Half-Baked Scheme

Somebody poke a hole in this.

It’s my new* theory about how businesses should pay workers. I just thought of it in the shower this morning, so it’s probably a little flaky.

First, we stipulate that the best way to hire workers is that you find the smartest, most competent and trustworthy candidates. All other things being equal, this should give you an edge against your competition in the marketplace. (If you happen also to have a great idea, or the best technology, or a huge head start, all the better.)

Once you’ve got your smart, competent staff that you trust, how do you determine salary structure? I suggest that you pay your people the most you can afford. You should run the numbers, find out what your revenue is and what part of that is profit, and allocate as much as possible of it to your labor force. The process should be as transparent as possible, so that the workers can be assured that they are, indeed, participating to the fullest extent in the wealth that they are, after all, helping to create.

As the owner, you should resist the temptation to pay yourself or your executives a hugely disproportionate piece of the available cash. You deserve something extra for taking a chance with your money, and the managers do, too, responsible as they are for making groups work together efficiently. But you must not go overboard, or you’ll lose the trust and respect of your employees. (For example, I would have to work almost 200 years with no vacations in order to make what the CEO of “my” company made last year. And I wouldn’t piss on him if he were on fire, much less contribute more than the bare minimum of my abilities to his bottom line You see how that works?)

In this way, you’ll find yourself with a happy, highly motivated staff who will do their best to make things better at your company. And qualified candidates from around the country will flock to your recruiting office to join your organization. Because let’s face it, when it comes to work, we’re in it for the money.

Supply-siders and free marketeers and “invisible handers” will argue that No, you should cut costs as much as possible to maximize profit, and you should try to “win” in your negotiations with labor by getting them to settle for less than they’re worth. Salaries are costs, after all, and should be pushed as low as possible. This is the perennial mistake that Capital makes. In fact, it seems to me that survival in the marketplace is much more likely when you’ve got the best people on your team. The focus should be not on reducing compensation, but on paying well and getting the most for your money: The most talent, the most loyalty, the most productivity and stability.

But then I’m working class, so I’m probably wrong.

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* I confess I have not read the classic works of communism and socialism, but I’m guessing this is more or less what they say. If you’re a baby boomer, as I am, think about it: The most horrible monster in the universe, the thing to be feared, fought and avoided at all costs throughout most of your lives, was communism, a way for people to get what they deserve in exchange for honest work. To save ourselves from this scourge, we have built 10,000 hydrogen bombs and lived in fear and isolation for generations.

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15 Replies to “Half-Baked Scheme”

  1. kStyle, that was a great video…

    Awes!

    I knew you weren’t ready for a big chair…

    🙂

    Larry, I feel the same way you do. And I try to be way more than fair whenever I have to hire anyone to help with our biz.

    On the other hand I beat my suppliers up day in and day out. They’re friends, too though — so I have fun beating them up! But, I still beat ’em up for cheap and fast everyday, buddy. Every. Day.

  2. Glad you liked the clip, Le Femme Bleu! There’s another great scene in that episode I couldn’t find a clip for, alas, but I found a quote online. Jack is prepping Liz for the salary negotiation…

    Jack: He [Josh] is not your friend, he’s your opponent. He’s going to try to grab all the marbles and it’s our job to hide them.
    Liz: That’s not how you play marbles, Jack.
    Jack: But that’s how you keep them.

  3. 1. I wish I watched 30 Rock.
    2. Ben & Jerry’s started a business with quite similar principles–and succeeded. They set limits on the differential between highest- and lowest-paid employees.
    3. the Great Place to Work Institute shows how treating employees well is profitable.
    4. I particularly like the “wouldn’t piss on him if he were on fire” line and have used it myself–when I told it to Bossman, he presented me with another one: “If he were drowning I’d piss in the lake to make it deeper.” Which I liked.

  4. kStyle – Allow me for a moment to completely miss the point of that clip (and quote) and say, like an angry, humorless ideologue, that’s blackmail! Alec Baldwin has added an additional layer of sleaze onto the greed implied in that scene. I saw the pilot of that show and didn’t like it. I guess it’s a hit now, so f*ck me. I don’t do television.

    Fille Bleue – I hope your business is doing well, and proving me right about this.

    Narya – Not familiar with the GPW Institute, but I like them already. Also, I drink a lot of coffee, so I’ll be glad to help out any time you need the lake deepened.

  5. Larry, this is what I’ve learned so far by having my own business now for nine years.

    1. I’m not a “business” person — at all. I’m a hard worker and a good problem solver and a creative thinker. But “business minded?” Pffft. Ain’t got it in me. My priority has *never* been to make as much money as possible on every job. And that’s just part of my personality. I can act like it is, but getting a project done on time and right will always win out when it comes to me.

    I’ve noticed that it’s totally opposite with people I know who have tons of money. They “talk” a good game about doing a good job, providing good service, etc., but all they *really* care about is the money and that’s their priority. It’s just built into them. They’ll screw something up and then have to total nerve to aks for more money cuz it took them twice as long.

    When I’ve hired people, I do give them as much as I can afford. Sometimes that’s worked really well and sometimes they’ll whine and complain they need more anyway.

    I just always think that if I’m fair, fair will come to me.

    See? That’s not a business way of thinking. But, it’s primarily the way my mind works.

    And so far, so good.

    Cuz. You know. The mansion and all.

    🙂

  6. Want to hear what I think is a total injustice?

    We have our own ad agency. So every project we get is like reinventing the wheel. Starting out with a blank piece of paper every time. Creating something brand new day in and day out. I *never* get the hourly rate I want to, cuz it’s just so time consuming. We’re doing *ok* though, so I feel like I shouldn’t complain too much.

    I have a friend whose husband started his business the same year I did. Now, he’s got a million dollar home on the lake, a condo in Palm Beach on the ocean and he’s building a vacation home at some ski resort place in NY.

    What does he do?

    He sells office supplies.

    He sells flippin’ paper clips and has worked it so well that he’s been able to get all that stuff in nine years.

    I’d be bored selling paper clips every day of my life. That’s my only consolation.

  7. Hi, this is my first visit to your blog. I found my way here from Blue Girl’s mansion place. Looking forward to being a regular reader…

    Peter Block (management consultant of “The Empowered Manager” fame) has come to very similar conclusions in his later years. You should check out his books “Stewardship” and “The Answer to How Is Yes”. In “Stewardship,” particularly, Block advocates transparency and honesty around compensation. On his view, we should pay as well as we can, stop acting as if people who actually do a business’s work deserve less than the managers who watch them do it, but then also drop that idea that we can buy people’s loyalty through compensation. I thought it was interesting.

  8. kStyle – It’s against my better judgement, but I’ll check out 30 Rock one more time. If it sucks again, I’m coming after you.

    Fille Bleue – You’re doing it right, my friend. And who knows? Maybe the paper clip guy is, too. Regarding “stuff”: I have enough of it. I don’t have as much as I used to think I wanted, but I like what I have, and most days I can live with myself.

    Ron – Not if we keep shopping, buddy.

    Hey, Res Publica – Thanks for your comment! I’ve been meaning to go reintroduce myself at the public library — now I have some books that’ll make me seem smart just by asking for them.

    I think the transparency and honesty you mention would go a long way toward earning loyalty. Thus far at HugeCorp (where I work), they haven’t even tried to buy my loyalty with compensation. Not saying I wouldn’t entertain an offer, though.

  9. I just always think that if I’m fair, fair will come to me.

    As often as that tack results in one gettin’ slammed where it hurts the most, it alternately results with precisely the consequences we’d hope. And IMO it’s nearly always worth the risk.

    More importantly, it really does seem to help in the maintenance of a more convivial atmosphere in the workshop. Even paranoiacs have a more difficult time being in full bloom under such conditions.

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