm in multiple industries and not all my escapades have, have paid off, right? So I've had

25:08some, I have some losses, but I've had some wins that have been extremely successful that helped

25:12funded growth in other areas that people got opportunities that had nothing to do with that

25:17particular company because of my cashflow situation to invest in something new or, or to pour money

25:23into something for growth. So what are some of the biggest mistakes companies make when they're

25:27trying to roll out a profit sharing program? Great question. I see tons of mistakes in my book.

25:32There's 10 rules. Every single one of those rules are mistakes that I've personally made when setting up

25:37a profit sharing. And we didn't get into like the whole progression of the story, but I started

25:42profit sharing in the first quarter of 2015. I didn't see an ROI or a real change until middle

25:48of 2018. It was three years of that. I almost gave up Mason, like 10 times and three years of grinding

25:55it out and making changes and communicating and getting feedback over and over and over until I had

26:01enough of the wrong three, the wrong things, right? Where I started to see the shift and where I was

26:08getting team members that was, that were thinking, caring and working like I was. And I was feeling

26:13less and less alone and where we were attacking problems together. So a lot of the mistakes that

26:17come out, like one of my first mistakes that I made was I did a quarterly profit sharing program

26:22and I teach that it must be monthly. Nobody thinks about, well, nobody thinks about a bonus that you're

26:29going to get the first week of April for the first quarter of that year. No one thinks about that

26:33in January and February and a good profit sharing program should be influencing the daily activities,

26:40the daily thoughts of your team members. That's a good point. So I saw once we went to a monthly

26:46profit sharing where we were paying a profit sharing bonus or a profit sharing check on a monthly P&L,

26:53people were thinking about that the first week of the month. That's a huge problem with Christmas

26:58bonuses. Yes, it's a great Christmas party. Everybody's drinking and smiling and laughing and having a

27:03great time, but no one thinks about that Christmas bonus or going the extra mile in February or March

27:08or April. And it's the same problem with quarterly. In America, most corporations are on, if they have

27:14bonuses or some kind of commission style deal, it's quarterly. And we team members start stressing

27:20about it two weeks before the numbers are supposed to be turned in, right? That's a good one.

27:24Huge, huge, huge change in the mindset when you go monthly. I've seen project managers that spend three

27:30hours a day in their car, stop listening to music and start listening to self-help books or some kind

27:35of podcast that has to do with their position or their industry and just becoming a better overall

27:42well-rounded individual with knowledge, experience, and just having that. If someone has that relentless

27:48pursuit of self-education, it really puts them on a whole nother level in another arena of stallions.

27:54The other mistake that I see a lot, there's two more big ones, is making the payout substantial

28:00enough where you're actually affecting your team member's financial needle. When I started out,

28:06profit, we had a bad quarter one time, but we still made profit. And I shared, and some people

28:13in the early days, this is going against a lot of rules, but just to tell you the story, there was

28:18like a $250 quarterly profit sharing check. And no one gave it back, right? Nobody did not cash the

28:26check, but it actually, it didn't change their life. They didn't think about it. Maybe it bought

28:32them a nice dinner out with their spouse, or maybe it paid one month's worth of cell phone bills for

28:37the family at the time, but it was wasted money. As the business owner, it would have been better to

28:43keep the $250 and use it in the bank, in the, in the company for something else. So we, we teach that

28:50minimal has to be a thousand dollars a month, a thousand dollars, depending on where you live,

28:55depending on your lifestyle could be a grocery budget for an entire month. It could be half your

29:00rent, or maybe depending on if you may, you know, where you live your entire month's rent or a large

29:06portion of your month's rent. It actually changes that financial needle that we think about every

29:11month. Going back to the quarterly thing real quick is nobody thinks about their rent costs every

29:16quarter or how much they spend on their groceries every quarter. So why are companies paying bonuses

29:21every quarter? It just, you miss that mental connection with your team members' life, with

29:27their life. Everything in their life has to do on a monthly cost. That's an excellent point.

29:31Yeah. The third thing that I see business owners screw up, and if we can hammer on this one a little bit,

29:36is making it obtainable. A lot of business owners, they bootstrap this thing. Their house is on the

29:41line. They're, they have gray hairs or loss of hair because of it. They've sacrificed baseball games

29:48with the kids. They've sacrificed date nights with the wife. They, they just, they've given so much

29:54up for this company that they have this mentality that everything this thing earns is mine. And I want

30:00to say, they're not wrong. It is all yours. You, it wouldn't be there because if you, it wasn't for

30:05you, but so what they'll do is let's say it makes $30,000 a month. They're going to say, well, if we

30:10double our profit, then I'll share it. And then they'll do the profit sharing launch meeting.

30:16They'll go over some metrics. They'll do some education on, you know, they'll do a 30 minute

30:20meeting about the profit sharing program. And it basically sums up as if you work harder and if we

30:25kill it, I'll share some of the rewards with you. And then they walk out and it's a disaster.

30:30Every single time.

30:32Let me guess. People are like, people are like, well, what if we increase it 40% and he's getting

30:38rich and we're not, and why, or, or he's dreaming that's never going to happen. And now you've got

30:42a demoralized group that doesn't believe it's achievable. And it's like, why bother? And that's

30:46the exact opposite of the try of the impact you're trying to have.

30:49Yep. It's a hundred percent. What happens? Your team walks out of there and goes, why even bother

30:53that we're busting our butts already? We're already overworked in their minds, right? A lot of times,

30:58maybe they're right. They're overworked. They're already putting in extra hours. And

31:02now you want us to double profits or, or do a 40% increase in revenue without increasing

31:07costs. Like they just, it's, it's, and honestly, it's impossible. Like your most companies that

31:13I've seen and work with, that's not going to, that's not going to work out. It just won't.

31:17I would think that would have the opposite impact. Cause even if the, even if the owner says,

31:21Hey, if we double this, then I'll share profits with you. But you know, what if you improve

31:26it by 50% or 60% or 70% or better yet, you, you don't double it, but you improve it by 90%.

31:30Yeah. Oh, you're 10% sure. Oh, golly gee shucks. How are the employees going to feel about that?

31:35Like we went, we made sacrifices because some of those employees might've missed time with their

31:40kids or with their spouse or missed baseball kids, little league games or family issues to make

31:47and to go for it. And they might've made some sacrifices. I would refer to that as discretionary

31:51effort above and beyond what is necessary to keep their jobs. And then to come up with,

31:57gee, thanks. I could totally see where that would be absolutely demoralized and then backfire

32:01completely. I would never even bring that up. Yeah. That's the fastest way to turn a stallion

32:05into a donkey. And then you're that now you just hurt the culture. You've, you created distrust.

32:10You've destroyed any unity that you may have have, and you're back to square one, maybe even worse.

32:15So for business owners that say, I already paid my people well, why should I share profits too?

32:20How do you respond to that? Well, I can tell you that you'll make more money

32:24sharing profits and you don't want to know the money that you're losing out on by not engaging

32:30your team. And I talk about this in a book a little bit that you still have to pay your team

32:34competitively. Like you, you know, you still, if a project manager in your area and your industry

32:39makes a hundred thousand dollars a year, you need to be at a hundred thousand dollars a year. If not,

32:44maybe a little bit over, like you don't want somebody. And this goes to like an employee retention,

32:49somebody leaves for two, $4 more an hour. How much damage does that cause? And you're just

32:55being stubborn. You're, you're making money. That's a great team member. The reason why you

33:00don't, they're not engaged is your fault, not theirs. So that's, that's the first thing you got

33:04to do. I don't like commission programs of any sort because I've never walked into a commission

33:12business, either a cell phone or a car dealership or a carpet salesman who had a great relationship

33:20with their team members because they're competing against each other. And I also, I understand why

33:25it creates urgency, but these people are stressed and because they're on a low salary with the

33:30commission pay, they are, it tends to be unethical. They tend to do unethical things because they have

33:36to pay rent or they have to buy the baby's diapers. And so that puts them in a really hard spot that

33:41does, that is an opposite of unity and teamwork and a team working together, creating unity to get the

33:47same goal. But when you have a profit sharing program that ties the whole team's efforts into

33:53the result, then you see people stepping up for each other. Then you see the team members that are

33:58lacking, get help from each other because the better that everyone is on the team, the more profit

34:03sharing they're going to get. And it's, yeah, there's really no downside to having the properly

34:09set up profit sharing program. If the owner is a good leader and then he's respected and has,

34:14you know, transparent and all the things that I talk about in the book that you need to have lined

34:19up before you, before you do it. So how do you, how do you address the fear that employees will expect

34:24profit sharing even in years when there isn't much profit to go around? Is there a right size or ideal

34:30stage of business for profit sharing to work or can it be applied across the board?

34:34Well, I, I think it'd be applied across the board and I, the, you know, cause I've experienced this

34:40too. Like you're going to have a bad month. You may have a bad four months in the year. Well, you know,

34:44one of my businesses is a car wash and it's seasonal, right? And I don't care how great your car wash is

34:51or where you're located. If it rains 27 days straight, you're not washing cars and you're not making

34:57money. Right. So I've actually seen this happen before. And one of the ways we combat that is

35:02with financial wellness training. I'm a huge fan of Dave Ramsey. Uh, there's other guys out there

35:07that do this stuff, but I had a guy, this is a true story working for me at the car wash. He was

35:13assistant manager and we implemented profit sharing there in 2019. Anyway, he joined the team, I believe

35:21in 2021 or maybe 2020. And we had a great summer, like our raining season, our area didn't come in

35:27in the fall. Like we, we were washing the same number of cars in November as we did in July.

35:32The weather was just sunny and perfect and we were killing it. This guy was cashing profit sharing

35:36checks, half of his monthly pay. I mean, he was just making all this extra money. He goes out and

35:42buys a Corvette and 21 year old, I think it was 20 at the time actually has this bad-ass car. And then

35:49the rainy season, March rolls around and then in the rainy season comes and you know, we cut some hours

35:54here and there. We, we, we, you know, it's, it's tough. We're, we're doing all kinds of things.

35:59We lower our car wash prices to make enough money to pay rent and make payroll, but we're not making

36:04any money and profit sharing checks stopped for like three months. And he's upset at me

36:09because he can't afford his Corvette anymore. And I'm like, okay, we don't want, this is a,

36:15it was a lesson learned for me is we need to teach, especially these young people about saving for

36:20that literally saving for the rainy day fund and how not only should businesses do it,

36:25but we should also do it in our personal life. And when you're on a, you know, I don't know how

36:29many 20 year old car wash assistant managers should be driving a Corvette, but if that's a priority for

36:35you, you need to plan that out and understand that there are rainy seasons and good seasons when

36:41you're going to make that money back. So teaching them about budgets, teaching them about financial

36:45wellness long-term has done a lot to help when the profit sharing may not be there for months on

36:51end or a month here and there. How does profit sharing affect cross-functional collaboration

36:56between departments or silos? Yeah, great question. So this is something I've experimented with in the

37:01last two years, all my companies. So I have one company, it's a construction company. And inside that

37:07there's a construction department, a plumbing department and a restoration department. And we used to do

37:12profit sharing per department. So if the plumbing department made their metrics, that those DMs in

37:18that team, the decision makers got profit sharing. And what I saw happening, what was interesting was

37:23if the construction company didn't make it and the plumbing company and the restoration company did,

37:29there were team members looking across the, down the hallway in the same building and being like,

37:35oh man, maybe I need to work over there or look at the culture over there. They're all laughing and

37:41clapping and doing great. And we screwed up this, you know, these couple of jobs and, or we, that were

37:46maybe one really big job and now we didn't get it. And maybe I will need to be underneath that leader.

37:52And so we, we decided to level the playing field a little bit and just try something. So one of my

37:58benefits of having all these companies and been doing this for over 10 years is I've been trying, I try

38:02things and I'll try something in one company for a whole year to see how it affects us. If the numbers

38:08change or the culture changes, and we do surveys to measure a lot of that stuff periodically,

38:13we tried taking all these departments, the plumbing restoration and the construction and

38:19combining the profit sharing into one pool. Or basically for the company standpoint, financially,

38:24it was the same metric, right? But we, we leveled it out. So if the plumbing company did really,

38:29really well, and the construction company was a little short, they can make up for that. And

38:34by running the numbers from two years past, before we did it, we've realized that we would

38:38actually pay out more profit sharing and it would help the company, uh, help, you know,

38:44kind of even, I don't know if even the playing field is the right word, but it would spread the

38:48wealth a little bit because, you know, plumbing companies have seasons too. So do construction

38:51seasons, construction companies. And what I found, what happened was by doing that, I saw way more

38:57cross-selling. So if I had a construction estimator with a customer walking decks, and he mentioned

39:03something about water heaters, he would jump on the opportunity. Hey, we do water heaters. Did you

39:08know about our sister company over here? You know, I can get them over here. We can do a bid,

39:12show me the water heaters. I'll take pictures and measurements and can get you a quote for that too.

39:17And the same thing with our, you know, restoration company, they would get a water leak,

39:21right? So they go in there with the D Hughes and fans to dry it out. Hey, you want me to call

39:26our plumbing company to fix the leak? You know, they can be here. I just, I just texted my guy.

39:30He can be here in 20 minutes. We're at a property down the street, right? So by combining their

39:35efforts into one pool of profit sharing, it actually increased and helped collaboration

39:40and sales and then teamwork and communication with different customers for the different services.

39:46You've mentioned, you've mentioned metrics a couple of times, like what kind of business metrics

39:50should a company expect to see after implementing a program like this? I mean, obviously maybe reduce

39:56turnover, maybe lower labor costs because engagement's higher. What are some of the metrics

40:01that you typically see positive results from? Great question. So I see, okay, so I want to talk

40:07about costs because a lot of business owners, they always go to revenue, more revenue, more money

40:12coming in. But one of the benefits that I see that I didn't expect or was not even, you know, maybe on

40:17my mind or was not the purpose of my profit sharing program in the beginning days was cutting costs

40:23down. You know, this is a, this is a little dollar amount story. The story I'm going to tell you is

40:28true story. It's not a bunch of money, but this is what happens. At my car wash, we mow our own lawn

40:34and we have a lawnmower. And once a week, the maintenance guy goes out there and mows the lawn.

40:39And I visit, I drive by that car wash every day and I probably stop in twice a week. I got a really

40:44strong manager over there. We communicate all the time and she does a really good job.

40:47I noticed that the lawn wasn't cut in a couple of weeks and I didn't say anything and I'm just

40:52keeping an eye on it. You know, my wife is a gardener and she's 50% owner of that car wash

40:58and she's got her white roses out there and the things that she likes to see. And I don't know

41:02if anyone else pays attention, but it's her thing, right? So a couple of weeks go by, they didn't mow the

41:09lawn. It's looking pretty raggedy. And then I drive by again and the lawn's mowed. And so now I'm

41:15curious. And I text the manager, I think I called him and I was like, Hey, what's going on with the

41:20lawn? You know, I noticed we didn't mow it for almost a month. And he goes, Oh, the lawnmower

41:23broke internally. We were debating on buying a new lawnmower. You know, it's $300 for a new lawnmower.

41:30I said, okay, well, 300 bucks. It's summertime. We're making money. You know, probably not a big

41:34deal. What happened? And he goes, the maintenance guy and two of the assistant managers got together

41:38on YouTube and figured out that they could rebuild the carburetor with a $12 Amazon rebuild kit

41:44and save the company $288 and increase our profit sharing checks that month. And which is a great

41:51story. Yeah. They, the cool thing about that story is I never got a phone call or an email or a text

42:00message asking to do this because me, that lawnmower was like five years old. Okay. It's probably done

42:05like buy a new one. No big deal. Right. But my team members, my leaders are thinking like this,

42:13you know, kind of that bootstrap mentality that every dollar adds up. And like I said,

42:17it's a small dollar amount story, but there's, this is happening with much bigger things, right?

42:22Like our cell phone bill, you know, every couple of years, my team on their own accord will audit it

42:27and then they'll go shop it. And I've seen one time, this is kind of embarrassing, actually a $4,000

42:33a month savings just on cell phone and internet costs by negotiating with other providers.

42:38You know, it's, it's funny that, you know, I'm sitting here doing the math on the guy's like,

42:41you know what, if they could do an Amazon kit and you'll get it done in two hours, well,

42:46then it did save you a bunch of money. And at least they're thinking that way, you know,

42:48and I took a bunch of dollars trying to save nickels. But the point is the thing that I take

42:54your point is that they're thinking with a bootstrap mentality and, and as opposed to,

42:59ah, no big deal. Who cares? Just go do it. It's the company money. They're, they're thinking of it

43:03as money out of their wallet, which is how a lot of entrepreneurs and business owners think about

43:08everything, no matter how successful they are. Yeah, exactly. You know, another thing too,

43:11is people will protect. So I used to have a huge struggle with getting oil changes done

43:16on our fleet vehicles because your techs, they don't care. Like they're just working. A van needs

43:21an oil change every 5,000 miles. All of a sudden I check it. It's 9,000 miles over, right? That's an

43:29engine. That's a, that's a $6,000 cost, depending on what it is. When you have a profit sharing

43:34program in there and knowing that, you know, maybe you're not making $6,000, but you're

43:39preventing the cost of a $6,000 engine repair by getting that $60 oil change done on time,

43:46right? So that people are motivated to make these things happen all across the board.

43:50You know, it's a, it's a tar carburetor real rebuild kit or a $60 oil change, but the mentality

43:55when you have your weight in gold, that's, that's the lead into the gold right there.

44:00I am so glad that we're having this conversation. Cause I mean, I look back on, oh, I guess it's

44:06kind of a cult classic, but did you ever see the movie office space?

44:08I don't know. The show is a movie back like around 2000, probably around 2000. It's been

44:15over 20 years.

44:16Okay.

44:16There's a scene in the movie where there's a worker and he shows up to meet these two consultants

44:22and they're sitting across the table from each other and they're productivity consultants.

44:25And the employee literally sits across from two consultants and says, you know, it's not

44:31that I'm lazy. He goes, I just don't care because it's a problem of motivation. I'll

44:35never forget this. It's a problem of motivation. See if I bust my rear end and our company sends

44:40out an extra 10 units, I don't see another dime from that. But if I make a single mistake,

44:44I got a whole bunch of bosses to come in and remind me about it and hassle me. And that's

44:48my only real motivation is to not get hassled. That or the fear of losing my job, but the fear

44:53of losing my job will only make you work hard enough just not to get fired.

44:57Right.

44:57And I'm sitting there thinking of that mentality. And I understand that that is as relevant

45:00today in a lot of businesses now as it was when they made that movie 20 years ago. And

45:05I love the work that you're doing because you are, you're solving the, you're answering

45:09the question, where's the motivation?

45:11A hundred percent.

45:12You have solved that problem. And I'm sure there's some, there's a road, like you said,

45:16you're, you're, there's a roadmap to how to do it. You've over, you've stepped in

45:20the, in the holes and tripped over the speed bumps and figured this stuff out.

45:24And you've written a book on it. Can you tell people how to learn more about what it

45:27is that you do in your book and the type of services you provide and how they can reach

45:31out to you if, if they don't want to learn all that by trial and error, and they're looking

45:35for ways to bypass all of that and just get to the outcomes that you're after, which is

45:41an engaged workforce and an excited workforce and a conscientious workforce and a motivated

45:45workforce, all of those things like sounds to me like your book and the work you do is

45:50the shortcut to that. How do they get that?

45:52The book is on Amazon called Profit Sharing, The Power of Shared Success. If I had that

45:57book 12 years ago, it probably would have saved me five years of extra work and hassle.

46:03And then I don't even really want to know how much more, how much money I did not make

46:07because I'm not having all these rules in this roadmap that I have now. And you can hook

46:12up with me on LinkedIn and Facebook and Instagram. The exciting thing though, Mason, is that book

46:17scratches the surface, right? It has the rules in there. It has everything that, that the

46:22three things that you need before you start your profit sharing program. I got a lot of

46:25stories in there and examples of all the whys, but if you're serious about it and you want

46:30to know everything about profit sharing, there is to know we have a course that we're launching

46:35end of this month. And that website that you can find that on is profitx.co. It's not done

46:42presently. I don't know when this will be, this recording will hit the air, but that course

46:46will be out there. I'll have all those links on my social media and, uh, you can follow

46:50us there. We're also going to do a community for people that are profit sharing. They can

46:55ask questions and we'll do a monthly Q and a where I can, we can get on a big zoom call

47:00and people can ask questions and we can really dig into the weeds to get profit sharing out

47:05there done correctly. Uh, which is really exciting for me because my overall vision, Mason, is

47:11that, that my wife and kids and my friends and family can, you can visit businesses. I

47:16don't care if it's a doggy daycare, a flower shop or a grocery store, but imagine going

47:22into a business and not being able to figure out who the owner is of that business. I had

47:27a client recently tell me this was like a year ago. He's like, I've been, I've been working

47:32with your company for two years and my sales rep that I've been dealing with. I didn't know

47:36he was not the owner. I thought he was because the way that he thought cared and worked. And

47:42so that's the power of a properly set up profit sharing program. And how cool would it be as

47:49consumers? You and I go to businesses all the time of having that same experience in

47:53America and small business.

47:55That is amazing. I think back, I'm into cycling and I bought my first real road bike in 2003.

48:03I was so fascinated by it and so interested in it. And I got there at like seven 45 in

48:09the evening and had just had dinner. Oh, there's a bike shop here. I walked in, talked to a guy

48:12and I remember this conversation today. I didn't get out of there till like eight 45.

48:16They closed at eight. I had no concept of it. He never, like, it was all about like,

48:22he, he knew I wasn't there to, to buy a bike. I was there to complete a triathlon.

48:27Right.

48:28And it was, it wasn't about the bike. The bike was just the tool to help me get the goal.

48:32But we, and we're friends to this day. I still have a cell phone. Like we're friends to this

48:36day. And that was over 20 years ago. That's awesome. That's an owner's mentality. And if

48:41you can get regular employees to create a customer experience where the customer doesn't feel like,

48:46oh, I've noticed that you guys closed or, oh, we're closing in a few minutes. It's time for us

48:51to go. I mean, I spent a few thousand dollars on the bike. Yeah. An owner realizes that, hey,

48:56I'm going to give this guy the experience he needs. Time doesn't matter. This guy's probably

49:00going to spend a few thousand bucks. I'm going to do whatever it takes. And he did it. But I,

49:03but someone that doesn't have a profit sharing mentality or doesn't have an ownership mentality

49:07would have said, dude, sorry, we closed about when I would have walked in, they say, Hey,

49:10we closed in about 15 minutes. Can I help you? That would be way different experience than,

49:14than what it was. And here I am 20 years later, I've purchased all kinds of stuff from him.

49:20Still now a personal friend. And I remember that conversation and could pick up the cell phone

49:23and call him anytime because that was the experience I got from an owner. And to be able to get every

49:30employee to be like, I don't care about what the time is. I'm here to serve and fulfill a client need

49:35because they understand that mentality, more power to you, man. I love what you're doing and I'll do

49:40everything I can to spread the gospel of your work. And I really appreciate you being on here.

49:44Thank you so much. Thank you, Mason.

The Mason Duchatschek Show - Full Length Podcasts

Recommended

Profit Sharing Secrets: How to Transform Your Business Culture With an Ownership Mentality

Category

Transcript

The Mason Duchatschek Show - Full Length Podcasts

Recommended