10 tips for keeping a lid on salary
Control variable costs.
Sounds like sensible, Business 101 kind of advice,
The trouble is that most small businesses have only
one variable cost -- salaries. Pay too much and you'll be out of
business. Pay too little and you'll find yourself desperately hanging
out the "help wanted" sign.
That means settling on the right salary for your workers
can be an ongoing small-business challenge.
Erisa Ojimba, compensation consultant for Salary.com,
an online salary consulting company, says what you probably already
know: If you're paying less than the salary midpoint, you'll probably
have trouble finding and keeping employees.
"You probably don't want to hire people who are desperate
enough to take a job that pays significantly less than somebody
down the street is paying for the same job," she says.
Here are 10 suggestions for avoiding that trap, while
still keeping the lid on your salary budget.
1. Do research. Make sure your salaries are
in the average range. While you may not be able to compete with
the top payers, it doesn't make economic sense to lose people constantly
because they can make $2,000 a year more down the street. Replacing
them will cost more than that.
Salary.com offers a free search engine that allows employers and
employees to research salary information compiled from surveys of
various industries. Other resources include the federal government
and trade organizations within your industry.
2. Give bonuses, not increases. That way, the
base salary stays the same, but the total package is competitive.
If your company does particularly well, the employees do well too,
a concept that seems fair to employees -- and a sense of fairness
is critical to employee satisfaction.
3. Be flexible. Big companies may not be able
to write their policies around employees' needs, but a small one
can afford to accommodate special situations. Ojimba says employers
worry too much about setting precedents. She believes employees
understand when you cut a special deal as long as a similar deal
is available when they find themselves in need of it. In return
for flexibility, employees may be willing to accept cash compensation
that is less than they could get someplace else.
4. Up the emotional compensation. Remember
most people work not only because they need to earn money, but also
because they take satisfaction from making a contribution. If one
component or the other is missing or out of whack, an employee will
leave. As Jim Chandler, a sales consultant in Fort Worth, Texas,
observes, "People go from job to job looking for someone to say,
'Charlie, you're doing a good job.' " So don't be stingy with encouragement
and praise -- it doesn't cost anything. Chandler offers this rule
of thumb: "For every criticism that you offer, tell people three
times what they are doing right."
5. Be willing to hire smart people who need
only training, even if you think they won't stay around long. As
Chandler says, "I'd rather have passing brilliance than permanent
mediocrity." Ojimba explains this philosophy another way: If you
feel you simply can't pay market wage, then, she says, "Look for
smart people and be willing to train them. You may spend $4,000
or $5,000 on a combination of formal and informal training, but
in the end they will have learned the business, appreciate your
commitment to them and may be willing to stick around longer than
they would have otherwise."
6. Get rid of any caps in commission-based jobs.
Phyllis Jacobsen, general manager of Shields Bag & Printing
in Yakima, Wash., hasn't had an opening in her sales department
in two years and her salary budget is firmly under control, because
what salespeople make is tied to what they sell. The more they sell,
the more they make. For people who work hard, Jacobsen says the
sky's the limit. "Every single account is commissionable; there
are no house accounts. If they sell it, they make it. We just keep
moving the carrot out further and further."
7. Look for somebody else to do the job. Ojimba
recommends analyzing each department or responsibility, looking
for opportunities to lower costs by outsourcing, which can lower
costs and provide better service. At the same time, she warns that
outsourcing can reduce commitment, consistency and control. Make
sure you're not giving up more than you get.
8. Move things around. Allocate resources to
ensure that every employee's talents and abilities are used to the
maximum. Temple's Deckop says many people are mission driven. If
they feel they are indispensable, they'll behave that way.
9. Share the risk. Talk to employees often
and honestly. Let people know when the company is doing well and
when things are going badly. Employees who understand the risks
are more likely to share their ideas for solutions and to ride out
the bad times because they feel part of the operation.
10. Take a look at your own salary. In small
companies, news travels fast. If the boss is making more than employees
think is equitable, you'll create resentment and that translates
into expensive departures.
Jennie L. Phipps is a contributing
editor based in Michigan.
-- Posted: July 20, 2000