Secrets and bonuses
in your past?
Everybody has secrets. J. Edgar Hoover used to keep his en- emies’ secrets in his FBI files by day
and then sometimes secretly wear women’s
clothing at night. We found out about that
soon enough. Mel Gibson used to keep his
alcoholism and anti-Semitism a secret, but
no more. Our president has been known to
secretly smoke cigarettes. I’ve always had a
secret crush on Katie Couric.
Well, now you know.
Kurt Marone’s got some secrets too. No,
he doesn’t wear women’s clothing at night
(“makes my legs itch”), drink too much alcohol, practice anti-Semitism or lust after Katie
Couric (“too annoying”).
Kurt’s secrets lie in his financial statements. No, he’s not hiding anything illegal.
He just doesn’t want people to see how much
or little he’s making.
“This is nobody’s business,” he told me a
few years ago. And he was right. One of the
benefits of being a penny pincher and owning your own company is that you can fly it
under the radar and not have many others
know all about your business. Our secrets
are our secrets.
But times change.
J. Edgar Hoover died and his enemies
eventually disclosed his secrets. A drunken
night in Malibu brought out Mel Gibson’s.
And when Katie Couric winks at me from behind that anchor desk, I just want to shout
out my secret feelings for her to the whole
But enough about Katie.
This is about Kurt. And for Kurt, what
changed was the recession. It’s caused him
to reveal his secrets. And share his financial
statements. Particularly with his employees.
Why? “To keep them employed,” he said. Kurt
needed to come up with better ways to pay
his people. So this penny pincher sacrificed
secrecy for a bonus plan. And it turned out to
be a great decision.
As the recession hit, Kurt found it tougher
and tougher to pay his employees. He was
able to lay off a few nonessential people. But
he didn’t want to part ways with so many of
the valuable people who helped him grow
Gene Marks, CPA, is the owner of the Marks
Group, which sells customer relationship,
service, and financial management tools to
small and midsized businesses.
his business. People that he trained and who
knew the company’s operations as well as
he did. People who would be busy once the
economy began picking up. So he decided
the fair thing to do was to tie their compensation in with his company’s profits. If they all
worked hard and succeeded, they’d get more
money. If the company didn’t do as well, then
nobody (including him) did as well.
At the beginning of the year, Kurt determined he would allocate 30 percent of his
profits to his employees for the next year. Not
sales — profits. He did the same thing in the
following year, too. Share the profits like this?
What is he, some kind of a milquetoast socialist? No way. Like me, Kurt’s a capitalist and
a red-blooded male through and through.
Sure, he’s not a big fan of Katie Couric. But
he’s mentioned Barbara Walters’ legs to me
more than a few times.
Of the profit share, Kurt equally split the 30
percent among his four departments: operations, sales, service and financial. And then
he let competition take over. He allowed his
managers to grab the money and decide who,
if anyone, in their department was to receive
the bonuses. Including themselves. This gave
the managers full discretion to reward those
employees that they felt deserved the most.
Some managers based this decision on formal employee reviews with goals and objectives. Others were more discretionary. Kurt
So why shouldn’t the managers just grab it
all? Well, Kurt, always had the final say. Each
manager submitted to Kurt their proposed
split of the profit share along with explanations why. And Kurt could override these decisions if need be. So much for socialism.
Kurt didn’t stop at the 30 percent profit
share. He took another 10 percent of the
profits and made a matching contribution
to the employees’ 401(k) plan, based on the
bonus they received from their manager. That
little extra, of course, only went to those em-
ployees who participated in the plan. This
is Kurt’s little way of saying, “Thank you for
putting money away for your retirement so
you won’t come to me with your hands out
when you turn 59.”
Kurt’s bonus plan worked. His employees,
now fully vested in the company’s profits,
were motivated to ensure the company did
well. They understood that the opportunity to
get a year-end bonus was fully in their hands.
They knew they had to please their own de-
partment head, as he or she would be making
the bonus recommendation. Even participa-
tion in the company’s 401(k) plan picked up
as more employees wanted to take advantage
of the extra company match Kurt was making
at the end of the year.