Employee expenses are the most considerable expense for the majority of organizations. The cost is rarely just salary, but when we include all employee-related expenses, including benefits, technology, workspace, and sundries, the amount will increase to almost an additional third.
Yet, the way organizations look at salaries is often an infinite resource to draw on. Each year employees are paid more, and soon enough, the expense grows disproportionate to the income generated. Therefore, paying attention to the metrics we have in place and managing accordingly is the path to potential success.
Similar to many sports organizations with a salary cap, you should look to optimize your people pool. There is a constant sense of how we can increase our team’s quality and performance while maintaining a lower salary cap. It is what success is built upon. Bring in hungry talent at a lower cost, and replace redundant or stagnant talent.
If we keep the same employee pool and increase salary, should we not also expect improved performance and with that enhanced output?
Reward strong performers, move the laggards on, and bring in hungrier and less expensive replacements.
Some executives may suggest that this approach may lead to a negative culture. The question is, how can a culture of high performers be negative? By merely maintaining the status quo, the performance will ultimately deteriorate. A mindset of better performance quickly leads to an understanding that performers are required while there is no place for those who choose not to improve.
