Unique compensation plans

[jrh]

A couple days ago I was presented with a unique opportunity, but I'd like to get some ideas on how to proceed...

The owner of the flight school I work for talked to me and basically said he'd like to see me get more involved with the management of the school. We're a small operation (two 172s, two full time instructors, myself being one of them) but have been steadily growing and he thinks the next logical step in continuing our growth is to get a dedicated manager/head instructor of some sort.

There's a million things that need to get done so he said I could basically write my own job description if I want to. Duties could include anything and everything such as organizing files, doing prog checks with students, standardizing instructors, managing maintenance on the aircraft, recruiting students, meeting with prospective students, flying discovery flights, teaching ground schools, organizing promotional seminars/open houses, developing marketing material, etc.

As it stands now, I'm a full time instructor, simple as that. I help out in other areas when I can, but I have a fairly high student load, so I don't have much time to do anything outside of flying.

The owner would like me to cut back on teaching in order to shift in to more of a managerial role. However, he's also a fair guy and knows that I'm making close to $30k/year as nothing more than an instructor making an hourly wage, so he wants to find a way to compensate me equally or better than what I currently have.

Being the entrepreneur that he is, he isn't a big fan of paying somebody an hourly rate to sit in the office. He wants to keep pay tied more closely to performance. He'd rather pay a modest base salary with some sort of commission structure on top. For instance, when I taught a ground school for him earlier in the year, I had a $200 base pay plus $25/student for every student I enrolled in it. That's the type of structure he likes using.

As an idea, he threw out that I could get something like X dollars base pay, Y dollars flight pay for the few students I continue flying with, and Z dollars for every hour the other instructors bill out, as an incentive to be a good manager and keep the other instructors busy. It might be like $1000/month base pay, $20/hour flight pay, and $2/hour for every hour the other instructors bill out. We didn't talk about those numbers specifically, but that's the concept.

Of course in talking about it we both admitted it's new territory and neither of us knows exactly how to proceed. He's open to any reasonable suggestion I give him, so that's why I'm here, finally asking my question...

Considering the position is a mix of flight instruction, management, and sales work, what do you think would be a fair form of compensation that's both sustainable for a small business's budget, yet lucrative enough that I could make a fair living off of it?

 

[WacoFan]

I applaud you looking at this and trying to find a fair mix of compensation with your boss - he sounds like a pretty good guy. I think that if your goal is an airline type job, the management duties will not serve you as well as flight time. If your goals are a Corporate/Fractional type of job, your management experience and customer satisfaction roles could be a great positive for you.

As far as designing a compensation plan, I would encourage you to figure out what you want first: How much pay do you want/need in total? After that, how do you want your duties to play out - 30% non-flying, 70% flying (or some other mixture that suits you)? After answering those questions about how you want the job to be (flying vs non-flying duties), plug in your total income needs/goals and then back into the math of how much base vs flight pay, etc. When negotiating with someone else it is always important to get a clear grasp on what YOU want. If you have that, you can effectively deal with the other person and hopefully come to an agreeable understanding. If you don't have a clear grasp of what you want then you run the risk of being unsatisfied simply because it is hard to achieve goals and ambitions if it wasn't clear beforehand what they were.

 

[CK]

I don't like the word unique when it comes to my pay. I would ask for a base salary of what I need to live, and ask for a percentage of the schools profits each month.

Alex.

 

[minitour]

I don't like the word unique when it comes to my pay. I would ask for a base salary of what I need to live, and ask for a percentage of the schools profits each month.

Alex.

I agree. If you start with management duties, you're going to find yourself in the office more and more. Unless you run yourself wafer thin, you'll find yourself out of the airplane soon. Your pay needs to reflect that. I'd ask for a basic salary to encompass all job duties.

-mini

 

[Goonie]

Get a salary! Guaranteed money!

I was in your shoes 6 years ago when my boss asked the same of me. He gave me a salary to do it. It wasn't much, hell we only had 4 aircraft and 4 instructors. Now we have 30 aircraft and 25 instructors. anic:

 

[jrh]

Thanks for all the thoughts everyone.

To clarify a few points, flight time isn't a goal of mine anymore. I have my ATP minimums so I'm kind of past the point of "building time." I'm mainly looking for a job that pays me a fair wage and offers me a decent quality of life, all while being something I enjoy doing. I know "fair wage" and "decent QoL" are very subjective terms, but I see the potential for both of those conditions to be met for myself with this position, at least for the next year or two.

I guess what I'm saying is, I'm not chasing after "the next big job" so to speak, I'm looking to make the most out of what I have going for me right here, right now. I highly doubt I'll spend my entire career at this place, but I can see myself settling in for a year or two.

As for asking for a base salary that encompasses all non-flying duties, I see the logic to that idea, but I'm not sure it's the best option for this situation. The main issue I see is that as a small flight school, the owner doesn't have $20k sitting around that he can throw at me with the expectation that everything will be fine.

One has to remember that he's taking a risk on me. What if he hires me and for whatever reason, be it my skills, the economy, or anything else, we don't grow like we think we can? Then where does the money come from to pay me? In a small business, guaranteeing a salary can be a risky proposition.

I like the idea of a base pay plus a straight cut of the profits. I'm not sure how to compute it, but I like the concept. "Profits" in this type of operation can be a risky word in itself because there are times when there are significant financial expenditures in the short term that may or may not translate in to profits in the long term. For instance, advertising expenses are the first example that pop in to my mind.

The same could be said for flight hours. If we fly the planes 50 hours/month we might barely break even, yet if we fly them 100 hours/month we might make a pretty decent chunk of cash. Sometimes the big months in the summer have to subsidize the weak months in the winter. Should profits be computed on a monthly or annual basis? On the months that we end up losing money, would my base salary need to be docked in the same way my bonus pay would increase with profitability?

Those are the types of things both the owner and I think about. A fact of business that we both agree on is that money has to come in to the business in order for money to go out in the form of pay checks. We want to formulate a system that will reward me for doing well, yet won't completely break the bank if things don't go as expected.

Anyhow, very good thoughts so far. Any other ideas are still appreciated.

 

[meritflyer]

Performance based compensation is nothing new or "unique".

Your boss is simply asking you to bear some of the risks and/or successes should you decide to take on more of an 'equity' position in the company. I think it's fair and candidly, I would do the same.

For example, in my current business (medical devices) our reps are salaried at $30,000 a year. Pretty crappy pay in the medical sales world. However, our reps are paid with financial incenties and commissions. Our top earner pulled $400K and our lowest paid rep pulled $140K last year. Our product line exceeds 300 different items. Some items are paid at a higher percentage than others. This drives higher margin products to be pushed.

If it were me, I'd request a base, a percentage of existing business, and a percentage of new business. You'll need to define what new business is. Generally speaking, an annual snap shot of the company's earning is taken and broken down monthly. Then, anything over that monthly mark would be considered new business at paid at a higher rate (commission).

I work these deals out every day within my region and would be glad to help if needed.

 

[jrh]

Performance based compensation is nothing new or "unique".

I know, but it seems rare in the flight training industry for some reason

If it were me, I'd request a base, a percentage of existing business, and a percentage of new business. You'll need to define what new business is. Generally speaking, an annual snap shot of the company's earning is taken and broken down monthly. Then, anything over that monthly mark would be considered new business at paid at a higher rate (commission).

I work these deals out every day within my region and would be glad to help if needed.

Hmmm...good ideas. I like the idea of defining and taking a share of "new business." I'm not sure how to cover my duties outside of marketing/recruiting, but it's a good start.

I'll ponder that some more. Maybe I'll PM you later.

Keep the ideas coming folks!

 

[tonyw]

Sounds like he's asking you do to a little sales for him.

The way it generally works is that you get a base that will pay your bills and then commissions based on what you sell.

So tell him you want something like $30K as a base and then I dunna, five percent of whatever revenue comes in from the day you start with the newly defined role. Or 15 percent of the profits and you get to see the books.

 

[minitour]

As for asking for a base salary that encompasses all non-flying duties, I see the logic to that idea, but I'm not sure it's the best option for this situation. The main issue I see is that as a small flight school, the owner doesn't have $20k sitting around that he can throw at me with the expectation that everything will be fine.

I don't see the dilemma here. He can either afford a manager (which is basically what he's asking you to become - title be damned) or he can't.

From this part, it sounds like the ball is in his court on that. Either he can afford it and he'll pay you or he can't and he won't. If he can't afford it, you don't do the work. Doesn't get much simpler, IMO.

Business is a risk, there's no such thing as "a sure thing". Business is about how much risk do you want to take and how much reward is at the end of the tunnel. Sounds like lots of reward but lots of risk and that may be outside of his comfort zone. There's nothing wrong with that, but still you don't want to sell yourself short.

-mini

 

[LostComm]

You touch on something important here: Profits. If you ask a percentage of the profits, understand that many small companies can adjust things in the books rather easily for tax reasons. Many things you might run across might come out of profits, too. Your boss may drive a new car - well, that's a business expense and technically not a "profit." Same with any number of things. Just an FYI from a business owner.

LC

 

[moxiepilot]

Having been in the same exact position at the end of last year, I will tell you that more and more of your time will probably lean towards management and less on instructing (to keep staff busy, work on projects, etc.)

It will cut down your flying drastically if you are managing. If you're not really managing too much then obviously it wont affect you as much. However, that being said - as a manager DO NOT rely on your flight time wage to pay the bills.

You will take it in the end in the end.

Good luck