I just read an article what I consider to be a great legislative idea being implemented by the state of Georgia. The article can be found at AJC.com. Georgia is giving significant tax incentives to small businesses to hire people who are not employed. The expected result is more people working, less people the state has to write unemployment checks for every week and more people making and spending money, thus truly stimulating the economy by productive means, rather than handouts. I really agree with this approach.
I wrote in a past blog that one of the pieces of management philosophy, as well as a management tool that we teach our clients is the idea that when you reward production, you get more production and when you reward lack of production you'll end up with less production. How this translates to the offices of our clients is through a variety of methods, with one of the key ones being a bonus system based upon production. We have found uniformly that offices that have pay systems with a lower base pay and high bonus incentives based upon productivity are generally higher producing, happier and more profitable offices than those that have their employees on a pay system with a high base pay and little or no production bonus incentives.
In order for this bonus incentive system to work, each position in the office must have a clearly stated job description, a clearly stated product or end result named for the specific job and a realistic means of measuring the productivity of the job. Without all three of these in place, incentive systems can end up being arbitrary and counter productive because the staff won't feel that their incentive or bonus truly parallels what they are doing and because of that they can't really be at cause over making it happen. But, with these points in place and with the staff member understanding and agreeing to each of these points, you'll find staff members figuring out how they can be more productive on their jobs and make the office more productive as a whole. Having an office wide bonus system will also help tremendously - i.e. having bonuses for all employees when the entire office hits certain levels of productivity and profit. At Silkin we have worked out job descriptions for each position in the health care offices that we work with as well as specifically named products and metrics for each job. With these in place we have bonus systems that have proven to be very effective in increasing productivity.
Taking this to a more "macro" look in a larger sphere, I feel that what is being done by Georgia, as explained in the above article, parallels this philosophy and management tool. Small businesses will be rewarded for hiring unemployed workers, thus they have a very specific incentive to hire and I'm sure more hiring will result. One state legislator says that this is dangerous as it will cost the state income due to the tax breaks. This, to me, is a backwards look at this and does not follow the idea that rewarding production creates more production. Why doesn't this legislator look at the fact that, although there will be lowered tax income due to the tax break provided the small business owner for hiring, there will be less money spent by the state on unemployment payments, more people working and thus paying tax on their personal income resulting in more tax income for the state, and more people with money to spend in the economy thus boosting the income of businesses in general which should boost overall tax revenue for the state. It seems to me to be a win-win proposition all coming from an incentive for productivity. I hope this concept spurs some ideas for any client or business person reading this. Look at how you can provide incentives that reward productivity in your business and you'll come out a winner.
If you have any feedback on this, let us know by visiting our discussion forum at the Silkin Facebook Page.
Larry Silver
President, Silkin
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