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- Subscribe - Contact Us - Rate Card - Place an Ad Archives Revels Classifieds Real Estate Menu Guide Wedding Weather Subscribe Contact Us January 28, 2006 Marketing Today How much pay is enough? Anthony Hernandez So far in this series on hiring, you’ve defined a job position and your ideal employee candidate. Your next step is to define how much work you expect from this person and how much you’re going to pay them. Setting clear performance expectations is essential for ensuring that your business is getting value from everyone who works there. You need to define both how much work gets done (quantity) and how that work should be done (quality) in no uncertain terms. Remember that the definition of “marketing” is all contact between your business and the outside world. You’ve invested a lot of time, energy and money growing your business to this point and cannot afford to erode any of that hard-won progress. Clearly defined expectations give both you and your employee an objective benchmark against which to judge performance. If the employee meets those expectations then all is well. If s/he does not, then either you made a mistake somewhere or your employee is not right for the job. Firing someone is an extremely difficult thing to do under the best of circumstances. Being able to demonstrate that you have an objective standard and that the employee consistently failed to meet that standard will go a long way towards easing this process for everyone concerned. Having clear expectations will also help protect you against a costly wrongful termination lawsuit. Spell out exactly how much work you expect from each employee every week or even every day and exactly how you will measure the quality of that work. Make sure that every employee agrees to this in writing and keep that agreement on file because you will need it in the future. Keep in mind that you are no less infallible than anyone else and encourage your employees to inform you if they deem your standards unrealistic. It is entirely possible for you to expect too much or even too little. It may seem like I’m discussing standards from a punitive angle, but this is not the case because standards work both ways. If you hire someone who consistently performs above and beyond what they are expected to do, then you can use the same benchmark to justify rewards such as bonuses, raises and promotions. How much are you willing to pay for this performance? Low wages might seem tempting but may come with hidden costs in the form of reduced performance and increased turnover. Can your business afford less output or quality? Can it afford the extremely high cost of employee turnover? A minimum wage worker earning $7.50 per hour in Oregon costs a bare minimum of $3,750 to replace (just over 25% of their annual salary). Do you really want to waste that kind of money? You read that correctly: Every employee who leaves your business costs you about 25% of their annual salary or more. I suggest that you approach your wages the same way you approach your pricing. You may remember my 80% rule of thumb where you price yourself at 80% of the difference between the lowest and highest prevailing prices for similar goods and services. Likewise, find the lowest and highest prevailing wages in your area for similar jobs and consider offering 80% of the difference between the two. For example, if the job pays between $8 and $12 per hour, consider offering $11.20 (80% of the $4.00 difference is $3.20, which you add to the $8.00). This is a very rough guideline that you will need to adjust based on your individual situation and goals but it does give you a good starting point. Should you offer more or less? That’s a complex question. Offering more can attract better employees who will stay with you longer and do better work, which can have dramatic effects on your bottom line — to a point. Whatever you decide, never make the mistake of thinking that lower wages equals less cost and higher profit. It’s just not that simple. Clear performance expectations and decent wages are critical for attracting and retaining employees who will add value to your business and themselves but there is a third ingredient I have not covered yet: management. That’s next week’s topic. In the meantime, if you have or are considering hiring employees, I again urge you to read “Nickeled and Dimed” by Barbara Ehrenreich for some great lessons on how not to manage employees. I am thrilled to announce the imminent release of my new book “The Enlightened Savage: Using Primal Instincts for Personal and Business Success” that describes how ancient survival instincts are guiding everything we do — and how to use those instincts to our advantage. I always welcome questions, feedback, and suggestions. Please e-mail me at [email protected] with your ideas and suggestions. My invitation for you to schedule a free session with me is always open and there is never any obligation. You may also visit me on the Web at www.coachanthony.com. Anthony Hernandez is a local business consultant with more than 19 years of business and marketing experience. He lives in Ashland with his wife Robyn, son Logan, and their two dogs. 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