be honest, with everything else going on I could have really done without this. Furthermore, his publicist was turning up the heat by feeding the Daily Mail stories that he was unhappy with the early starts and fancied a change. The company share price reacted and I needed to solve the problem.
I needed to bite the bullet but which one?
Promote another DJ? Search the market for a replacement? Or do a deal with Chris? As you’d expect, we considered these options carefully. I discussed the situation with our board of directors at our next meeting.
One director said: “Paying the first million-pound salary is always the hardest.” He worked at a bank where I assumed this was just pocket money.
That seem to swing the mood in the favour of Chris remaining, which quite frankly was my favoured option. After much toing and froing, we reached agreement. Fortunate, as I didn’t really have a plan B we were confident in. And searching the market is always tricky. Although much later on that’s what we ended up doing.
Eventually we agreed new terms with Chris and his agent that kept him out of the arms of an aggressive competitor. The thought of him broadcasting for them and taking his loyal audience with him was keeping me awake at night.
I resolved to build a good relationship with Chris, not just rely on his agent, and groom a successor. Lessons learnt and I didn’t want to get caught again.
The truth is, I should have known better. Identifying your key executives, building relationships with them and ensuring the temptation to move elsewhere is not on their radar is pretty fundamental.
As a business leader this is a top priority. If you don’t have high-flying people around you building products, running operations or whatever your business requires, you’ll run into trouble sooner or later.
There are many things you can do to ensure a motivated workforce but one of the most difficult to get right is the tricky issue of pay and reward. In theory, it should be a relatively simple exercise. The business world is awash with experienced managers, consultants and other experts ready to help.
There are many precedents for every industry, yet what we pay and reward people seems to be as contentious as ever. Out of all the questions I get from businesses, “How should we reward our people?” is among the most frequent.
“The thing is, I don’t want to sound ungrateful, but I think I deserve more.”
“I could earn more elsewhere, what I’m paid is way below my market rate.”
“Others at my level are paid more than me.”
“New people are earning more than we do”, and many more phrases you’ll be very familiar with, no doubt.
“On reflection, I think I’m overpaid. Please reduce my salary” – yet to hear this one.
If you’re the boss, stuck in the middle between your superior (perhaps in title only) and the front-line troops, all this is the kind of pain you can do without. You don’t want to lose good people but you’ve a budget to recognise and often it’s the same people putting you under pressure. The high-flyers, confident their direct approach won’t be saved up and retaliated against at some point, feel they’re acting from a strong position.
Like everything else it’s a people problem where blanket policies and company doctrine are great in theory, but increasingly irrelevant to the individual and the everyday working world. At one time, an annual blanket pay rise was commonplace, everyone received the same and the only way of beating the system was to be promoted. In theory, it has great merit of course. Nothing to really think about. Everyone knows the rules, no one steps out of line and the company can accurately predict its labour cost. Link the rise to inflation and the whole idea can be easily justified.
I recall working at a company where there was a proud defence of the rigid pay and reward system. But what do you do when this happens?
“The thing is David, everyone here understands the system. An inflation linked rise for all and company profit share on top at the end of the year.”
A simple system easily communicated, no argument with that.
So far, so good. Until the high-flyers from the IT development division discovered the market valued them more than their current bosses. Slowly and surely the exodus began, as the grass on the other side really was much greener. Ever in denial, the CEO, having blamed managers, HR and unscrupulous head-hunters, had to face up to the fact that his policy to motivate and retain his key people needed a radical rethink.
Not least because the cost of replacement was significant. New candidates were far more expensive than the leavers. They were on long notice periods and were not prepared to join a pay and reward system that ignored market value and personal performance.
What did the company do? Well, it first had to recognise the problem and acknowledge there was an issue. This was difficult and involved all sorts of discussions, which inevitably became wide ranging in their scope. Everything from company culture to extra benefits. All important elements that we’ll return to, but the truth is unless you get to the central issue, adding free beer and a staff discount isn’t going to cut it.
New candidates of quality are usually confidently aware of their negotiating position.
“Look, this is a really important decision for me. The job seems perfect and I know I’ll make a great contribution. From what I’ve seen it’s a brilliant culture and the possibilities to advance are really going to motivate me. But the basic package is less than I currently earn and to be honest I’m looking for a step up. I’ve had many approaches with more money, which I’ve said no to because the position wasn’t quite right. This is the job I’d love but I need another 20% on what you’re offering.”
So say many candidates in a variety of different ways. Of course, they wanted at least market rate or above and that meant the company’s fixed-tiered system would be broken, providing that a different set of pay rules, just for new people, could be put in place. Or the company could employ lesser people for less money, hardly a good idea if you’re trying to grow a business, which I assume you are.
Government-sponsored organisations are typical of rigid, inflexible thinking on pay and reward. Levels, tiers and bands are commonly used to fix remuneration, inevitably geared to treasury budgets. These provide the foundation for an increasingly dissatisfied workforce until only the committed, desperate and challenged candidates take the jobs. Then there’ll be public outcry about the quality of teachers, the lack of nurses and the politicians will blame the previous regime and put in place a catch-up pay plan and recruitment drive. Then the whole sorry, sad cycle will start again to be repeated a few years down the line.
It’s so short-term and damaging. Recruiting people into many industries takes years. You can’t train a doctor on a three-month course at the local Travelodge. If you make entire sectors unattractive, the recovery period stretches out over the years. Crazy. As we know to our cost, those that ignore history tend to repeat it, as the saying goes.
Another example of an extreme system, which I also don’t advocate, is that normally attributed to bankers. The annual bonus. This method of reward is prevalent in many, many industries outside of finance. It’s just that bankers, for a number of very well-trodden reasons, are singled out to take the media hit.
Mostly, annual bonuses appear to be part of an opaque system that has little apparent relationship to performance or productivity. That’s why they’re
