Picture of dollar bills. From Geralt on Pixabay

From Geralt on Pixabay

There’s a growing movement today for employers to pay employees more.

And with stats telling us that a federal minimum wage worker would have to work 127 hours – per week – to afford rent a modest two bedroom house it’s easy to see why the movement is gaining speed.

I don’t think there are many employers out there that want their employees homeless or in unsafe conditions.

But sadly – as many of us know – the answer isn’t just paying employees more. We’ll get into the “why” of that in this article.

And make sure you are following me on Medium and LinkedIn because in an upcoming article we’ll be discussing how we, as business owners and leaders, can find ways to pay our employees more. That’s the happy side of this.

But let’s find out why just paying employees more isn’t the answer.

#1 – Businesses Need Reserve Capital

Business is tough. We’ve watched household names like Blockbuster and Kodak go from major players to footnotes in business. The same seems to be happening to Sears.

And businesses, that will last, need to go through periodic reinventions. IBM today looks nothing like IBM of 30 years ago. A company known for being a hardware manufacturer reinvented itself into a consulting and information giant. Ditto that for Netflix, a current Wall Street success story, that scared a lot of investors when it split it’s streaming business from it’s DVD by mail service. (Can you imagine DVDs by mail?!?)

So those of us that are business owners and leaders know this truth: we need money for realignment and reinvention.

And I can tell you as someone that has built a few businesses that you often have to invest a lot of time and money before revenue comes in. 

So we, as business owners and leaders, need to marshall resources and keep them available for rainy (reinvention) days.

Paying out too much and being generous could cost us our ability to pivot when needed.

We have a duty to our businesses and employees to buy one less boat, one less car and one less gold toilet – and control employee pay – so we have money ready for when the business really needs it. It also means if we want to survive long-term we need to keep pay in line with the market.

#2 – If We Get Too Generous We’ll Lose Our Businesses

Which leads to the next point. If we are too generous we may not have the ability to compete if a new competitor enters our market and undercuts us.

Turning a sold profit is a good thing. Some folks will argue that you should share your profit with your employees. And I think that is possible in a smart way (more on that in my next article).

But not being careful about our profit can be a big mistake.

Not only can profit allow us to pivot, as mentioned earlier, it can also open up opportunities. If we wish to expand our business banks will be much more likely to offer us lower interest rates and better terms if our businesses are more profitable.

Keeping some resources in the business can allow expansion and growth that will allow us to create even more jobs and opportunities.

#3 – Paying More May Hurt Our Workers In The Long-Term

I sense that most people would like more income. We all have some things we want, even if it’s more money in our retirement accounts for the future.

I’ve had many employees approach me over the year wanting to make more money. And I view this as a very good thing – for me and for them.

But we have to be careful about simply giving raises to give raises. Giving a raise just to be nice or because there is some profit at the end of the year is risky business. Not only do we lose resources in the business we could use elsewhere, we also lose incentives for employees.

When employees have approached me about making more I use it as an opportunity to discuss paths to higher value creation. It causes me to explore, with the employee, what can we do to put the employee in the position of helping the business more that will, in turn, allow me to pay the employee more.

Not developing this value creating and value seeking skill is critical to the long-term growth of those we care for.

#4 – It Can Create The Wrong Incentives

In business the incentive should be to do more of what the customer values and better.

Incentives are powerful drivers in our world. And they are important to business. We can explore incentives in detail in another article if enough of you are interested (comment below).

But we want the right incentives. We want to incentivize our internal staff to be looking for more value.

The pay we give employees isn’t for showing up. The pay we are giving should be for the value they add to the process of creating value to the customers of the business.

If we lose track of that we can find ourselves running businesses bloated with expenses – which is good for no one.

#5 – We Need To Encourage Employees To Grow

All of this leads to encouraging employees to grow.

We should want all of our employees to grow.

I have always wanted those that work for me to do better. I’ve wanted them to grow and lead portions of my operations. Or grow so much that we can co-own a business together.

A rising tide lifts all ships as they say.

Not paying employees just because they simply want more money allows us to encourage that growth. And if we’ve done it right their growth will allow us to pay them more because they’ll increase the value our business is providing.

What To Do Now

Part two of this article is coming on Medium.com and we a going to dive into how to pay employees more. Make sure you are following me.

Spend some time thinking about your value chain and how you can communicate that to your employees.

We’ll then get into the fun part. How we CAN pay employees more!

LET’S DO MORE: If you are a business owner or leader let’s be in touch more. I’d love for you to read my online work and give me your honest feedback: join my mailing list, follow me on LinkedIn and jump into my Facebook Group.

NOTE: This article is a piece develop a small portion of the content of the book tentatively called The Journey: Finding Your Place From Entrepreneur to CEO being co-authored by The Our Shawn McBride and Ann Gatty. If you want updates on the book including the possibility of joining our release team or getting one of the first copies please join our mailing list here.

DISCLAIMER: This article talks about legal issues. I am a lawyer licensed in multiple US jurisdictions, but I am not your lawyer unless we have signed an engagement agreement. Please view this material as educational and general in nature (as it is). Consult counsel you have retained for advice on your specific facts and circumstances and applicable laws. Do not rely on the statements in this article as legal advice.

By: The Our Shawn McBride, is the business nerd and long-time business attorney that focuses on changes of ownership in businesses. He works with business owners that know their business is about more than themselves to get ready for their future through keynotes, training and personalized solutions. In furtherance of this he hosts The Future Done Right(TM) Show where he collects, digests and gives lessons and insights on The Future of Business. If you want regular content on the future of business subscribe to get new blog posts from us here.

You’ll quickly notice his unusual suits which he uses open the conversation of how businesses should Do Business Differently™.

The Our Shawn is based in DeLand, Florida (between Orlando, Florida and Daytona Beach, Florida) and Dallas, Texas where he keeps offices. You can also find Shawn on webinars or traveling nationally or internationally for speaking engagements.

Check me out at: www.planningdoneright.com

NOTE: This article contains links to sites where I may be paid a small commission on your purchase.

Do you really want to make plans that work?

If you really want to get deep into making great business plans, make sure you get my FREE guide “Planning In Light of A Changing Future” by clicking here.

Resources:

Future Done Right™ YouTube Channel  – Check out this YouTube Channel for interviews and discussions about the future of business.

FREE preview copy of Business Blunders! – This is my first book and it looks at common business mistakes that I’ve seen in my years of working with business owners. This will allow you to avoid those issues in your business!

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