Pay your employees more

http://www.newyorker.com/talk/financial/2012/03/26/120326ta_talk_surowiecki

by bicknergseng • 14 years ago

105 21 14 years ago

newyorker.com

veguss2• 14 years ago

You get what you paid for applies to everything including salaries.

jpdoctor• 14 years ago

> You get what you paid for applies to everything including salaries.

Hmmm. Lehman's CEO was not exactly underpaid. Nor Freddie Mac. Nor Fannie Mae. Nor GM. Nor Enron. Nor Worldcom. Nor Rich McGinn in his Lucent days.

And that's just the first people that spring to mind in 60 seconds.

veguss2• 14 years ago

I'm referring to people who live on their wages and not investment income, eg: the 99%.

sophacles2• 14 years ago

I'm not sure if you are being snarky or missing forrests for trees (or the other way around). It's probably a complicated multi-variable situation. If I buy a polished turd for 70% again as much as a regular turd, I stil have a turd, albeit a lovingly polished one. The one widely applicable truism is not cancelled out by another: "a fool and his money are soon parted".

Another way of looking: those places all got exactly what they paid for: someone good at manipulating a given set of rules and following strategies to the T, and who brings a fancy name to the table. Too bad they didn't also focus on the "changes behavior when the rules and the strategy don't make sense" too.

ktizo• 14 years ago

You get what you paid for applies to everything including salaries.

However each and every thing has its own price vs quality graph. If I am buying apples, a ten dollar apple is not likely to be ten times better than a one dollar apple.

binxbolling• 14 years ago

I don't understand the misleading title. What employees are paid was certainly a small part of the article, but how many employees you have seems to have been the major focus. So how does "Pay your employees more" capture the article's content at all?

sophacles2• 14 years ago

Well, pedantically, employees is an aggregate term, and higher salary costs (either by higher individual wages or more individual wages) meets the conditions.

Less pedantically: the focus was on more, better trained employees, and more experienced employees. In the later two situations, this generally translates to individuals being better paid -- experienced workers demand higher wages, as to better trained ones. Further, a large number of the faiure examples given were about firing the higher cost employees (experienced, trained ones, and full-time ones) in favor of cheaper ones, again implying that the per-employee wages were dropped as well.

georgemcbay2• 14 years ago

The headline here on HN is a bit misleading, the article is really about spending more on your employees in the aggregate (eg. by hiring more of them, spending more on training, etc) than paying individual employees more.

In any case, I know this doesn't count as data but there is a growing number of establishments (retail stores, coffee shops, etc) I just don't go to anymore because I know the lines are going to be overly long due to understaffing.

It is not okay to make customers wait 10+ minutes in line so you can save a handful of multiples of 8 bucks an hour. And if you do this you may well save a tiny bit of money in the short term, but eventually the customers will just go elsewhere and those customers are unlikely to come back for a long time even after you fix the problem.

(tl;dr -- FU, Vons stores in San Diego).

ps. I realize having to wait 10-ish minutes in line for fresh produce and other groceries is the epitome of a first world problem, but I still reserve the right to point it out as a failing business strategy.

jfoutz• 14 years ago

No, they come right out and say the four case study retail companies pay their employees more: "They pay their employees more; they have more full-time workers and more salespeople on the floor; and they invest more in training them."

georgemcbay2• 14 years ago

I'm not saying they said nothing about paying employees more, but that clearly isn't the focus of the article, thus the headline is still very misleading.

astrofinch• 14 years ago

And additionally, the article says nothing about businesses outside retail.

electromagnetic• 14 years ago

I've seen this in many businesses. My two favourite restaurants are always near-fully staffed, one of them regardless of the time of day. 6am on a Tuesday or 6pm on a Friday night, they have just as many staff working.

Even in these normally 'off' times, they'll have around 80% capacity, often workers for the cable companies, etc. who want to be in and out fast but get good food. And they are. I've been in on those off times and you can get your food in under 5 minutes because they're prepping everything. Even better, when you tell them you're done, they're back with the bill in under a minute.

I've never gotten service like that at a chain-restaurant, because even in their off-times they've barely got any staff. You wait longer for your food, you wait longer for you bills and god forbid you want a refill on your drink, because they'll never pass you at this time of day.

andyking• 14 years ago

I'm reminded here of a piece I read here on HN just the other day - about jobs being obsolete, or something.

We're now living in a world where a lot of jobs are being automated away, and we don't need as many people in employment as we did, say, 30 years ago.

Having automated away menial and administrative tasks, smart companies are now spending some of their vast profits on employees who are nice to have, rather than absolutely necessary for the running of the business. A few extra shop workers to save people waiting in line, a few extra people at the end of the phone.

I'd much rather live in that world, than the alternative, which is a few people having jobs and the rest in the dole queue.

sardonicbryan• 14 years ago

I think in the cases cited in the OP, investing in more employees is probably strongly correlated with knowing how to deploy additional employees at high ROI.

A smartly run business is probably better equipped to get incremental revenue out of more people/investment.

wtvanhest• 14 years ago

This is a classic correlation vs cause... head fake we always see.

All else equal a company should pay its employees a salary which helps them live a meaningful life. But the article doesn't support the title in any way.

Take best buy for example. Does paying their employees more save them from bankruptcy? Of course not.

dinkumthinkum• 14 years ago

This statement just seems weird to me. So do you think a company should make profits that make it exist in a "meaningful way?"

inopinatus• 14 years ago

A better construction of this recommendation is to pay your employees enough to take the question of pay off the table. It's simply because people who feel even slightly underpaid become unresponsive to every other form of motivation.

However, it's just a specific example of following the classic talent-based management formula:

* Hire good people,

* Give them goals and the resources they need, and

* Get the hell out of their way.

aptwebapps• 14 years ago

In other words, managing by metrics is problematic and there's no substitute for using your brain. It's interesting to juxtapose this with the thread from the other day about The Well Intentioned Commisar:

http://news.ycombinator.com/item?id=3688198

Centrally planned governments don't have a monopoly on stupidity.

guard-of-terra2• 14 years ago

A corporation is centrally planned.

bennyfreshness• 14 years ago

It comes down to product.

If your product is in high demand and you have incredible mind share (as the mentioned brands do), revenue will follow. With more revenue you can afford to ramp up your customer service.

This article seems to claim that revenue is directly correlated to payroll costs. So spending more on payroll will somehow magically increase revenue? Then everyone would be doing it. There is a delicate balance.

Lastly, Circuit City failed because they couldn't innovate as fast as other competitors, namely Best Buy, not because they tried, as a last ditch effort, to save money by hiring temp workers.

guard-of-terra2• 14 years ago

On the other side, if one dollar apples are so bad that you can't bring yourself to eat them, then ten dollar apple is infinitely better as long as you're still eager to buy it.

Pay your employees more

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