The largest expense of all service companies and almost all other companies is employee costs. If the comments I get from my clients are representative, employees – specifically payroll issues – is your biggest frustration when it comes to dealing with the internal policies of your company.
So how can you reduce this frustration and, at the same time, gain a competitive advantage from your competitors? I sat down with a human resources friend of mine and asked her where the business owners can do a better job managing their staff. Here is what she told me:
- Know what the market salary is for every position in your company. There is plenty of free information available to you and you can also raise the bar and pay for salary studies. Click on this link to download a couple of current market salary surveys.
- Pay just a little above market. The strategy is to pay well and create an environment that makes your staff want to perform at the highest levels. Resentment is the worst of all emotions in the workplace and you need to keep it to a minimum. If your pay is above market and your staff knows this, you will attract better employees.
- Raises and bonuses are not automatic. Raises should be tied to CPI or some other index. Bonuses plans should be designed to reward staff for their direct efforts/results and, to a lesser degree, the results of the company. Once the bonus and/or raise is automatic, it brings you, the employer, no value for the money you are spending. If you are thinking about replacing a 5 year employee because you can replace him with someone cheaper, you have shot yourself in the foot.
- Be specific and write down your expectations of your staff. You have sales goals for your salesmen and they won’t get commissions if they don’t perform. That idea has to find its way across all departments in your company. Don’t make your staff guess what they need to do to be successful. Offer them a carrot for great performance or the stick for mediocre performance.
- Lastly, be careful what you promise. In general, all of us remember what someone owes/promises us and we forget what we owe or promise back. If you make a deal that only considers upside, you will fail. For example, if your deal with a salesman is he will get xxx percent commission once he hits $10,000 month in sales but don’t tell him he may be fired if he doesn’t hit $2,000 in sales, what happens when he is only at $2,000? As the boss, it is your responsibility to make sure staff understand what you expect of them.
There are a lot of moving parts to running your business. Your staff is one of the most important parts. I hope these insights help you.