Recently, one of my friends was telling me about a conversation he had with some entrepreneurs in the Dallas area. They had managed to grow organically for 10 straight quarters, and they were looking to expand people-wise, i.e. make some new hires. But a curious thing happened on this growth path: Almost all their roles, even the ones requiring some seniority or strategy, were around $30,000-$35,000 annually. Now, Dallas isn’t a coastal city, but it has a relatively expensive cost of living and that’s a low offer for a supposedly strategic role.
My friend asked about this approach.
“Well, if I wanted my lawn cut,” one founder explained, “I wouldn’t go to a horticulturist, even though they might do a great job. I would get a teenager in my neighborhood that I could pay 1/10th of the price. Then, if the teenager does a good job a few times, I might increase the base rate or give them more tasks and responsibilities where they can earn money.”
So start everyone — presumably younger employees — low and give them a path to more opportunity? That’s certainly one approach to growing your business. If you have a focus on costs and cost-reduction above all, it makes sense.
But then my friend asked them about learning, mentorship, and other engagement and development opportunities.
“Well, we haven’t quite thought that through yet.”
And there’s the rub.
My guess on what would happen in that company
This article is not about compensation, no. But compensation is certainly one input — and a major one — to the engagement of your people. In this case, the compensation is low relative to (a) location and (b) expected output. When compensation is low, engagement will tend to be low unless there’s a plan in place whereby compensation can be higher at some logical point in the future. I would assume this company will be able to hire younger go-getters off their 10 straight quarters of organic growth branding, but if there’s no plan in place on comp or broader engagement, I would assume a lot of these young bucks will turnover/churn pretty quickly, probably within the first year to 18 months.
There is another point of importance here. A high-growth company has to offer competitive salaries, because the lack of alignment between “We are high growth” and “These salaries are pauper level” means there is some clear priority alignment problem within the business. Usually, high-growth but low-pay means the founders are trying to keep more for themselves. Again, not a bad thing in and of itself. But it conveys a message and if you want good people, that message won’t resonate in the market.