Decades ago, tiered pricing (the “level” system) became trendy. It started with good intentions and what seemed like a well-considered approach. The philosophy of the model revolved around the belief that professionals with superior skills should charge and be compensated more for their services. So, salon owners placed their professionals in different skill levels, assigning labels to them like “apprentice,” “associate,” and “master.” Their menus displayed several different prices for each service, their values being determined based on the skill level of the person performing it.
Seems like a decent idea, right? Your senior professionals are happy because their superior skills are being rewarded and recognized. The investment and liability from your lower-skilled workers gets offset by their lower cost. (In addition to charging less for their services, many tiered salons were paying those professionals less.) Ultimately, this system just doesn’t work in practice the way it seemed it would on paper.
Salons that essentially rank their professionals in this way give clients the (correct) impression that their professionals aren’t of equal technical competence.
Why would you have anyone performing services on clients in your salon if their skills fell below what you would expect of your most capable licensed professionals?
This system enables managerial laziness by presenting subpar hiring standards and mediocre employee training as some kind of strategy. It excuses poor technical skill by appending a lackluster job title to those professionals and pricing their services accordingly. Clients should expect that they’ll receive the same quality of service, regardless of whose chair they’re sitting in.
Finally, for a system seemingly designed to increase morale, it tends to do just the opposite. For every “senior” who feels validated exists a handful of “associates” and “apprentices” who feel undervalued.
To make matters worse, promotions initially tend to cause more stress for the professional than they alleviate. When they “move up,” they must contend with their own clients, who may be frustrated that their service prices suddenly—and from their perspective, arbitrarily—increased. They might be happy for their stylist, but the clients may also feel that they’re being punished, especially since their willingness to repeatedly sit in that professional’s chair despite her mediocre abilities lead to that promotion in the first place.
It doesn’t stop there. Employees may not agree with the promotion of one of their coworkers. Some apprentice level professionals may get angry to see one of their colleagues promoted before them. Some senior level professionals may not appreciate a coworker they consider to be less skilled being promoted to their tier.
Ranking professionals by skill level introduces more toxic competition to an industry already plagued by it.
Instead of creating “levels” and complicating your pricing (and your work life), I recommend keeping your prices and job titles consistent, and allowing your employees’ individual merits, qualifications, and contributions to inform how you compensate them.
Alternatives to the “Level” System
To encourage and reward performance, I recommend first implementing a performance-based compensation structure. These systems can be configured a variety of ways, but most commonly, commissions are contingent upon the professional exceeding sales goals.
For instance, professionals would not be eligible for commission bonuses at all until their sales exceed a particular dollar amount—referred to as the Tier 1 Goal. Until they hit that goal, they only receive their base hourly wage (and their tips, if your salon accepts them). If their sales exceed the Tier 1 Goal, they receive their hourly base wage plus a commission bonus on all of their sales. Typically, these commissions are modest—ranging from 3-5%.
The professional could then strive to hit the Tier 2 Goal, which would make them eligible for an even higher commission percentage. (Often, Tier 2 bonuses range from 5-8%.)
You could create as many tiers as you like, but most salons stick with three. (Tier 3 bonuses range anywhere from 8-15%.) However, these systems are highly individual. Salon owners need to be evaluating their own businesses, utilizing their own numbers, to determine how to best structure the system so their services are profitable. (The Salon Compensation and Pricing Megakit contains the tools necessary to run those calculations easily.)
Base Wage Increases
Instead of raising commission compensation percentages (which is tremendously expensive and does nothing to incentivize superior performance), raise base wages when a professional has demonstrated that they deserve it.
Increased bonuses reward sales performance. Increased base wages reward superior work ethic.
Performance reviews should be held on a quarterly basis. Employee raises should always be justified by more than sales performance alone. As employers, we should be requiring our professionals to convince us they deserve to be compensated more, and recognizing and rewarding them when they’ve demonstrated to us that they’re worth more.
Expanded Responsibilities and New Job Titles
When it comes to awarding new job titles to professionals, “new” doesn’t mean “arbitrary” or “symbolic.” These new titles must come with expanded responsibilities that leverage the employee’s strengths. Typically, professionals are promoted to supervisory or education-related roles.
For example, if you have an employee who is passionate about product and sells retail like nobody else in the salon, that employee should be named the salon’s Procurement Manager and given responsibilities that include: new product testing/research, salon product education, and inventory management. As a Procurement Manager, the professional would be authorized to host demonstrations for clients and employees, educating them about the products the salon carries. They would also be compensated for attending product workshops and presenting their findings to the purchasing authority in the salon, ensuring the business always has the newest and best products the industry has to offer.
Promoting employees this way not only gives them a sense of upward mobility that most salons lack, but helps to alleviate managerial burdens from the owner and/or management. Additionally, employees feel recognized, appreciated, valued, and trusted, which reduces turnover considerably and gives the professional a sense of pride and partial ownership.
The more employees who treat your salon as if it were their own; the better.
Transitioning From the “Level” System
Before implementing any significant operational and/or compensation changes, you’ll need to communicate with your current employees and clients.
Even if the changes are necessary and completely non-negotiable (for instance, in cases where the services are not profitable or barely profitable), try to keep the discussion focused on the positives. Be honest and sympathetic about any potential negatives, but reassure everyone that your decisions weren’t made on a whim.
“A lot of thought and consideration went into designing a new system that will work best for everyone and ensure the continued success of the salon.”
Clients will likely take the change much better than the employees will, as customers tend not to like the “level” system whatsoever.
Employee communication will need to be prioritized, so start the conversations three months before you plan to switch over to the new system. Failure to discuss these changes in advance and listen to the ideas and concerns of your professionals will likely lead to significant turnover. They should be made aware of which changes won’t be negotiable and which are still open for discussion.
More than anything, employees will want to know how the changes will impact them, so have that information prepared in advance. Give them the ability to schedule one-on-one meetings with you to present their concerns and ideas, and to have any of their questions answered.
Employees who are ranked lower in the salon (anyone ranked below your “master” level professionals) will need to have their technical skill evaluated and any deficits corrected before the change occurs. Should those deficits not be resolved by your deadline, the professional should not be permitted to perform any services they aren’t capable of competently executing until they’ve successfully completed training.
The clients of these professionals should be made aware during the months leading up to the switch that this training is taking place. While the prior system is still in use, trainers will be actively observing, evaluating, and educating the professional.
“We’re excited to announce that we will be conducting several months of rigorous advanced training. During your appointment, one of our trainers may observe, evaluate, and educate your professional to help refine their technique.”
From the day you decide to make the transition, your recruitment and onboarding processes will need to change. Professionals who do not demonstrate the technical proficiency you expect from every other professional you employ will need to be trained—or not hired—until they do.
Stop hiring unqualified (or underqualified) people. Expect better.
This may mean implementing applicant evaluation procedures and structuring a training program for new hires. During their training period, employees would only be permitted to perform the services they’ve proven they can execute proficiently.
For this system to be as effective as possible, salon owners will have to work hard to establish and maintain a positive, productive, supportive salon culture. While the compensation system does a good deal of the heavy lifting, it’s up to the employer to create a culture that motivates and enthuses professionals so they feel more invested and as if they have a degree of ownership and control over their own success and that of the business.
During the months leading up to the transition:
- become more diligent about showing gratitude routinely
- practice active listening when communicating with employees
- strive to create an atmosphere where employees (especially your trainees) feel comfortable seeking help and admitting their limitations
- complement the skill of your professionals by remarking on service outcomes daily
Transitions of any kind can be rough, especially those that essentially redefine a business, so don’t expect everything to go smoothly. You will likely lose a few employees and clients. You’ll have doubts. You’ll probably experience some fear and anxiety. Just remember that one day, it will be over and you will come out through the other side—and your business will be better off for it.
How does your compensation strategy reward and/or encourage your employees? Do you use a similar ranking system, assigning different prices to different employees? Does it work well, or has it presented challenges/complications you didn’t anticipate?