February 11, 2021

Skin in the Game

In the five years since taking over Pepco Sales and Marketing, Charlie Parham put his own stamp on the family business. His grandfather, Phil Parham Sr., started the company in 1965, selling plumbing lines out of his garage. After inheriting Pepco in the 1980s, Charlie’s father and uncle expanded the company to include HVAC and waterworks sales and grew from six employees into the 60-person agency that exists today. If it moves water or air through a building, be it pipes, vents, ducts, faucets—the vital systems behind the walls of every structure—Pepco sells it.

Look to the people already in the building

Charlie’s goal, and that of his non-family partners, has been to further grow and professionalize Pepco. They want to invest in its people and run the company like the biggest and best firms in the industry. To do that, Charlie focusses on roads to growth, of which one core value is accountability. So, in 2020, he wanted to find a way to make everyone in every department feel accountable—like they had a direct hand in the company’s future. All he had to do was look to a group of his employees already in the building: The sales team.

“A salesperson gets this immediate feedback every month: their commission,” says Charlie. “Are they selling things or are they not? If we’re all going to be accountable, our entire team needs to feel that in some way.”

The answer, Charlie believed, was to come up with some sort of metric for each department that could result in a bonus or commission for employees. In late 2019, he conferred with different department heads and gathered their ideas.

“We wanted to give everyone agency,” says Charlie. “If we want to grow, I have to give individual leaders responsibility, give them room to grow. This idea gave them an increased sense of importance and positivity. Everyone took this and ran with it.”

By the start of 2020 Q1, every employee of Pepco had some skin in the game:

• Warehouse: Here, it’s all about inventory accuracy. Employees got points for catching errors on inbound materials and got penalized for missing mistakes on anything outbound. “Every warehouse employee got a bonus,” says Charlies. “It became a race of who could find errors—they had a lot of fun with it. And we became a hell of a lot more accurate.”

• Customer Service: They put together training sessions and processes and were rated by other departments on the clarity, relevance, and effectiveness of the presentations.

• Accounting: Points were awarded for keeping accounts receivable up to date.

• Marketing: Points were given for new leads and new subscriptions to the mailing list and newsletter.

Two things happened immediately as a result of this new initiative. First and foremost, employees were incentivized to improve their performance in a friendly competitive atmosphere. And the results went straight to the bottom line. Less inventory was wasted, there was a reduction in breakage, and departments stayed under budget. Charlie says that Pepco gained almost a percent of margin this year, even amid the economic downturn. 

Exposing yourself to new ideas

The second and perhaps more surprising benefit was that by motivating the individual departments to help come up with their own goals, Charlie was exposed to new ideas on how to improve all aspects of his company’s performance.

For instance, the purchasing team came up with an idea to get rid of dead inventory by having a sort of garage sale to local house-flippers and DIYers. When a warehouse worker left, the Warehouse Manager came to Charlie and convinced him that his crew could cover the absence with the talent they had, enabling Charlie to turn the departed worker’s paycheck into raises for deserving crew members. 

“Before, it was just me saying we need to do this and we need to do that,” he says. “But I don’t want to be a micromanager. I truly believe that I don’t know someone’s job better than they do. This way, the department leaders and employees came to me with ideas that I never would have had otherwise—ideas that I didn’t even realize were possible.”

No surprise that Charlie wants to institute this incentives program and adjust goals on an annual basis. He’s under no illusion that every idea will pan out, but he and his company are prepared to adjust things as they go.

“We’re making great progress,” says Charlie. “Why mess with it?”

photo credit: Pepco Sales

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