Pay + Purpose = Profit, and Even Better Pay

I remember the first time an engineer showed up at the press I was operating to perform a time study. I was terrified! I hadn’t been with the organization very long and had to work as hard as I possibly could just to hit my daily efficiency numbers. I was convinced that this spelled the end for me… Looking back, I’m almost certain someone explained what they engineer would be doing and why, but my guess is that some negative-Ned in that department had also spouted off about how those time studies were going to be used to get rid of jobs and raise the expected hourly rates. It’s not hard to guess which voice a twenty year old kid would listen to, especially if he had more routine interaction with Ned than with his supervisor!

Three decades later, and having worked with companies in nearly every industry since, I have a far different understanding (and appreciation) for time studies and every other piece of the budgeting process; if we don’t know how much it costs to provide a product or service, there’s little chance the business we’re operating will be around long. And contrary to what the Ned’s of the world believe, looking for ways to continuously improve every process isn’t based on making them work harder or faster - even though most of the Ned’s I’ve worked beside weren’t delivering anything close to what they were capable of…

The reality of those time studies, and any other part of the cost analysis process, is that every organization needs to have a clear picture of what’s spent to yield their product or service - on equipment, materials, and labor - to have the slightest chance at remaining competitive in their market. Truth be told, the consumer has a lot to say about pricing in a free-market economy, and there had better be a very good and very clear reason for even a modest variance in price. Since most companies in a given industry deal with the same or similar suppliers and have comparable material expenses, the costs they’re forced to manage are those related to efficiencies and salaries. 

Some organizations lead with best-in-class pay right out of the gate to attract folks to join them. In many cases, this results in the starting pay being relatively similar to what the same job pays someone with years of experience. Other times, the high wages equate to harsh working conditions, long hours, or poor treatment from the management team. Every now and then though, a company manages to offer ALL those things in one location - and I’ll let you guess how that impacts things like morale, turnover, and long term profitability…

On the opposite end of the spectrum, organizations may skimp on pay while attempting to design the simplest processes possible so the required skill level remains low. That can produce results but I’ve seen many companies that take this approach serve as a training ground for the others nearby that offer higher wages to folks with modest experience.

Here’s where the rubber meets the road on this: companies operating in a free market society must remain competitive - with their pricing, and with the atmosphere and compensation they provide their team members - or they’ll soon find themselves holding an empty sack. Earlier, I suggested that when all things are equal, purpose matters. I went on to say that even if all things aren’t equal, purpose often matters the most to some of the best folks we’ll ever have on our teams. But even then, it’s our responsibility as leaders to take care of our teams; even the most powerful purpose won’t feed their families!

However, the organizations I’ve seen provide fair compensation and combine it with a definite purpose that each team member can connect with have also been the ones to achieve significant top and bottom line growth. When that happens, providing even better compensation to the great team members who helped make it possible is a no-brainer! But not all of those team members view compensation the same way so we’ll take a quick look at that before diving into how to recognize the purpose that drives each individual we lead.