Managers' World 4875

September 1, 1997

7 Min Read
Managers' World

Managers' World

Bonus Programs...What Should They Consist Of?

By Pamela Alton

When an owner contacts me looking for a manager, oneof the very first questions they ask is, "How much should Ipay the manager, and what sort of bonus program should I have tomotivate him?" I am not going to discuss wages in thisarticle; however, I will try to give you some insight into thetype of bonus programs I see being offered in the industry.Please keep in mind when designing a bonus program that there isno right or wrong.

A bonus program should consist of two things: One, it shouldmotivate the manager to reach for a clearly defined goal; andtwo, the bonus should be attainable. There is nothing moredeflating to a manager than working his tail off for bonus he cannever reach.

One thing for sure is all managers will receive a basewage, and 95 percent of the time, they will also get some sort ofbonus for doing a good job. In addition, about 70 percent of themanagers today are receiving medical benefits.

Per Rental

To keep a manager sharp and motivated to answer the telephoneeffectively, some owners like to pay a commission per unit thatthe manager rents. It could be $3 to $5 for each rental of a10-by-10 or smaller, and $5 to $10 for each rental larger than10-by-10. Or, it might be a flat fee of $3 to $10 no matter whatthe unit size. This type of bonus could be paid to the managerand relief manager, based on how many units they each rent. A lotof owners like this type of bonus because it is probably theeasiest for the accounting department to handle. However, thereis not much motivation for the managers to keep sharp and ontheir toes. Sure, they will receive a per-lease bonus for eachunit rented, but where is the motivation to keep their existingtenants happy or to collect as much income as possible eachmonth?

Percentage of Monthly Income

The manager could get a percentage of the monthly income. Forexample, if your facility has been bringing in $40,000 per monthand you think a good manager could bring in more, you might sayto your manager, "I will give you 20 percent of anythingover the $40,000 base." So, if the manager brings in$43,000, which is $3,000 more than the expected income, he willreceive $600 for the month, and it could be split with the reliefmanager, 70/30. This type of bonus really motivates the managersto make timely collection calls and collect as much money as theycan each month, not rent units at a discounted price or waivelate fees.

Income and Delinquency

The bonus could be based on a predetermined monthly goal ofthe income and delinquencies that will be expected at thefacility each month. When you sit down with your manager at theend of each year to prepare the annual budget, you might say,"OK, for January we will set goals of 92 percent occupancyand 5 percent delinquency, and for February we will have 93percent occupancy and 5 percent delinquency. For March, it willbe 95 percent occupancy with 4 percent delinquency," and soon. If the manager achieves the occupancy goal, he gets $200 or$300; likewise if he achieves the delinquency goal.

With a "split" bonus, the manager could achieve halfthe bonus if he reaches one goal but not both. This type of bonusalso motivates the manager to get the highest occupancy andlowest delinquencies. Most managers think in terms of occupancyand delinquency percentages, not monthly income. If they achievehigher occupancy and lower delinquency, then this translates intohigher profits for you.

Shopping or Sales Skills

Some owners are now using a shopping or sales-skill bonus inconjunction with other bonus programs. In this case, the manageris shopped on a monthly basis, and given a bonus based on histelephone or face-to-face performance. With this type of bonus,the manager usually is given a telephone sales script to follow.If he uses the script and asks all the questions--providing thefacility name and directions, providing his name, asking for thecaller's name, etc.--he is given a specified bonus, perhaps $100.If the manager misses just one item on the script, the bonus isreduced to $5 or $10--a big difference. There is a real incentivefor the manager to make each telephone call count and shouldtranslate into more rentals. Used in conjunction with otherbonuses, this method keeps the manager sharp in his telephonesales.

There are several "shopping" services in theindustry today. Some shop your manager and just send him awritten notice a month later, which has some good points.However, if you just give the notice to your manager and don'tdiscuss the findings with him, it is a worthless piece of paper.Some services will immediately follow up with your manager afterthe "shopping" call and evaluate his telephonepresentation, as well as send a written evaluation. This way themanager can immediately get feedback from his telephonepresentation.

Late Fees and Commissions

Some owners figure X amount per month in late fees will becollected at their facility. Managers, on the other hand, oftenprefer to drop the fee when a tenant complains about it. Toreduce late-fee credits, an owner could work them into a bonussystem. For example, all late fees over a specified amount gostraight to the manager. This will make the manager think twicebefore he is so willing to drop late fees, because he is givingaway some of his own money.

Another avenue for bonuses is in sales of ancillary products.Some owners pay commissions on sales of locks, boxes, packingsupplies and insurance policies, and give this to the manager asa monthly bonus, which motivates them to sell these items.

Rental trucks are another form of income. If you have trucks,it's advisable to pay your managers a commission on them,otherwise there is not a lot of motivation to actually rent thetrucks. Renting trucks is not easy for the manager, especially atan active facility. Truck-rental companies may want to convinceyour manager that he is there only to rent the trucks. However, yourbusiness is owning a storage facility and renting space. Yourmanager should devote his time to renting space and collectingrent. With truck rentals, your manager has two bosses: you andthe truck-rental company. By compensating your managers for truckrental, they will have the incentive and motivation to rent thetrucks and bring in the added revenue. The average truckcommission paid to the manager is 30 percent of the owner'sprofit. Some owners pay 50 percent, some only pay 5 percent andsome pay nothing.


If you have more than one site, you might want to considerorganizing contests between your various locations as anotherincentive to keep your managers sharp. If your sites vary in sizeor locations, it is a little more difficult to determine whichsite does better than the rest. Therefore, these contests shouldprobably be based on percentages. For example, you could rewardmanagers at the facility with the highest percentage increase inrentals or the facility with the highest percentage reduction ofdelinquencies or the highest percentage increase in income overthe previous month, and so on. Obviously, this sort of bonusprogram takes more time to calculate than a per-rental bonus.However, you might find it drives your managers to compete withone another, resulting in more profits. You could use weekendtrips, cash, small TVs or appliances, or whatever you like ascontest prizes.

Whatever bonus program you chose to motivate your managers, itshould be designed to keep your managers sharp and on their toesand to make them stretch to reach goals. At the same time, itshould be attainable by the manager. It is de-motivating for amanager to work hard for a bonus that is so far out of reach thathe can never achieve it. It will only deflate your manager and,in the long run, hurt your facility as well as your chances ofretaining a good manager.

You and your manager might elect to design a program using acombination of bonuses to help keep them sharp, motivated andfocused. These bonuses could be paid on a monthly, quarterly,biannual or annual basis, or a combination of these. By workingwith your managers and getting their input and feedback, you willcome up with a good program that they will be pleased with andthat will make you, your manager and your facility a winner.

Pamela Alton is the owner of Mini-Management TM,one of the industry's largest nationwide manager services.Mini-Management also offers policy and procedures manuals, salesand marketing training manuals, inspections and audits,consulting, low-cost "Storage Support" TM, telephoneshopping and training seminars.
For more information on the services offered byMini-Management, call (800) 646-4648.

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