What are the obstacles to paying your employees what they are worth?

Last month’s recommendations to help you provide that “better” job covered wages and how to use job descriptions to measure your “white collar” employees. We also addressed the issues of paying top wages to top performers to be certain that all your No. 1 employees were rewarded and respected as the No. 1 members of your team.

You must never overlook the fact that your opinion of that employee’s performance may not be the same as his or her own opinion. More important, it may not even be close to the opinion of that employee’s peers or subordinates! What kind of respect would that create?

You certainly want to pay each employee what he or she is worth to your company. To accomplish that you need to establish what they are worth. Let’s take a quick look at some of the obstacles:

  • How much is seniority worth? Is a new employee not worth as much as a longtime employee, even though they both perform the same job?
  • Do you pay more to an employee with a college degree?
  • Do you pay more for a licensed journeyman?
  • Is your bookkeeper or secretary worth as much as your plumbers or truck drivers?
  • Is your estimator worth more than a plumber or foreman or superintendent or project manager or your purchasing agent?
  • Is a salaried individual who works 45–50 hours each week worth more than one who works only 40 hours?
  • Should your office staff get a share of jobsite, labor-saving incentives?

You may or may not have heard all of those questions from your own employees, but you surely must realize they are asking them along with, “Why do they get that?” and “Why don’t I get it?” In addition to questioning “what” and “why” about everyone on your payroll, they are constantly comparing your wages and benefits to what all your competitors are offering.

But none of this is bad. You must never overlook the basic fact that your employees are human beings and that is what human beings do. In fact, doing the right thing with your wages would have absolutely no motivational value or attract any good employees if they didn’t make comparisons.

Setting job descriptions: With all of this in mind, let’s look at using realistic job descriptions to establish a fair criteria for measuring what each individual “white collar” employee should be paid. As we stated last month, you need to consider each employee as a supplier and treat them as you would all your other suppliers.

You don’t buy anything for the company unless you establish a definite need. You or one of your employees must determine that you need or want something that must be purchased. It may be a simple item like a new company vehicle, a set of cutting torches or a new copy machine. Once you have decided that you need it, you then must determine where the best source is to buy it and how much you should pay.

You will either write your own specs for what you want or get copies of what is available and compare cost vs. effective return for your dollars. In most cases, the cheapest product will cost more in the long run than a better product with a higher price tag. But you or your staff must carefully evaluate each situation because that is not always a fact. What I really want to stress is the critical importance of writing or getting those specs on paper to justify your evaluations.

In order to simplify my comparison of treating your employees as suppliers, we can start with the small entrepreneur in his second year of business. Business is great and the company is growing. Our entrepreneur is bidding the jobs, buying them out and scheduling and supervising five crews on different jobsites. He uses a payroll service, but still does all the accounts receivables, payables, taxes and insurance. He has one office employee and one yard employee who also makes jobsite deliveries. Simple reasoning tells you this leaves no time for fun, family or relaxation, even if it were possible to continue.

Our entrepreneur definitely has established a need to buy some services. Now he must find a source and establish what he needs and what it will cost.

Unfortunately, the majority of our contractors will simply advertise for a estimator, bookkeeper, office manager, project manager or general superintendent. These job titles are well-understood in our construction industry, so many of us assume any new recruit will automatically relieve our crisis. In most cases the reverse occurs.

Aren’t you glad that only happens with your competitors? You can easily understand why their frustrated employees are reading the help wanted ads and talking to all their friends about finding that “better” job.

Let’s look at the right way to establish exactly what services you want to buy as well as how much you should pay:

  • Write down all of the tasks that must be performed for your business to succeed and prosper.
  • Beside each one, write down how many hours each day, each week or each month that task will require.
  • Put a “dollar per hour” value or replacement cost beside each of those hours. How much would you have to pay someone to answer your phone? How much to drive across town to pick up blueprints? How much to enter data into a computer? How much to decide which items to purchase?

You can now start to delegate which of those tasks you wish to buy and which you choose to perform yourself. You can also now determine which employee is best-suited for each task. If that employee is salaried, you need to establish whether you want 40, 45 or 50 hours per average week. Using that predetermined goal, you can then determine which of your tasks will best fill their allocated time budget. Your employees can select which of those “dollars per hour” tasks are within their abilities and desires to determine what salary or hourly wage they wish to earn. As your employees progress, they may choose more expensive tasks to increase their income or maintain “status quo” and only expect cost of living wage increases.

I think you can see how easy it becomes to measure each employee’s daily performance when you both agree to and document exactly what services you are buying. You can also see how content your employees become when they get the options of what they must do as well as how much they will earn.

All that remains is to be certain that you or their immediate supervisor checks out what they do, talks with them about it and documents any above or below “agreed upon” performance in their file. These documented issues then become the only topics that can be discussed in performance or wage reviews.

None of this costs you any money. But you can rest assured that your employees will become those “bragging” goodwill ambassadors who are now telling their friends where they can find the better job.