How Being Cheap Can Cost You a Ton of Money
Roberta Matuson
Strategic Advisor on Talent | Global Executive Coach | Public Speaker I Brand Ambassador | HBR Contributor I Helping organizations attract & retain the best people.
The other day, I was waiting at the checkout of my local Walgreens. There was not a single cashier in sight.
I had plenty of time on my hands to take notice of a help wanted sign that read:
Cashier: $20.00/hr
Pharmacy Technician $21.50/hr
Leadership $22.00/hr
See manager for details.
A woman in front of me looked my way and said, “Looks like no one wants to work these days.”
I said, “That’s not true. They just don’t want to work here. Maybe the management is so bad that they can’t get their employees to stay. I mean, look, they’re paying leaders a few cents or bucks more than the rest of their employees. What do you expect?”
She said, “I see your point.”
I’ve said this many times, but it bears repeating.
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People don’t work for companies. They work for people.
This is why I advise my clients to be very careful who they let into management.
If you’re only willing to pay a few cents more for someone in a leadership role, what does that say about your commitment to providing your team with the best leadership possible?
Not much!
How much does it cost you every time an employee leaves your company?
Studies have estimated the cost of employee turnover to be somewhere between two or three times annual earnings.
Using the example above, every time a cashier at Walgreens quits, the company loses between $41,600 and $83,200 per employee.
If you look at it another way, the company saves between $41,600 and $83,200 a year when an employee remains at Walgreens. With this kind of savings, Walgreens can surely afford to pay their leaders more than they’re currently paying.
In life, you get what you pay for—that’s for sure.
Here’s your assignment this week. When was the last time you looked at your pay ranges? If it’s been more than four months, check the market to ensure your wages are still competitive. Do this now—not at year-end when it may be too late to retain those people whom you wish to keep.
If you discover your leaders are paid slightly more than the people they manage, it’s time to take action and rethink your compensation philosophy.
Got questions about attracting and retaining talent? Let’s talk.
Paralegal, Hochstein Strategic Legal Planning
2yExcellent article! I love people who do the math!
Bachelor of Commerce - BCom from Nizam College at Hyderabad Public School
2yGreat share. 👏👏👏
Roberta Matuson excellent post. In a past job, co-workers wondered why I did not put my name forward for a supervisor's position. I explained it costs $10/hour for a babysitter for my son, so if I make $X/hour as an employee, I need to make not less than $X + $10/hour to be the supervisor. And the employer was like your Walgreen example, a minimal increase in pay for supervisors versus a regular staff position. For the responsibility and challenges that must be handled by a supervisor level role, it was not even close to compensating. It is ironic how corporations can dish out serious six figure annual bonuses to executives but to pay a living wage to the employees (who do the work of the corporation) is such a hardship for the corporation. Thanks for sharing your knowledge with us.
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2yI agree…. My part time bookkeeping job I get paid a few pennies more than housekeeping & dining staff, which I find very irritating. I have spoken with the Union but they are part of the problem.
Professor - Strategy and Leadership
2yAgree 💯. Many organisations have myopic vision for themselves and their employees. Also, a huge misconception that people can be easily replaced if they have to be paid more. What they fail to understand is that they can replace people but not talents!!