Volume 47, Issue 4 - May 2008

AMD Headlines
Can Raises Hurt Your Employees?
by Dan Barber, vice president of finance and administration at Barnett Millworks Inc. in Theodore, Ala., and treasurer for the Association of Millwork Distributors. Mr. Barber’s comments are solely his own and do not necessarily reflect those of this magazine.

Distribution Works
Pay Increases Should be Linked to Additional Responsibilities

During an economic recession, it is only natural for companies to tighten their belts and take a hard look at the way they do business. Everyone knows about layoffs and cutbacks and all the other “normal” things we do to save money, but what about things we don’t think about? Could some of those things actually hurt our employees?

Recently, I was talking to an employee who told me he would never leave our company because he could never make as much money doing something else. Never, really? We greatly value our employees, but I was curious to find out what he meant. I decided to do a full company audit of salaries. After all, business is down and we do need to watch every penny. After several hours and several cups of coffee, I realized he was right. 

What did I find? Well, it turns out several of our employees were compensated very well and, in some cases maybe a little much for their job responsibilities. They had performed the exact same job function for years, sometimes decades, and were now making a considerable wage. I should caveat this by saying I am speaking primarily of hourly workers on the production line—the people who really get things done. We must ask, though, what is it worth to pay someone to perform one task for 30 years? We value loyalty above everything, but we need to learn to value individual growth just as much. 

Where’s the Incentive?
This may sound a bit heartless on the surface, but I assure you it is not intended to be. One should consider the long-term well-being of the employee. If he or she is rewarded solely on years of service, and rewarded generously, where is the incentive to do better? The next generation of supervisors and managers should at least partially come from existing employees. It is through promotions and additional responsibility that employees should attain their greatest salary gains. Long term, we need to decide if we provide jobs or if we provide careers.

Very few people work one job their entire lives. Some start out at one company, leave, and then return later. We have several employees who returned to us after pursuing career opportunities elsewhere. The reasons vary, but a great number of ours found they could not make as much money as they did here doing the same job. In this respect, I blame us. We have done our employees a disservice if we have maintained them for so long and not challenged them to move up, gain new skills and obtain new responsibilities. Granted, not everyone wants a challenge, but most everyone likes more money, and that is the key. In many ways, upper limits on certain jobs are good for everyone. It prevents the company from overpaying and encourages employees to learn more. 

What If?
So, when I start to think about the employee that has worked here for many years that has only one skill I am somewhat concerned. What if something happened to his job during a housing slump? He makes a decent wage here, but would he be able to find it elsewhere? The answer is probably not, and it’s unfortunate it wasn’t addressed years ago. We aren’t responsible for every aspect of our employees’ lives, but maybe beyond paying them a fair wage, we should pay them the right wage. Such practices may encourage employees to keep climbing the ladder, and if something does happen, perhaps the next job will be able to pay them well because they will have more skills, more training and more experience. 

To prove this is not simply anecdotal, our company does have managers who started out at the very bottom. It seems such a waste to have someone 30 or more years and not encourage them to be their very best. The best ideas usually don’t come from upper management; they come from the people in the trenches. These people are the difference makers, and they should be rewarded for it. Let us reward their drive and growth, not simply their longevity. And let us be sure we provide the proper learning environment and training opportunities. In the end, both employee and company will be better off. 

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