1. Your No. 1 must be No. 1, and all of your employees should respect and honor those top positions.
2. Promote from within to build a dependable “homegrown” management team. Every position should be offered to every employee on your payroll.
3. Offer those “make-a-good-living, not-just-a-living” flex time work schedules that will fulfill your needs and still satisfy the personal desires of each employee.
Noticeably missing from that list is more money! That’s not because it isn’t important. There certainly is no doubt that big wages will attract good employees. As most of you already know, big wages will also attract those “not so good” employees. That is why we list those three recommendations first.
But that does not lessen the importance of high wages, salaries, benefits perks and incentives. This month’s article is the beginning of my 14th year writing for PM. Some readers have read them all, and a few contractors I’ve met have even saved all of those issues. Anyone who has been reading these articles or heard me speak knows one thing for sure — Paul Ridilla likes high wages! Not only do I dislike low wages, I also dislike the contractors who pay low wages.
Unfortunately, there are far too many contractors who think their bottom line profits are based on how little they can pay their employees. What is really tragic is the enormous number of good contractors who never learn how much they should pay or even how to motivate, measure and reward good performance. You can easily understand why they do not provide those better jobs the really good employees want and need.
Although money was not mentioned in our first three recommendations, I’m sure that most of you sensed my merit reward philosophy with “What it takes to be your No. 1, and what it means to be in that No. 1 position.” Common sense tells you that anyone who is smart enough and good enough to attain that position is also smart enough to evaluate the rewards. Who would continue to strive to reach a goal that doesn’t exist?
Keeping Score: My affection for high wages is totally based on high performance. Simply paying everyone on your payroll more money will definitely not provide that better job nor provide that critical incentive for any employee to try harder. You must establish realistic goals, a fair way to measure, keep score and be sure that score is reflected on their paychecks. Anyone who is good wants to be measured. If you have anyone who doesn’t want to be measured, you had better ask yourself why.
Before we get into some of the effective methods for administrating attractive wages, you should stop to analyze your existing pay structure:
- Separate your employees into comparable categories. (Apprentices, journeymen, foremen, superintendents, service secretaries, clerks, truck drivers, etc.) You should then list your evaluation of each one’s productivity or performance on a scale of 1 to 10, with 10 being the best. You can now place your number one, two, three, etc., of every classification in ranking order on a separate sheet of paper with your rating by name. If you have a problem trying to decide what criteria you should use, simply think about layoffs or what we always called “pecking order.”
If you had to lay off one of those employees, who would be the first to go and which one would be the last. That pecking order is also your evaluation of each employee’s “cost to replace,” which is the underlying foundation for establishing competitive wages.
- Your next step is to compare evaluations with what you (or that employee’s supervisor) discussed and documented in that employee’s performance file. That file should be their score card and they should know how well they are doing. Would you feel comfortable showing these comparisons to that employee? Would each of those employees agree with your evaluations? If not, you are heading down the wrong road.
- Now it’s time for the big question: Does your pay scale match your evaluations?
You can take all of your 1997 W-2 forms and add whatever benefits and perks each employee received last year to determine what it cost your company for their services. Put that total beside each employee’s name on your “pecking order” sheet. You can now evaluate your wage administration test for providing a better job that doesn’t require any research or accounting. No employee should ever have to ask for a raise.
If that employee was worth more money, shouldn’t they get it without humbling themselves into coming to you and begging for it? If that employee was not worth more money, shouldn’t they know it, if they were properly supervised?
Making The Grade: Your wage and benefit administration can be easily compared to a teacher’s grading system in our schools:
- Every student had a course outline with an accompanying measuring or testing criteria. Each student knew exactly what they must do to get an “A” or “B” in that course. They also knew very well what it took to fail. Depending on that student’s God– given ability and how hard they wanted to work at that subject, they could be on the honor roll, make average grades or flunk the course. Our work is exactly the same except we give out dollars instead of grades.
- A teacher does not wait until the end of each quarter or semester to evaluate each student’s performance, or to let the student know their scholastic standing. They evaluate and discuss what each student does each day and on each test. These evaluations are then documented on that student’s record, and that record is evaluated to determine the semester grade. How could they possibly remember all of that to give out a fair grade or have any justification to defend any grade that might be questioned? Relate that to what most of our contractors are doing and you can easily understand why there are so many good employees searching for a better job.
Let’s take a look at how you can adapt this grading system to your company and attract all of those “good” employees who want to be measured and rewarded fairly.
We have two totally different standards for measuring performance:
- Your jobsite or shop employees who work under a foreman based on their ability to perform those duties. That foreman must then relate this evaluation of average, above average, below average or failing to his superior to adjust that employee’s wage.
If there is any doubt or question or unfairness, you can move that employee to work under a different foreman. Whenever a pattern of doubts or unfairness occurs you will soon learn the people skills of each of your foremen.
- Your management team, from working foremen all the way up to CEO, does not have a full-time supervisor telling each of them what to do and measuring how fast or how well it is being accomplished. Any one of them could easily do half as much as they are capable of doing if there is no one watching or keeping a score that is reflected on their paycheck. Here again, anybody good wants to be measured, but they want to be measured fairly.
The simplest way to relate a fair measuring system is for you to consider each employee on your management team as a supplier of services to your company. You can then use the very same system that you are already using with all of your other suppliers:
- You need a written purchase order detailing exactly what you want to buy to be sure that you are getting what you need at the right place. With your employee this P.O. is called a job description. We will go into detail next month on how to write these job descriptions.
- Someone must check to be sure that your company received everything on that purchase order before your accountant will write a check in payment. Likewise, someone should check to be certain that employee performed all of the services agreed to in that job description before your accountant can write them a payroll check.
- If your supplier does not furnish everything that you ordered you must buy it from some other supplier and deduct that amount from their invoice. Likewise with your own employee.
- If your supplier furnishes more than what was called for in their P.O. you will simply document the difference and adjust their P.O. accordingly. Can you understand why this eliminates any misunderstandings and would create that better job a lot of good employees are seeking?
Above all else, I want you to consider how little all of this costs vs. how much you will benefit by providing those better jobs.