What do I have to manage? # 5. Hiring & Retaining good staff – Part 6.

Friday, July 16th, 2010

 This is the final newsletter in the series on the importance of good management of staff and human resources, so I’m sending it out sooner than I normally would.  It’s also one of the most important – especially now, as so many firms, government departments and parastatals are coming under renewed pressure from Trade Unions and employee representative associations to increase wages.

 The reasons for this are perfectly understandable – wages for general workers are simply not enough to meet the high cost of living today. South Africa’s history of job discrimination, and the whole apartheid system, has also meant that wages have been coming off a very low base.  Trade Unions are looking for increases way beyond the official inflation rate, and generally speaking, business owners and economists are saying that’s unreasonable.  And on the one hand I agree with them – after all, how does business absorb such monumental increases in labour cost without passing it on to the consumer (which will affect the inflation rate again!)?  On the other hand, a 20% annual increment in a wage that’s already historically too low for anyone to live off, is hardly asking too much, is it?


So, – somewhere between the two, both employee representatives and business – and as a result, the average man-in-the-street, – are going to have to come to some sort of compromise on this matter.  Yes, the average general worker needs more money to live on – just to make the basic ends meet!  And yes, the business owner simply cannot absorb such increases and still remain competitive in a global market.  Well, I have some suggestions to consider…

PAY WHAT THE JOB’S WORTH!

This is a really touchy subject – for both employers and employees – and there’s good reason!  In many cases, unscrupulous employers pay desperate employees way below their worth.  Also in many cases, employees with very little ambition and almost as much interest, continue to demand annual increase after annual increase, for doing the same job, year after painful year.  I believe that this status quo really has to stop, especially if businesses want to grow, and want their employees to grow with them.

WHAT ABOUT THOSE EMPLOYERS?


A great majority of employers pay their staff according to what the market dictates.  They will phone a personnel consulting firm in their local city, and establish a bench mark for a certain job profile, and then look around for someone who is willing to work for that salary each month.  This is weird because the market in Johannesburg is different to that in Durban, and that in Cape Town.  Yet the job function may be exactly the same in each of those three cities.  What I’m usually told is that the cost of living in Johannesburg is so much higher than Durban, and that’s why the salaries are higher.  Or, – I’m told that there’s a greater demand in Johannesburg; that it’s simple economics – the law of supply and demand.  And the best one yet, – people will accept less to work in Cape Town because it’s a nicer place to live.  Now, all those things may be true, but that doesn’t mean the job is any different; and this applies particularly to those large national companies with branches all over the place.

On a very simple level, let me relate a personal experience.  I remember an incident many years ago when a neighbour offered to share the services of his gardener with me.  When he told me this he added, “Please don’t pay him more than Rx per day, otherwise it will affect everyone he works for.” At first I complied because I really didn’t know how this gardener would turn out.  Later on, however, I determined to pay him much more, – and for one simple reason – he was worth it!  And by that, I don’t mean that he was a better gardener than I expected, I mean he was worth it to me!

I calculated what it would cost me to mow my own lawn in terms of time and effort and it was significantly greater than what I was paying the gardener.  After all, it would use up my own valuable weekend time (which I have to say nowadays I guard very selfishly and very carefully), and it would also create the additional stress of being aware, each day through the week, that the job needs doing. 

In addition, by using his services it was freeing up my time to generate income at a far greater rate than his actual cost.  I had determined that he was part of my income-generating team, and on that basis alone, I was going to look after him!

The old adage of “fair pay for fair work” comes to mind. There are also two biblical reprimands to be considered in this regard:

How terrible it will be for one who builds his palace by doing evil, who cheats people so he can build its upper rooms.  He makes his own people work for nothing and does not pay them. (Jeremiah 22:13),

And

“The pay you did not give the workers who mowed your fields cries out against you, and the cries of the workers have been heard by the Lord Almighty.” (James 5:4)

If you’re not a Christian, you may say, “What’s that got to do with me?”  Well, I happen to believe that regardless of what your belief system is, there is a universal principle inherent in those warnings.  I believe this because I have seen the results of this kind of blatant exploitation, and it goes under the heading of “you will reap what you sow”.  I have often come across someone who pays his workers poorly, and then wonders why he struggles to collect debt due to him; or wonders why every job he does is problematic; or why his vehicle breaks down just when he needs it.  Call it poetic justice if you like….!!

Employees need to know that they are valued, and (sadly) there is no better way to demonstrate this than through the pay-packet.

WHAT ABOUT THOSE EMPLOYEES?

I recently heard someone say that he values the loyalty of his employees over everything else.  The question I felt I should ask is this: “how do you know that employee is loyal?”  Is it because he has worked for you for ten years and never missed a day on the job?  Is it because he wears the company T-Shirt?  Or, is it simply because he doesn’t know much else, and every month he gets his salary paid into his account, and every year he gets an annual bonus and an increase?  Now don’t get me wrong – I’m not suggesting it’s either one or the other; an employee could really be loyal and also happy to be regularly paid, but I’m also not naïve enough to think that an employee will stay on if he’s offered a better job with higher pay somewhere else. (Generally speaking, of course!)

So, someone could start working for you today as a general worker and be earning R5000 per month.  In ten years time, with an average annual increment of some 10% (about 4% above the current official inflation rate), this person will be earning nearly R13000 per month – still as a general worker, and because he is now ten years older, is probably doing less work than he was doing before.  In fact, when one looks at this example, over the ten year period, one can see that this particular worker would have cost his employer R213,000 extra for doing the same job.

This is simply untenable, especially now that we are part of the global economy, and in the global economy, wages are paid for the job, and not for the period of service of the employee.     

But, how do we overcome this problem?  In my father’s generation, it wasn’t unheard of for employees to work for a business for anything up to fifty years.  A worker would leave school at the age of 16 and have one job until he retired at 65.  This is almost unheard of today (though I do know of one at Rawdon’s Hotel in Nottingham Road, who’s been there for over 50 years!).  Nowadays, I believe the average period of service for many employees, in the global western economy, is about eighteen months!  There are two reasons – workers know that to advance in their careers, they need to be constantly improving in what they do, and who they do it for; and secondly, – employers don’t want them hanging around doing the same old job for too long.  It sounds terribly mercenary, but it’s a reality!

I do believe that all future employment contracts should clearly state that the remuneration offered to an employee is tailored to the job profile, and that it will only be subject to annual increments at the CPIX incremental rate. (there are obviously other issues to consider, though I won’t go into those now.)

The onus is therefore on the employee to improve him/herself, if they want to earn more income.  However, I would also encourage employers to identify those employees that show promise and a desire to improve – don’t leave potential star performers to find their own way; get alongside them and push them to greater hieghts – it can only benefit your business at the same time.