Great Entrepreneurs Understand the Importance of Incentives and Employee Empowerment

In the mid-1950s, Les Schwab, already successful in establishing several tire stores, encountered a challenge with a newly acquired location that was underperforming. Sales were low, customer footfall was minimal, and the store's morale was noticeably poor, with employees showing signs of disengagement.

Recognizing the untapped potential of this store, Schwab decided to employ a radical strategy that was quite unconventional for the time. He believed the key to revitalizing the store lay in empowering the employees, making them feel truly invested in the business's success.

Schwab introduced a profit-sharing model that was a novelty in the tire industry. He gathered the store's employees and unveiled a new compensation plan. Rather than just receiving a standard wage, the employees would now be entitled to a significant share of the store's profits. This innovative approach meant that their earnings would directly correlate with the store's performance: the better the store did, the more they would earn.

Additionally, Schwab gave the store manager more autonomy, encouraging him to think and act like an owner. This empowerment allowed the manager to make decisions that would have a direct impact on the store’s success, fostering a sense of ownership and responsibility within the team.

The impact of this strategy was immediate and significant. Motivated by the new profit-sharing scheme, the employees became more proactive. They enhanced their customer service, stepped up their sales efforts, and managed the store operations with greater efficiency. As a result, the store's performance improved dramatically. Sales numbers began to climb, and this once underperforming store quickly became one of the best in Schwab's chain.

This success story was not just a one-off event but became a model for the rest of Schwab’s stores. He continued to implement profit sharing and employee empowerment across his business, which played a crucial role in the company’s growth and success.

Through this initiative, Les Schwab demonstrated the powerful impact of aligning employee interests with business goals. His innovative approach to motivating his team not only salvaged a struggling store but also set a new standard in effective team management and business operations.