Don’t overfeed

One of the more challenging things to do in any business is to set the pay rates for your team. Even with millions of staff around, we seem to get it wrong a lot of the time. There is a simple reason for this.

Every survey you ever look at tells you that pay is not the main motivator – recognition is. Pay is probably the largest demotivator when you get it wrong and paying a low amount does not necessarily mean you are getting it wrong.

Of course we all need enough income to get on in life. There is no point in paying so litle your employee cannot get on in life, but let me give you some examples of where it has gone wrong when paying too much.

Let us start with our old favourites, the bankers. Many of them get paid a lot, in fact we all know many of them get obscene amounts. But are they satisfied?  I always have to think of the book by Jack Welch, though I cannot remember which. He had bought Kidder Peabody, at the time a leading US investment bank. What a disaster! He sold it with a big loss, in his words his best loss ever. All because he could not or would not deal with the greedy b……s.

I looked at buying a subsidiary of British Airways many years ago. It had a nice product but was failing. I quickly realised it was because the management was completely spoiled and it would be impossible to turn it around. They got 2 or 4 first class tickets each for them and their families to any location on the globe each year. We could not match that in any way. I don’t know what happened to the company. I just know that BA staff are better pay and benefits than the low cost carriers so cannot compete yet the staff is continuously on strike.

Another aspect of course is not to be too greedy yourself. In the recession of the early 90s I cut the salaries of all my 110 employees by 10%. I cut my own by 17% and everyone knew that. Never a problem and a year later I was able to restore salaries, and give increases. A friend did it differently. He cut salaries for all by the same 10% and on the day he announced it publicly took delivery of his new car. He went bust two years later.

Local authorities are making the classic errors. They are cutting everything for the front line workers. No more salary increases, more demands on their time, more pressure, less recognition and creating uncertainty by going through one redundancy round after the other. In the meantime we see the packages given to the Directors going up big amounts every year.

If you reward a fat child with chocolate you are creating a problem for the future, both for you as a parent as well as for the child. With salaries it is no different; be fair, be consistent, be firm and don’t overfeed.

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