A plumbing contractor once told me of a young employee demanding a raise because he needed more money to pay his bills. He seemed oblivious to the fact that most pay increases are based on performance, not need.
At first, I was shocked by that employee's gall, but after looking at the situation from his perspective, I realized it's easy to identify with that young man. Everyone wants to make more money, and many need to make more money than the job they have can realistically pay. It's the main reason people go looking for better-paying jobs or start moonlighting. It drives people of low character to steal from employees or customers.
So let's come at this issue from a different direction. Keep in mind that pay scales are determined mainly by the nature of the job and the cost of worker replacement. What opportunities do you provide for your topped-out employees to earn more money?
I talked about this subject a couple of years ago in "Service Sense," a business tape series recorded for Grandy & Associates, titled "Ten Ways to Earn a Pay Increase." It was aimed at plumbing and HVAC technicians, but I think it has lessons for other kinds of contracting firms as well. (For more information about the "Service Sense" tapes produced by Grandy & Associates, call (800) 432-7963.)
Here are a few ways employees can earn a boost in pay.
Increase the company's sales and profitsThe most obvious way to justify more money is to make more money for the employer. This is the fundamental premise of incentive-based compensation systems.
A poorly designed incentive-pay system may defeat its purpose if it's too hard for employees to achieve goals and make good money. Straight-commission plans also create incentives to mistreat customers. Monitoring systems need to be in place to prevent abuse.
Salaried and hourly sales employees can earn more money from commissions on equipment add-ons and upgrades. Any company that doesn't offer such opportunities is doing itself and employees a disservice.
Save the company moneyThe other side is letting employees share in identifiable savings. All business owners ought to have standing offers of rewards for money-saving ideas that can be documented.
The key is that they must be provable. It's easy for employees to boast of coming up with a valuable idea, but can they prove it? Share savings with employees, but put the onus on them to show in dollars and cents how much they are benefiting the company.
Develop a sense of ownership in the companyIt's customary for employees to refer to "my company" or "our company" in describing the workplace to family and friends. You want them to take the next step by always looking for ways to help the company succeed, and by sticking up for the company and management when co-workers snipe at it. In some employee circles, being identified as a "company man" is a mark of derision, the equivalent of "brown-nose" or "suck-up." You need to help your people overcome such peer pressure.
Getting to that stage requires that they have a reason to feel like an owner. Some sort of profit sharing or bonus plan is a big help here. If they don't have a personal stake in company prosperity, it's hard to get them to look out for anything beyond their own paychecks.
It takes more than money, though, and sometimes it doesn't even require extra pay. A sense of ownership comes when people get consulted on decisions that impact them and feel their ideas are taken seriously.
Take on more responsibility, either in sales or managementEmployees need to understand that some jobs are more valuable than others. The person who sells a job usually gets compensated higher than the person who performs the work. People who supervise others usually earn more than those who don't.
More often than not, taking on managerial responsibilities is a route to higher pay. Be careful, though. The worst mistake many contractors make is to automatically promote their best salespeople or service technicians to managerial positions, which they often are not cut out for. It's not necessarily wrong for top producers to make more than the managers who supervise them. It's one way to keep talented performers doing what they do best.
(Jim Olsztynski - pronounced Ol-stin-skee - is editor of Supply House Times, a sister publication of SNIPS. He can be reached at (630) 694-4006, or e-mail email@example.com.)