You’re Overpaying Your Staff: Here Are The Consequences
Episode 614: Show Notes
This is the second hottest take of a conversation we’ve ever had publicly! We are so passionate about this topic, and we really want to pass on this valuable information to you because we deeply care about you and your team! When the mistakes that we are going to talk about today are made, we know that it’s coming from the best of places, but because the future of your company is at stake, and because we care about that, we really hope you’re going to listen to this episode!
The fact of the matter is that you are most likely drastically overpaying your staff. We so often see owners hardly taking a salary for themselves, but then paying their staff six figure salaries. We also see people hiring super cheap labor. There is so much wrong with both of these phenomenons, but the good news is that there is another option!
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The Inequity That You’re Ignoring In Your Small Business
Our generation has always been told that we can do whatever we want. We are also the most overeducated generation, and we are living during a time where big businesses are dominating giant parts of the economy. These factors play a major role in contributing to how we run our own businesses. For example, small business owners compare themselves to the big players in terms of the salaries that they give to their staff, trying to ensure that they are running a more ethical business. The problem is that this is like comparing apples with oranges; the skill sets aren’t the same, the job requirements aren’t the same, the hours aren’t the same, so the pay doesn’t need to be the same. Wanting to take care of your staff is admirable, but it is pointless if it is achievable to the detriment of your business!
Budgeting For Employee Salaries
If you start your employee salaries too high, you will have no room to grow. You have to be able to train people for growth positions, otherwise you are going to simply maintain the business that you have today, and if you’re listening to this episode, we know that’s not your goal! From a high level standpoint, you should be building towards the point where 30% of your monthly revenue can go towards paying your team members. In order to get to this point you need to start by looking at wage ranges within the region where your business is situated, and determine whether it fits within your budget for the role that you’re looking to hire for. The next step is to come up with a title that aligns with future growth potential and career opportunity in your business. One of the biggest mistakes we see business owners make is hiring people into executive leadership positions and feeling like they have to pay them a salary that matches their title, even when they aren’t qualified for the position! The better way to approach hiring if you’re aiming to grow your business is to allow for upward mobility, which means having three to five potential title changes available to your staff!
How You’re Accidentally Creating Major Burnout For Your Employees
If you bring someone on expecting them to know everything about your business from day one, and paying them as if that is the case, you’re limiting their growth potential, and the growth potential of your business. It isn’t fair of you to hire people in leadership positions without properly onboarding and training them, and that takes time! We know multi millionaires who run huge companies, and they still don’t hire leaders until they have spent years in the business! Also, if you hire people above a reasonable wage, you’re likely going to burn them out with tasks because you’ll be expecting them to do more than they are capable of, which creates a toxic work environment. In this case, your employees would probably prefer you to just hire more people to take on some of the work, even if it means a salary decrease for them! We are able to employ the amount of people that we do because we built our business up from the bottom up, allowing for sustainable growth along the way.
What To Do If You’ve Realized You Are Overpaying Your Staff
As you build your business, you have to constantly be thinking about the long term viability of your business model. If you are paying someone a salary that you’ve realized you can’t actually financially afford, then you need to start doing some risk analysis and having very open conversations with your staff. One option would be to let the person (or people) go, but another option (which may sound wild and ridiculous, but in some circumstances we would recommend it) would be to offer for them to keep their job at a reduced salary (and reduced tasks) which then has the potential for growth because the company itself will be growing. As the founder of your business, if you want it to have a future, you are going to have to make some hard decisions and have some difficult conversations, but overcoming challenges leads to major growth!
Quote This
Contractors and employees simply must be different, and because of that, you also have to pay them differently.
Highlights
The Inequity That You’re Ignoring In Your Small Business. [0:05:10]
Budgeting For Employee Salaries. [0:13:50]
How You’re Accidentally Creating Major Burnout For Your Employees. [0:20:58]
What To Do If You’ve Realized You Are Overpaying Your Staff. [0:32:57]
ON TODAY’S SHOW
Abagail & Emylee
The Strategy Hour Podcast
We help overwhelmed and creative entrepreneurs break down their Oprah-sized dreams to create a functioning command center to tame the chaos of their business. Basically, we think you’re totally bomb diggity, we’re about to uplevel the shiz out of your business.
KEY TOPICS
Hiring, Budgeting, Growth, Upward Mobility, Burnout, Titles, Salaries, Leadership, Overpaying
