Just Wages – An Issue of Business and Community Trust

coins in hand

As we look toward the future, society and businesses must recognize the symbiotic relationship formed between them. No business can survive long-term without the support of the community which it serves. In addition, no community can survive or thrive without businesses which employee and provide for the common good of the community. The combined reality of these two statements often goes unrecognized by communities and business owners. A crucial link between a business and the community its serves are the people it employs. Paying a just income is fundamental to the financial and sometimes physical welfare of the employee, as well as the health of a business’ culture and the maintenance of strong community ties.

First, let me state that purpose of this article is not to advocate for government intervention into wages, salaries or bonuses. This article should guide business owners on how to identify and pay just wages.

Why should we better define and enact just and fair wages as business owners? The facts show that improving compensation will benefit the health of our businesses and improve our bottom lines. A Gallup study conducted in 2015 showed us that 44% of the employees surveyed would consider leaving their current employer for a higher wage of 20% or less. Even more painful to consider, 37% of employees considered “highly engaged” would consider leaving their current employer for a higher wage of 20% or less. In most cases that would be a wage increase of less than $7,800 per year.

The substantial cost of hiring and training new employees should make any business owner pause. The Sasha Corporation conducted four different studies that found the average cost of training new employees is over $9,000. This does not include the amount of productivity lost during the training period or the time it takes an employee to become proficient at their role in your company.  A just and fair wage will save businesses money and allow them to retain and attract the best employees while insuring a return on the initial investment of training new employee.

How do we define a just and fair wage? In defining a just and fair wage we must look at the equation from three points of view: the business, the employee and the community. The business owner, having put their own person capital at risk, has a right to have a profitable return on their investment. Without a profitable return, the business owner will be unable to pay just and fair wages. Next, the employees work to live and provide for themselves and their families. Earning a just and fair wage provides hope for their future and supports the philosophy of the dignity of work. Unfair wages or lack of work strikes at the very core of human dignity. Paying a just wage will also remove an element that sometimes contributes to toxicity in a company culture. A just and fair wage creates greater incentive for a willing employee to increase personal productivity. Lastly, the community must understand and attempt to strike a fine balance between businesses and employees. An unprofitable businesses will often vacate the community they serve, while a community that has an underpaid employee base will become impoverished, not only in goods, but in morale and spirit. This will end in the long term decline of any community, large or small. In short, a just and fair wage will create a balance between the business owner, the employee and the community while providing for the common good and insuring mutual financial prosperity.

As a business owner whose business depends on guiding other business owners on how to properly compensate their employees, I know if you are reading this, you are asking how do I apply this thought process in real life.

Consider the following item as you build your compensation plan for your team:

  1. The living wage for your market.
  2. Profitability of the business.
  3. The five key performance indicators for the team member.
  4. Quality control indicators by position.
  5. An individual employee’s contribution to profit and/or expense control.

These five basic items can help build a fair and just compensation plan for your team.

The living wage is your starting point. This information can readily be found online. The average living wage in the USA is approximately $15.15 per hour. If you have team members that are below that starting point, consider how to move them to a higher base pay or identify opportunities for them to increase their pay through performance bonuses.

Business profitability is a key component in any performance based compensation system. Profitability is typically a key indicator of the health of a business. Each industry has its own unique targets for profit and profit margins. These should be taken into consideration. If the business is not profitable, it would be a failure of fiduciary responsibility to pay any member of the team bonuses until it has become profitable. Any balanced performance based compensation plan should include company profitability as a one of the primary measures for bonus payouts.

After considering the living wage and profitability, identify each position’s measurable Key Performance Indicators (KPI’s). Measurability is crucial, as this will give the employer and the employee specific accountabilities and targets. Generally, by identifying measurable KPI’s and removing ambiguity, employees will focus on improving the most important aspects of their job and increase productivity. Consider placing a priority value on each of the KPI’s as a way to direct employees toward the most important aspects of their role in your company.

Caution: Be careful what you measure, you will get it. Productivity alone cannot be your only measurement. Including quality components will eliminate mercenary type behavior and increase product output quality for your customers. Include measurable items such error rates, product failure rates, regulatory compliance or items specific to your industry that will improve product quality and service.

Lastly, consider the employee’s individual contribution to your company’s profit and/or expense control. This is typically not difficult to measure. It is not unusual for your most productive employee to know and have access to this information even if the business owner does not. This last component can give your employee a sense of destiny control and begins to build an ownership mentality that improves work ethic and the company bottom line.

In summary, creating that balance between the employer, the employee and the community is vital. It will require creative thinking and team collaboration and at the end of the rainbow you will find improved bottom lines, increased employee loyalty and retention and a stronger community.

Thank you,

Jay Toups

President

Retail Management Resources, Inc.

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The Memo – By Jack Yoest (A Must Read)


The Memo – By Jack Yoest

Over the last 30 plus years of my business career I have read hundreds of books on leadership, management, organization, sales and more. From this point forward I will place Jack Yoest’s book within close reach as a guide. Jack has written the quintessential leader and follower’s guide for any person involved in any organization or business.

Yoest does a fantastic job using the top secret memo that is credited with winning WWII to build the frame work for his book. Biblical quotes build a foundation for ethical leadership and followership. Well researched and documented accounts from historical figures keep the reader’s attention and make this a book for anyone to enjoy irregardless of background or interests.

Jack’s use of humorous, humble personal stories and a strong ethical standards gives the reader the direction and encouragement they need on their way to success. I honestly found myself saying out loud, “Yes I made that mistake.” or “Exactly, Jack! I get it.” as I read this book. I will be buying several copies to hand out to friends and business associates!

Great work, Jack Yoest! 

Ken Blanchard, look out Jack Yoest has arrived!

Jack, I am humbled and honored to count you as a supportive friend.  Congratulations on a job well done! 

Link to The Memo – By Jack Yoest 

“Getting Our Happy Back” – Motivating the Team

“Getting Our Happy Back” – Motivating the Team

Team motivation! An engaged team will significantly improve any company’s bottom line. The primary responsibility of executive management is to engage the team in the business of growth and profit. This article will examine recent studies on workplace motivation and how they can be implemented on today’s heavily regulated banking environment.

Highly motivated teams outperform their peers at all levels. Gallup conducted a comparative study in 2014, concluding that companies with highly engaged teams outperformed their peers in the following areas:

  • 147% higher earnings per share
  • 41% fewer quality defects
  • 48% fewer safety incidents
  • 65% less turnover (low-turnover organizations)
  • 37% less absenteeism

These facts alone indicate a fiduciary responsibility to get a handle on the team engagement level.

Motivating and demotivating factors must be understood. Columbia Business School, one of the premier business think-tanks worldwide, has conducted numerous published studies on team engagement in the workplace. Their studies indicate key motivators as:

  • Verifiable Truth
  • Team Education
  • Control
  • Intrinsic value
  • Praise and recognition
  • Performance-based rewards
  • Loyalty
  • Good communication practices

Demotivating factors include:

  • Coercion
  • Public reprimand
  • Punitive practices
  • Low pay scale
  • Poor communication

Looking at the facts presented by Columbia Business School studies gives us indicators on where to start “Getting Our Happy Back” in each of our organizations. Eliminating the negative factors to motivation will help create a positive work environment.

Coercion and public reprimand as a practice must be eliminated at all levels. This behavior will cause a cancerous trickle-down effect throughout the organization. Members of the team that use these practices should be identified and addressed in writing if needed.

The banking industry has undergone significant changes over the previous five years. As an industry, the path forward offers opportunity for growth. Bank executives must continuously look for opportunities in increasingly creative ways. Helen Keller once said, “When one door of happiness closes, another opens, but often we look so long at the closed door that we do not see the one that has been opened for us.”

Punitive practices are often subtlety imbedded in most organizations. The heavy burden of federal regulations has bank executives understandably reeling. How these issues are addressed will pave the way for the future of the company.

Management must change the process of addressing regulatory issues in the industry and inside banks. One item that can be quickly address is how success is measured. Most regulatory measurement systems are gauged based on failure. This can be easily adjusted to measure success. For example, a 4% loan portfolio exception rate will produce less favorable results than reporting a 96% loan portfolio accuracy rate. Studies have proven people will run toward the positive number and avoid the negative.

Low pay scale can be addressed in multiple ways. Industry leaders must acknowledge the living wage and begin to work toward moving our entry level workforce to the living wage.

Louisiana Living Wage Statistics: (Range based variances in market.)

Adult:                              $10.03 – $11.04 per hour

Adult w/2 children:          $22.68 – $24.68 per hour

2 Adults w/2 children:      $22.18 – $24.06 per hour

The expense of taking this action could be financially daunting. Fiduciary responsibility requires a thoughtful approach. There are two immediately possible approaches. As employee turnover occurs, first identify opportunities to consolidate positions and responsibilities and reward high performing employees with additional responsibilities and raises. Second, implement a monthly or quarterly performance bonus plan allowing greater pay for those members of the team that exceed tracked performance expectations.

Poor communication is an issue all organizations must address. The steps to improving communication have been a dealt with in a previous article. Effective communication is the lynch pin to building a strong culture based in trust.

As the demotivating factors are addressed, positive motivating actions must be instituted. Team education, control, and intrinsic value are addressed from here on.

Effective training has been proven to increase productivity by 20% or more while reducing employee turnover by the same rate. The key is having a training plan/budget and a manager responsible for implementing it.

Here are some items to consider:

  • Access to banking and financial publications
  • Training plans by position
  • Class room training
  • Webinars
  • Banking association training
  • Partnering with other organizations to share the cost of training

Training will prove to be a positive return on investment.

Control, or the ability to make decisions close to the customer, has been seriously limited in the current heavily regulated environment. Moving authority close to the customer will give the team a positive sense of control and flexibility when helping their customers.

Establishing a simplified thought process will help decide what requires greater control.

  • If there is a significant regulatory risk, centralize and control.
  • If there is limited or no regulatory risk, decentralize authority close to the customer.
  • If there is an increased need for fast decisions, decentralize authority close to the customer.

Excessive use of controls will limit your ability to gain business and discourage your team from pursuing new business.

Intrinsic value has traditionally been thought to lie at the heart of ethics. Philosophers use a number of terms to describe such values. Something’s intrinsic value is the value that is has “in itself,” “for its own sake,” or “in its own right.” The majority of your team wants to comprehend how they can contribute to the greater good of society and the company. Helping the team understand their value is much more than giving them a financial reward. They need to understand the impact of their position on the success of the company and their community.

Effective techniques include:

  • A Simple two line mission statement
  • Published core values
  • Define the financial impact of the bank on the community
  • Create an internal spotlight on business and consumer customers and the positive impact the bank has had in their lives.
  • Teach the team to express how they of benefit the community

Defining the impact employees have on the greater good can and will change how the team looks at their work life.

The fact remains highly engaged teams will significantly improve the profit and growth of every company. The monetary and inherent rewards will far outweigh the effort required. Build and execute a plan of action. As world renowned motivator Zig Ziglar has stated, “People often say that motivation doesn’t last. Well, neither does bathing. That’s why we recommend it daily.”

If you would like to read our three previous posts on culture building your can follow these links: What is the “Culture Building” Talk All About?, Building a Strong Company Culture and Identifying, Defining Successful Cultural Behavior, Culture Building: The Middle Manager Perspective and The Path to Success: Communicating the Culture.