I was working late one evening, and I saw one owner in the office working. It was about 10:00 PM. I thought I would drop in to say, “Hi” and to see how things were going. It was a bit of a mistake because I had to listen to her rant for about 20 minutes about how ungrateful and backstabbing employees were. Especially the ones she had done special things to help. While she didn’t mention the word hate, I got the distinct impression she hated employees.
That was almost 20 years ago. I have spoken with several owners and managers that have the same level of angst towards their employees. Of course, I have heard many employees complain about how bad the owners, bosses, and managers are; how much they don’t care about the employees. It’s as if both sides are engaged in trench warfare, they sit in their trenches on opposite sides of the battlefield and lob their grenades of hate into no-mans-land.
Everyone complains, no one tries to find a solution.
Let’s look at the motivation for employees. If an owner is trading dollars for hours or salary, what is the motivation? The truth is employees are motivated to do the least amount of work possible for the highest amount of pay. I was talking to a manager about a consultant they hired to come in and assess processes in their office. The consultant discovered the employee the manager liked the most and had worked at the firm the longest did the least amount of work. When the employee was confronted with the facts about her productivity she quit. I have seen the non-profit sharing scenarios in many companies. I have seen terrible employees stick around for years, mostly because they know how to kiss the right butts.
The managers and the owners are not paying the employees to produce value. They are paying people to show up and act like they are working. The owners and manager assumed are paying for work. However, the employees don’t see it that way. The employees just try to make the owners and the manager like them and keep them employed. I explained to the manager the hourly wage was not motivating the employee to work or think like an owner. I explained the employ was doing what kept her employed.
Profit sharing is a way to change this behavior. Let’s explore a typical scenario. If you think about it when someone gets paid hourly the harder they work, the less valuable they are and the less value they create for themselves. For instance, if I paid someone $10 an hour to make pizzas and they produced ten pizzas an hour. The cost of labor is $1 per pizza. Materials cost maybe $2 per pizza. If the Pizza sells for $15, an average price, then I am making $120 an hour as an owner. What if the employee produces twenty pizzas an hour? The labor cost is now $0.50 per pizza. Making the value of the work per pizza half what is once was. The cost for materials is $40, and so I am now making $250 for that hour. The owner wants the employee to produce more and gets out the whip and expects the employee to keep up this level. However, the employee hates the whip and despises the owner, especially if employee figures out how to estimate how much the owner is making.
However, if profit sharing is setup correctly, it will get employees to think and act like owners. If I pay an employee $1.50 per pizza at ten pizzas an hour, the employee feels they are getting a fair wage at $15 an hour. I only make $5 less and am still making $115 an hour. If the employee makes 20 pizzas an hour, they are getting $30 an hour and brag to their friends about the killer job they have. Instead of making $250 an hour I am only making $230 an hour, but I don’t have to use a whip, and the employee shows up early and doesn’t ask to leave early. But the reality is the employee will figure out how to make 30 pizzas an hour. Now they are making $45 an hour and are planning to work for me until they retire. At 30 pizzas an hour, I am now making $345 an hour; I have to expand and hire more employees for which I make between $230 to $345 an hour.
Owners and managers blame the employees for the problem. However, the real problem, as I have shown in the pizza story, is the owners and the managers. Some of you may be claiming, “Blasphemy,” especially the owners and managers that hate employees.
I am not the only person that thinks this way. Dave Ramsey agrees with me.
From Dave’s EntreLeadership group, Dave said,
“I cannot change anyone. I can only change me. This is called taking responsibility. Owners and managers need to realize when we exchange dollars for time employees have no need, have no motivation and have no discipline to add value.”
If you want to stop the vicious cycle of hatred implement an effective profit-sharing strategy and the profits will take care of themselves!