Negotiating Compensation (In A Recession)

Look at the big picture and know your own value before asking for a raise.

What are your skills worth? Probably more than what your employer is paying you, right? While that might be true, it does not necessarily mean your employer wouldn’t like or want to pay you more; instead, it could be that the potential earnings from the service you provide limit what the company is able to pay. An increase in earnings has to be a win-win situation for both you and your employer. And then there’s the recession to consider.

What are the best ways to discuss compensation? It depends on the type of facility you work for and the policies it has in place. Most important, it depends on how you prepare for and approach the negotiation. That will be the ultimate backbreaker that determines a successful or unsuccessful outcome.

Laying the Compensation Groundwork
Whether you’re preparing for a performance evaluation or you’ve scheduled a salary review meeting, you need to know how your current salary or hourly rate compares with the industry average. A lot of variables go into that comparison, including your job title, the region where you work, the type of facility you work for and the number of members your facility serves. The perks you receive—such as benefits, cash incentives and educational assistance—can also affect your compensation.

Salary comparison charts for different industries are available on a number of websites, such as Kiplinger.com’s Salary Wizard at http://kiplinger.salary.com. In addition, you can find out where you stand by referring to the 2008 IDEA Fitness Industry Compensation Survey, which gives average hourly rates and salaries in each job category. The Kiplinger salary comparison chart for personal trainers was right in line with IDEA’s survey findings. (Complete, detailed results—along with geographic cross-analysis, multiyear comparisons and much more—are available to members in the online IDEA Library, at www.ideafit.com, and in the January 2009 issue of IDEA Fitness Journal.)

Getting Paid for Performance
Fitness facility managers and owners have different ways of determining whether to increase an employee’s wages. Many provide a review process either at the end of the year or on each anniversary of an employee’s hire date. Typically, these reviews determine whether the associate has performed adequately to merit either a cost-of-living raise or a set increase predetermined by management. For instance, at the World Bank Fitness Center in Washington, DC, all employees receive detailed performance reviews in April and May of each year. This is when management determines how much of an increase, if any, is warranted. In the past few years, according to Mike James, the center’s manager, increases have ranged between 3% and 6%. “It’s up to me as manager to determine the percent increase for each individual, using that scale,” says James. “An outstanding employee would get closer to the 6% [range], and an average performer closer to the minimum 3% [range].”

However, as James also explains, a standard performance evaluation system may not work, depending on the situation. His facility uses a performance evaluation system designed by the human resources department at the World Bank. But, in addition to that, the center has its own evaluation procedure. “Bank performance evaluations are somewhat generic and not really written for a unique setting like a corporate fitness center,” says James. “While we respect the process, we place more credence on our own evaluation system,” which is a 360-degree peer review process.

Some fitness facility operators have stopped tying raises to performance reviews. In the past, annual reviews at Elevations Health Club in Scotrun, Pennsylvania, usually resulted in some kind of pay raise, but co-owner Rob Bishop says that employees started to look at their review as an automatic “time for a raise.” So, in 2007, he decided that employees would no longer be rewarded for longevity, nor would reviews equate with a salary hike. “For new employees, each job now has a probationary wage (for the first 90 days),” says Bishop. “If, after 90 days, we feel this is a good fit for both the employee and employer, we increase pay to the appropriate rate for the job. Future pay increases come only when that person takes on more responsibility or excels at doing his or her job. If you are showing up every day and doing your job, you get paid. You get paid more by doing more work or by doing it better.”

Other facility owners determine raises based on a change in job title or the level to which an employee has progressed, leaving little room for negotiating higher pay. Club One in San Francisco, California, has a specific training progression program. A trainer’s level—personal trainer, specialized trainer or master trainer—affects compensation. “Each has a different price point and compensation percentage,” explains Bill McBride, chief operating officer. “Each progression requires a higher level of experience and education.”

Other operators don’t negotiate salary at all. Instead, employees earn additional wages based on net income for the facility. “Most of [our] key people are on base salary, and then they get a percentage of net income,” says Mike Arteaga, founder and owner of Mike Arteaga’s Sport Health & Fitness Centers, Poughkeepsie, New York. He explains that supervisors get the profit and loss statement for their area based on the budget month. Employees are expected to hit their goals, and then they get a percentage of that. So if the goals are exceeded, the percentage is higher.

What You Need to Bring to the Table
If your facility is negotiation-friendly, the burden is on your shoulders to successfully garner a raise. There are two common ways facility operators determine pay increases: merit and income production. So, while you may believe you deserve to be making more money, you’ll need to demonstrate why to your employer. Even more important, you’ll need to show how your pay increase will benefit the facility.

As far as merit goes, personality and education are important. “We look at [employees’] skills and their continuing education, and whether they attend conferences,” says Troy Demond, owner of Fitness On The Move, Fort Myers, Florida. However, Demond recognizes that he’s “had great trainers who are super book smart but have no personality and don’t want to get additional continuing education because they have their degree. And then there’s the trainer who has no degree and says, ‘Where can I go?’” Which plea has more merit potential? The latter, because the trainer has not only the personality for the job but also the desire to keep learning.

Still, even with all the personality and skills required for a job, an employee must perform. According to Arteaga, in today’s environment, a staff member who wants to be eligible for a pay increase must go to her manager and show how she will improve the club. “People have to be more productive and prove it with numbers,” he explains. For instance, Arteaga has a system in place that pays group exercise instructors at different levels, depending on average class attendance. The more people there are in the class, the more members the instructor is drawing, which determines how successful the instructor is. “In the past, [instructors would say], ‘Here I am. Give me the members, and I’ll teach them.’ Those instructors are no longer with us,” adds Arteaga. “The onus is on the teachers to develop their classes. It’s within their capabilities to do it; the good instructors bring people in.”

Even at McBride’s Club One facilities, which pay more only on title advancement, an employee needs to demonstrate how she will add value through programs, increased fees, targeted member support, etc.: “Employees need to show a win-win—how they will generate more revenue and profit for the club through their program [or] approach to training.”

Increased attendance in classes or other areas of the facility means a growth in business, which frees up dollars to pay employees more. Like Arteaga, Demond says he will pay for performance.  “We’ve had great trainers who have come to us and who want to build their business under our umbrella,” says Demond. Yet, there are “others who say, ‘Where are my clients?’” Demond looks for trainers who want to contribute to the company. “I would rather pay more to a trainer who says, ‘Troy, I’d like to grow the business,’ and then shows me some ideas,” he adds.

“I know what’s going on, and I see the [club’s] revenues,” says Demond. “So, I say to the trainers, ‘Bring me some ideas.’ It’s not up to me to come up with the ideas for bringing in more money. I like to hear the trainers’ perspective.” He suggests encouraging employees to look for ways they can work smarter and not necessarily harder. “That’s how we’re trying to get them to think,” explains Demond. “Trainers, on the whole, aren’t taught to be businesspeople; they’re trained to be in the trenches. But you want them to make as much money as possible so that there’s loyalty [to the club]. So, as an owner, you’ve got to find an incentive to give them a higher percentage of the take.”

Ways in which his club’s employees have done this include offering small-group training as opposed to one-on-one and teaching 6-week summer conditioning classes for high-school athletes. With their potential for increasing revenue, these types of programs are becoming more common at many facilities. But even better are programs that create revenue streams out of something new. One of Demond’s employees who has been with the facility for 14 years really started thinking outside the box. “In Florida, we have residences that have fitness centers in their communities,” says Demond. “[Our employee] went out and started running our off-site division, and we now have 40 accounts that she services.” So, in effect, Demond incentivizes her to go out and build that business under his name. “I think we get 5% of everything after expenses,” he adds. That may not seem like a lot of extra revenue for the facility, but every little bit helps, and the employee gets paid more by drumming up the extra business.

Bishop of Elevations will also pay for services that are considered “extra,” even those that are not outside the box. “We will consider increasing the hourly rate paid to a trainer as that trainer increases his or her business,” he says. “The more sessions the trainer completes, the more valuable he or she is to us, and therefore, the more we will consider paying (either in the hourly wage or in the form of bonuses).”

The bottom-line advice on performance: “Have specific accomplishments and measurable/quantifiable successes that differentiate you from everyone else at the facility,” says Bishop.

Also, make sure your employer recognizes that you are a team player. “A complete team player always supports other associates and helps in multiple departments,” says McBride. This means giving 110% to the job before even considering asking for more money.

The Negotiation Process
When is negotiation a good move? Not when you’re hoping for a token cost-of-living increase to keep your buying power up with inflation. That’s not a raise. The time for negotiation is when you want to be rewarded for going beyond expectations in your performance and contributions. If you’d like a raise—one that’s not based on inflation—you have to ask for it. To better your chances of success, make sure your timing is right and your preparation is impeccable. Also, be sure to go in with the mindset that your pay raise is based on your contribution to the company.

“First, make contact with the supervisor ahead of time, to set up a meeting,” says Bishop. “Second, make the supervisor aware of the reason for the meeting.” You don’t want to surprise your manager—you had time to prepare, and so should your boss. “Third, be ready to discuss in detail the ways in which you have affected the business in a positive way. It should be something measurable and tangible,” he adds. “Fourth, be able to discuss . . . how you plan to continue to improve things or effect more positive changes. Last, be ready to discuss, in a nonconfrontational way, any areas you need [to improve].”

Timing is especially important if you have annual performance reviews and you’re broaching the subject at another time. If this is the case, try scheduling an appointment to negotiate a raise after you’ve taken on additional responsibilities or you’ve created a new program that brings in additional revenue.

Don’t be locked into asking for money. Consider benefits and perks when negotiating, especially during a recession. Right now, many independent club operators are forgoing their own paychecks because of declines in membership. If that’s the case where you work, your chances of receiving more money are slim—so, for now, consider vacation time, flexible work hours or even reimbursement for the costs of education and training.

Understanding the Whole Picture
Your attempt at negotiating a wage increase may or may not work. To understand the results of your attempt, be sure you grasp the whole picture. It’s common for employees to misunderstand where all the money they are earning for the fitness center is going. Therefore, begin the meeting by showing that you understand the costs associated with your employment, says McBride. That includes taxes, benefits, insurance, overhead, operating costs, etc. “Don’t act entitled,” he exclaims. Instead, “approach [the meeting] as a true contributor to the organization.”

Bishop explains ways in which many employees may not see the whole cost picture. “The club has expenses, and the trainer doesn’t share in those expenses,” says Bishop. “For instance, if we run a special coupon for $50 off a personal package, the trainer earns her regular hourly fee, and the cost of the coupon comes out of the club’s percentage. If we run a newspaper ad that promotes the club and our trainers, the club pays for it. If our credit card company raises its fees, the trainer gets paid the same—those costs come from the club’s percentage of the revenue.”

Demond appreciates this all too well. He started as a hospital wellness physiologist, has been a fitness center trainer and is now a club owner. “I’ve come full circle, so to speak,” he explains. “As a trainer, I’d go into an existing club and rent space or take a percentage of training fees, and try to get as much as I could from a small-business [owner].” Now, as an owner himself, he knows the overhead costs, but he can also appreciate where the trainers are coming from, especially those who are loyal to his business. The problem, as he says, is that “it’s a very delicate situation. We want to give them as much as we can, within reason.”

That is what most needs to be understood in negotiations. Facility operators want employees to make more money, because the more money the employees bring in, the more money the club stands to make.

The Recession’s Effect on Raises
There isn’t a fitness business that hasn’t been affected by the recession. And there couldn’t be worse timing than a recession for a wage negotiation. How have facility operators reacted?

Bishop says he noticed a slowdown in business toward the end of 2008, which caused him to reduce hours for some part-time staff people. “We also let everyone know that for the foreseeable future, we wouldn’t be considering raises except in cases where an employee took on a significant change (increase) in responsibilities,” he adds.

Demond says he started seeing changes “about a year ago when the real estate market started tanking.” For instance, his fa­cil­-ity, like many others, relies on corporate accounts as well as individual clients. “Com­panies that normally would have paid for reimbursement—they just cut it,” he says.

At Arteaga’s facility, the recession has affected employee bonuses because the club’s nets aren’t as strong as they used to be. To counter that, they’re encouraging employees to find ways to cut expenses. “We’ve challenged them to save money,” explains Arteaga. “We have a weekly meeting, and [the employees] come back with their suggestions and what they’ve done.” This has allowed them to renegotiate what they bring home.

The main thing that facility operators are relying on during this slowdown is additional revenue streams. Says Demond: “The last thing [we] want to do is cut trainers’ revenues.” The reason is obvious: trainers are the ones who bring in the revenues. So, if you’re bringing in more money for the facility, whether through existing or new clients and programs, the recession shouldn’t be an issue.

Final Negotiation Advice
The most important thing an employee has to consider when negotiating a pay increase is his or her value to the facility. In today’s competitive environment, facility operators are getting back to basics. “Right now, we have to focus on performance and the package we’re providing our customers,” says Arteaga.

For trainers, that is especially beneficial when it comes to wage negotiation. It’s all about forming relationships with the customer, says Demond: “The trainers are saving our business right now; they’re an integral part of what we’re doing. I would much rather pay more money to a trainer who walks into the club and says ‘hi’ to everybody, and ‘What can I do for you?’” First form the relationship, he adds, and the money will come second.

If you want a raise, walk the talk. Show how valuable you are to the facility by being proactive with revenue-generating ideas. Demonstrate how those ideas are going to improve the club and its bottom line. Then, broach your negotiation professionally, and if all the pieces make it a win-win for you and the employer, be prepared to earn more on payday.

Ronale Tucker Rhodes, MS, has more than 22 years of experience in the fitness industry and was previously the editorial director for Fitness Management magazine. Reach her at ronaletucker@yahoo.com.

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Ronale Tucker Rhodes, MS

IDEA Author/Presenter
July 2009

© 2009 by IDEA Health & Fitness Inc. All rights reserved. Reproduction without permission is strictly prohibited.

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