Aug 16
45m 24s
In this BONUS episode, we dive deep into the transformative power of profit sharing with Rob Gallaher, CEO of Gallaher Co. Rob shares his journey from an overworked entrepreneur sacrificing family time to building a thriving business model that aligns employee success with company growth. Through practical insights and hard-learned lessons, we explore how monthly profit sharing can revolutionize workplace dynamics and create genuine shared success.
"I was an entrepreneur, working long hours and sacrificing family time. I realized my situation in life was not so good anymore, and even my health was suffering."
Rob Gallaher's journey to profit sharing began with a personal crisis. As a successful entrepreneur, he found himself trapped in the classic founder's dilemma - working endless hours while his health and family relationships suffered. This realization prompted him to seek alternative business models from other successful owners. His discovery of profit sharing wasn't immediate magic, but rather a methodical approach to solving the fundamental disconnect between business success and employee engagement. Since implementing it in 2015, Rob has refined his approach through real-world application, leading him to document his learnings in his book after others began noticing the remarkable success of his companies.
"Take the company's financial success and share it with individuals that make it happen. The main thing: it must be monthly."
Rob's definition of profit sharing goes beyond traditional annual bonuses or stock options. His approach centers on taking actual company profits and distributing them to the people who directly contribute to generating those profits. The cornerstone of his system is monthly distribution, recognizing that people manage their personal finances on a monthly basis, not quarterly or annually. This frequency ensures that profit sharing becomes integrated into employees' monthly budgets and thinking patterns, creating immediate behavioral impact rather than distant, abstract benefits.
"No one manages quarterly their personal life. The profit sharing needs to adapt to that monthly reality. If we don't affect people's monthly budget we don't affect how they think."
The monthly frequency of Rob's profit sharing system creates tangible, immediate impact on employees' financial lives. Unlike equity or long-term bonuses that feel distant and uncertain, monthly profit sharing becomes part of employees' regular financial planning. This immediacy changes how people approach their work, leading them to ask "what can I do to get it" and investing more personally in company success. Rob emphasizes making the amounts substantial - recommending four-digit numbers that genuinely affect people's monthly reality rather than token gestures that get lost in regular paychecks.
"I don't like the word 'review'. I prefer the word 'reflection', we do it every 6 months. I wanted to change the tone and what was happening in those meetings."
Traditional performance reviews create antagonistic dynamics where employees feel anxious and stressed, often leading to negotiations that feel like battles. Rob has completely reimagined this process by separating profit sharing from performance evaluations and changing the language from "reviews" to "reflections." This shift eliminates the transactional nature of traditional reviews where employees feel they must fight for raises and promotions. Instead, profit sharing operates independently of individual performance metrics, creating a more collaborative and less stressful environment for genuine performance discussions.
"You need a business that makes a profit, you need to have accurate accounting, and you need to be a leader - you need to have the respect and trust of your leadership."
Rob outlines three fundamental prerequisites for successful profit sharing implementation. First, the business must be genuinely profitable - you cannot share what doesn't exist. Second, accurate accounting systems are essential to track and calculate profits transparently. Third, leadership credibility is crucial because profit sharing requires employees to trust that leaders will follow through on commitments. Rob recommends starting with a flat rate and minimum amount, such as $1,000, and focusing on decision-makers who directly affect company profitability rather than attempting to include every employee from the start.
"Who are the people who make decisions that affect the profit of your business? Share the profit with the decision makers that affect profit."
Rather than implementing company-wide profit sharing immediately, Rob advocates for a targeted approach focusing on employees who make decisions directly impacting profitability. This strategic selection ensures that profit sharing reaches the people whose daily choices most influence company success. By identifying and rewarding these key decision-makers first, companies can create a focused impact that generates measurable results before expanding the program to additional team members.
"Figure out your average profit."
For companies interested in profit sharing but unsure where to begin, Rob recommends starting with fundamental financial analysis. Understanding average monthly profits provides the baseline for determining sustainable sharing amounts. This analysis helps leaders set realistic expectations and design a program that won't compromise business stability while still providing meaningful benefits to employees. The key is ensuring that profit sharing enhances rather than threatens the company's financial foundation.
About Rob Gallaher
Rob Gallaher, CEO of Gallaher Co., leads five companies across industries. Since founding his construction firm in 2010, he's championed profit sharing as a catalyst for growth. His book, Profit Sharing: The Power of Shared Success, and upcoming course reflect his passion for aligning employee and company success.
You can also learn more about Rob’s Profit Sharing strategy with his online course at Profitx.co.
You can link with Rob Gallaher on LinkedIn, and connect with Rob Gallaher on facebook.