Apparently, we have a huge problem in business these days. The employee. Specifically the ones we can’t find or we can’t keep. This problem is not new. But it is getting worse.
This seems a tad odd because, for the most part, businesses are still not at the pre-COVID level of employment. YET they face a massive shortage of qualified people. This misplaced belief sidesteps the real problem. What’s the real problem, you ask?
There is a vast shortage of skilled managers.
All businesses are responsible for focusing on expenses, demanding a decent return on money spent, and pocketing some profit for future use. However, underpaying labour or talent should never be part of that equation. Here’s why.
A natural law of business is that twenty percent of your employee base creates 80% of the value of your business. This means that if you are like the more progressive (and very profitable) companies, 20% of your employee base is star performer calibre, and 60% of your employee base falls into the ‘excellent soldier’ category. Only 20% falls into the ‘average’ group.
This means that because 80% of your workforce is firing on all cylinders, you are getting 100% of what everyone can give. And 100% from your rockstars is 150% or more from your ‘average Jane and Joe.’
Once we understand this, it makes complete sense to pay at or more than 75% of the market rate for those rockstars. It also makes sense to have a decent benefits package and a bonus package for attaining ‘beyond ordinary’ results.
All humans will move mountains when they feel respected, appreciated and appropriately paid. Minimum wage, rates below market and even living wages do not increase the desire to be respected, valued and adequately engaged.
When we lean towards the cheap side of payment for services, what we are saying is we don’t value human contribution. When we lean towards cheap, we get what we pay for. By keeping talent dollars low, we never attract anyone from the excellent soldier category and we have no way of ever enticing star performers.
By only opening our doors to the average Jane and Joe talent pool, we mistakenly believe there is a massive short of qualified people. This is simply not true. What we have is a massive misunderstanding of how business works, how to use humans to further our goals and how to reward humans for helping us.
Here are the benefits that accrue from paying market rates or higher.
- You effectively stop the employee from looking for a better job. Not counting the distractions from duty that every employee has while preparing to leap, you can avoid the 30% to 75% of their salary, you will pay in recruiting and onboarding another person.
- All good suggestions for improvement come from those who have held a position for at least 18 months. The odds of getting regular and excellent suggestions for improvement exponentially expand when dealing with medium to long-term employees. Good suggestions for improvement is how the profitable companies STAY profitable.
- When employees understand they are respected and appreciated, they go out of their way to ensure new recruits also understand that respect and appreciation. Suddenly motivating employees is a team effort with much less stress on the manager.
- By rewarding employees in accordance with their efforts and their results, all employees are motivated to work smarter and harder. This means all that extra effort pays huge dividends across the entire company.
- Whether your company is in start-up, slowly moving up, plateaued or scaling robustly, the labour component should never be dismissed until ‘the days we might have enough.’ You owe it to yourself to keep the best with you for as long as possible.
The labour component is the one piece that needs to be clearly articulated — values, qualifications, expected outputs and remuneration. Sales prices and marketing messages can always be tweaked; human capital not so much.
Gone are the days of ‘being grateful’ for a job. Gone are the days of ‘the boss knows best.’ Gone are the days of slave labour. It’s time to recognize the real reason for the vast shortage of skilled workers and talent. We have a vast need for stronger managers. This is shorthand for saying we need much more potent people skills.
Acquiring those skills is NOT the job of the HR department. Those skills need to be learned and embraced by the CEO and senior leaders. Those skills can also be gained easily with some of the newer tools and technology which were not available even twenty years ago.
Interested in learning more? Let’s have a conversation.