Paying people properly

Finding and keeping good people is getting increasingly difficult. Paying people properly – it’s one of those areas that is a constant issue for those who own and run a business – is essential if you want to win the talent war.

In the A/E business we’re locked into a lot of old-school thinking and arbitrary rules that don’t help us one bit. Like looking at everyone’s pay once a year. Or paying bonuses once a year. Or doing something like giving away Christmas turkeys or “Jam of the Month” club memberships instead of bonuses (although my brother has given us a “Bacon of the Month” club membership twice for Christmas and I will say it was much appreciated). None of these practices do a thing to motivate your people or help you keep them in your employ.

Here’s a better idea. If someone needs (read “deserves”), a raise, give them one. Doesn’t matter if it is on May 21 or August 12. Just do it. And if it needs to be $5,000 this time and $2,000 five months and three days from now, that’s OK, too. This is America. It’s great not to be told every single thing and how to do it. You can do what you like.

Bonuses? I am all about structure for bonus programs. Everyone needs to be tied into the success of the enterprise. If it is doing well then the individuals who work there should do well also. It should be completely linear and immediate. That also implies if the firm is doing poorly. In that case, no one should be getting any extra compensation. And if the firm is doing well and someone working there isn’t doing well then the individual either has to be fixed or move on.

Owners are yet another matter. There has to be a linear relationship between their “extra pay” (anything above base salary), and the amount of ownership they have. If these two are not closely tied then you will kill all interest in your ownership transition program. C-corps really struggle with this because IF they tie share of ownership directly to distributions or bonuses then the IRS disallows it as an expense. It becomes a dividend. This is certainly one place where “pass through entities” such as S-corps or LLCs really work better for A/E firms.

Finally, the condescending giveaways. You have to be careful with these. They can alienate people rather than making them feel good. If they get the idea the “Amazon Gift Card” was their prize while you got a new BMW 7-series … well, they aren’t going to feel real good about it. These things may be nice “extras” but they aren’t good substitutes for something meatier, if you follow me.

Having good people – or not having good people – is all impacted by this stuff. Isn’t it time you started questioning “how we’ve always done it” and started trying something new?

Mark Zweig is Zweig Group’s founder and CEO. Contact him at mzweig@zweiggroup.com.

Posted in Articles | September 9th, 2016 by