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.
“My focus is on the numbers”
You hear this a lot from founders and brand-builders, and it’s not a bad thing. You do need a critical eye towards your key business metrics. That’s unquestionable. But you also need people to be engaged. An engaged workforce matters a lot. The simplest way I can frame this up is: “run through a wall for you.” If your managerial level is impactful, the execution level will run through walls to get projects done because they believe in their co-workers, their leaders, and the purpose of the business.
Unfortunately, this isn’t always the case. To wit:
“… this crisis in engagement that we’re facing now, where only one in three people can actually tell you what their role is at work. Two out of three people don’t know what they’re doing, so of course they can’t be engaged in it. And even if they know what they’re doing, they’re distracted by competing demands.”
This is common in scaling companies. People are hired to underscore growth — hopefully at more than $35,000 — and oftentimes, job role can be unclear (2 in 3 don’t know what their role is). When job role is unclear, engagement suffers. And even if job role is clear, the additional concern is that competing priorities will confuse employees. Are they supposed to work on A, B, or C? And in what order? Because there’s a possibility that the manager associated with A, with B, and with C have all told the employee that their task is “extremely urgent.”
What does this mean for you as a business owner?
You need to have a clear set of metrics that are important to you, yes (“the numbers”). But you also need to think just as critically about how you manage and engage your people, which involves:
- Compensation: While you don’t need to break the bank, especially as a smaller outfit, you need to be competitive at least in geographic market.
- Job Role: Is it clear how each employee contributes to their own development, their department/functional area, and the overall business?
- Process: Is it impossible to get even the simplest stuff done? What processes could be killed to make things flow better?
- Team Functions: Are there opportunities for teams to connect outside of tasks? Are there happy hours, gym sessions, and more to help them learn about each other at a personal level?
- Development: Are there learning opportunities? Can employees take classes, either online or in-person? Is there a mentorship setup so that more veteran employees can teach younger ones?
- Empathetic Management: What are your managers being evaluated on? Is it solely numbers? If so, can you incorporate numbers related to their management of other people, i.e. scores from their direct reports or something similar? You need to have a path to ensure that managers are actually managing and developing, not just looking out for their specific KPIs.
Business growth comes from both external — sales, marketing, operations — and internal — your people — strategies. Think about employees as “internal customers.” That one vocabulary shift might help you reframe the issue.
In general, the most successful, speedy-growth companies focus on 1-2 big goals and align everything — the people systems, the IT processes, the revenue reporting — to those goals. Otherwise you can get trapped in thinking 10-15 things are important, and never really pay the right amount of attention to any of them. So if you have a big goal of “Fluid and easy processes,” for example, make sure everything around IT tickets is intuitive and easy, everything around hiring is easy, everything around the metrics tracked and reported is easy, the path to a higher salary is understandable, etc. The alignment drives the strategy forward, and the strategy being aligned creates the growth.