Share and share alike - incentive schemes at work

Mill House Inns has launched a unique equity sharing scheme. Phil Mellows meets Gordon and Janine Marshall who have taken up the offer

Take a look at the Elstead Mill and you might wonder what more incentive you need. The setting is idyllic, its 14 acres of grounds rolling round the quietly lapping waters of a duck pond, while inside the historic four-storey red-brick building, once the home of the Mr Bentley who made posh cars, a vast mill wheel churns in the downstairs bar.

Yet for managers Gordon and Janine Marshall the best incentive for making this pub a long term success is that it feels like theirs.

They are the first Mill House Inns licensees to take advantage of a new equity sharing scheme, believed by the company to be the first of its kind in the industry.

Strictly speaking, a pub manager is no more than a company employee. Unlike the freetrader or even the tenant they may be in competition with, the business is not truly theirs. The pub has the advantage of corporate backing and systems, of course, but pubcos such as Mill House face the problem of how to give the business a distinctive character, how to motivate their licensees to treat the pub as their own and how to give good operators the incentive to stay.

The idea behind equity sharing is that managers are invited to invest their own money in the pub. If the business increases while they are there, they get a cut of the value they have added, a share in their success.

Not only do the managers get an incentive to stay and build the business, the scheme encourages them to put their own ideas into action at the pub, harnessing their creativity and local knowledge.

Gordon and Janine arrived at the Elstead Mill, on the outskirts of Elstead village near Godalming in Surrey, last March, in time to oversee a refurbishment that brought out the potential of the building.

They are experienced licensees with a flair for food who have worked for big chains and once had their own tenancy, the kind of operators who can pick and choose their pub.

They already knew the Mill well and for 10 years hankered after the chance to run it themselves, but the deal would be crucial to their decision. Talks with Mill House began more than 18 months ago.

"We took a long time thinking about it," said Gordon.

"We didn't just want to be managers and when Mill House mentioned equity sharing it was a fantastic hook for us.

"Having an ownership in the pub makes a huge difference and it changes your whole outlook. You feel as though you are working with the company and not for it."

The investment managers make to take part in the scheme varies according to the pub. At the end of each year the business is valued on the formula of six times the operating profit. If that figure has grown, the manager gets 10 per cent of the difference - plus the usual salary and bonuses.

Managers must commit themselves to a minimum of three years at the pub, but Mill House hopes they will stay a lot longer and those considered for the scheme are carefully selected for that potential. So far, four other management couples in addition to the Marshalls have been approached.

"It is critical to the success of pubs like ours that the managers become well-known locally and they get to know the needs of the local community," said human resources director Sue Newton.

"You can't train people in that, and you can't make centrally the kind of decisions about what makes a particular pub work. We need the right people on the spot, people with a vested interest in the success of the business.

"We think what we are doing is unique, and it is sure to help us attract quality people."

Built into the idea of equity sharing is the necessity of managers making decisions and taking actions that go well beyond what most pub managers are allowed to do.

"We always feel we can change something if we want to," said Gordon. "There is scope to try new things, and if there is a limit to that, we haven't reached it yet - anything seems possible!"

Importantly for the Marshalls they have complete control over the food and Gordon, a chef by profession, has put together two menus, one for the bar and the other, more up-market and semi-organic, for the River Room restaurant upstairs.

They have also changed the opening hours. These are usually set by the company but during the winter, because the trade isn't there, the Mill has been closing in the afternoons and at 9pm in the evenings.

"It is soul destroying to have to keep a pub open when there are no customers," said Janine. "For us, it's not just the equity sharing itself that's important, it's the whole new ethos behind it.

"It has meant that we really feel part of the community. There is always a lot going on in Elstead, but this pub has never been part of that before. Now we sponsor the Elstead Marathon, the paper boat race and the pancake race and we had 200 villagers in here for New Year's Eve."

Now Gordon and Janine can hardly wait for the summer when the Mill comes into its own and customers are attracted from miles around, filling the 100 benches in the grounds as well as the 260 covers indoors.

This year they are planning to ingeniously overcome the problem of actually serving all those people scattered across 14 acres by selling them picnic hampers.

Sue is confident that the Elstead Mill is the kind of business that will "build and build forever", but as well as the satisfaction of running their own pub the Marshalls have not been immune to the stresses that go with it.

"I used to have a goatee but I had to shave it off because it turned grey," said Gordon. "But really I thrive on the challenge!"

Incentive schemes​

Keeping people in a business is just as important as recruitment for pub companies, and incentives are playing an increasing role in keeping managers and staff motivated and loyal.

Towards the end of last year, both Regent Inns and Scottish & Newcastle Retail (S&N) introduced new schemes.

S&N launched a £100,000 sales incentive scheme which will give more than 700 managers and staff in its unbranded houses the chance to win up to £30,000 in cash for increasing takings at their pubs at key times over a six-month period.

Called "Now That's What I Call Sales", the programme is designed to incentivise managers around Halloween, Children in Need, Christmas, Valentine's Day, St Patrick's Day and the Grand National.

Flexible promotions linked to Scottish Courage's Kronenbourg and Foster's brands plus increased head office support aim to encourage licensees to take a creative approach to lifting footfall and spend.

Winners of each week receive £5,000 cash, £1,000 of it split between barstaff with £3,000 going to second place and £2,000 to third. The best performing pub at the end of the six months wins a trip to Disneyland, Paris for the whole team.

"The new scheme has really motivated my barstaff from the newest member upwards," said Terresa Smith, manager of the Barley Mow in Chiswick, West London. S&N Retail marketing manager George Wright reported that the scheme has got off to "a great start". "We have had a sales uplift across all the pubs taking part," he said.

"The approach should incentivise pub teams over a longer period than a traditional sales-driven promotion and we can reward successful entrepreneurialism among our managers."

Meanwhile, Regent's Star Players Award gave its three top-performing managers the chance to drive off for a weekend spin in a £50,000 Jaguar XKR sports car.

"Employee motivation is pivotal to the success of companies across the retail sector," said chief executive Stephen Haupt. "A reward such as the Jaguar helps get across our commitment to and appreciation of our staff."

"The award has got everyone talking," said one of the winners, Scott Imlach of the Shepherd'