On 1 January the governments of the City of Macon and Bibb County, Georgia consolidated. As a result, we have a host of employees now working for a single new governmental entity, where two once existed. But this isn’t the case with our law enforcement employees. On 1 January the Macon Police Department ceased to exist, and their staff was absorbed into the already existing Bibb County Sheriff’s Department. As they were planning for this absorption of employees, there was a lot of discussion about differences in pay between Sheriff’s deputies and police officers. It wasn’t that they started off so differently, as starting pay was similar, but over the years deputies were paid more, and officers were paid less each year.
These two organizations fell into the trap that so many organizations fall into — paying for time instead of value. Now don’t get me wrong; I’m not talking about the occasional adjustment of base wages based on the increase of the cost of living. What I am talking about are two fairly common practices of paying people for time:
- Paying for time spent at work
- Paying someone because they have been with the organization another year.
The first issue is not that easy to deal with, as there are federal and state laws that pretty much establish that organizations are forced to pay employees by the hour unless they are “exempt.” But these laws only cover “base pay,“ and does not preclude the ability of the employer from paying those employees who provide greater value greater pay.
For example, I had the opportunity to visit the corporate headquarters of Cracker Barrel a few years ago and learned about how they pay their wait-staff. If you have ever been to Cracker Barrel before you probably have noticed that wait-staff wear aprons, and on those aprons they have their name stitched on them, and maybe some stars. Some have the stitching in gold, and some in red. No, the stars are not for how long they have been at the store or with the company, and the colors are no accident.
All wait-staff start out at the same base pay per hour, but from there on out they get paid for value. As they complete their onboarding training they get a pay increase, because they now can do their jobs without another staff person having to accompany them to each table (an increase in value). As they learn additional responsibilities they are given a corresponding increase in pay and a star for their apron. And if they learn how to train new wait-staff, then they get additional pay for that, along with different colored stitching. It doesn’t just stop at pay, either. Cracker Barrel also provides additional perks for the increase in value, as well.
What happens if a person loses the certification that caused them to earn that star or different colored stitching? They lose the star or color from their apron, but they also lose the corresponding increase in pay and benefits. Why? Because they no longer provide that extra value because they can’t do whatever they were being paid extra for.
How can other organizations apply this principle? Simply look to what provides value to your organization and then as employees can learn to do those things, insure that they get that pay. For example, if you are a service organization and someone gets cross trained on another job, then pay them extra because at any time they can step in and fill an absent co-worker’s job and help customers. If you are a manufacturing organization then the cross training also applies. Whether it is a separate job, or the ability to operate a different machine, paying people for being able to help the organization is the key.
What we definitely do NOT want to do is pay them extra money per hour simply because they have been at the organization one more year. This sets the stage for inequalities in the future. After all, why should one employee who produces more, can fill more job functions, and provide a greater value to the organization be paid less than another employee, simply because the second employee has been with the organization a few years more?
I am often told that having an employee stay with the organization another year is valuable, but that assumes several things that often aren’t true. The assumptions are that because they have been there longer they know more and can do more, and that if they don’t leave then the organization won’t have to spend money to replace them. The fallacy is that many employees don’t learn that much after their first year because most organizations don’t encourage them to do so. Secondly, if someone is only marginally performing then it might be beneficial for the person and the organization if they actually left that position and you hired someone who could perform exceptionally well.
This is just scratching the surface of a well-designed and operated compensation system that will help your organization become exceptional. Remember, you can’t do what everyone else is doing if you want to be the best; you have to do things differently. You have to pay attention to research that shares that pay for performance doesn’t really work, but pay for value and impact does. In other words, we wouldn’t necessarily want to pay someone individual bonuses and commissions, as these are based on individual performance only, and not on the overall impact and organizational performance results. Too often individual performance benefits only the individual, but simply doesn’t translate into achievement of the organization’s goals. But we would want to pay someone for their education, training, skills and ability to provide options, and reward them and their team for helping the organization realize great results towards achieving the organizational goals.
Whatever you decide upon, get yourself, your fellow managers, and your employees out of the mindset that you are paying for time. Time isn’t money; organizational results is money, and what an employee provides towards achieving those results is value. Pay them for that and manage around value, not time.