Why Do You Pay Your Employees?

Few management blunders have attracted as much attention as the one committed by the CEO of mortgage lender Better.com.

If you missed it, Vishal Garg fired more than 900 of his team members on a Zoom call by simply saying, “If you’re on this call, you are part of the unlucky group that is being laid off. Your employment here is terminated effective immediately.” (At least he didn’t add, “Happy Freaking Holidays!”)

Mr. Garg displayed a stunning lack of self-awareness and respect for his team. However, this is apparently nothing new for him. According to The New York Times, Garg previously told his colleagues they were “stealing from the company by working (out of their home offices for) only two hours a day — which…was contradicted by his team’s recent promotions and raises.” In addition, the NYT article stated that Mr. Garg’s rantings “had made it challenging for them (former employees) to apply for new jobs.”

Everyone needs to be rewarded and respected for the organization to excel — not just those in the office every day. Look at what happened when Vishal Garg sent his company into chaos if you don’t believe me. (The company’s Board of Directors has brought on a third-party firm to assess its leadership and culture, according to a copy of a memo obtained by The New York Times.)

There’s a lot to unpack here. One question we could consider is: what is the quality of management of a company that believes they can terminate a significant percentage of its employees — yet presumes they can deliver an equal quality of customer experience going forward?

This point also begs a larger question: Why do you pay your employees?

• Are you paying them for the hours they work?
• Or are you paying them for the results they produce?

Too often, we get wrapped up in tracking time. We think that if someone is “only working two hours a day,” they must not be doing their job. But is that really fair or accurate?

Obviously, there are certain businesses and industries where hourly compensation is perhaps the only way to deliver remuneration. For example, employees must be at the checkout counter from 10 AM to 6 PM — and if they aren’t there, it creates problems throughout the business.

However, in my experience, most people who work from home are highly productive. In fact, many of the people I know who telecommute put in over 40 hours a week — but it is only reflected on their timesheets as a typical, 40-hour week.

The next time you’re tempted to track time, ask yourself this question: are my employees being paid for the results they produce?

Paying employees for results instead of hours is a better way to measure productivity and employee engagement. When you pay employees for the hours they work, you encourage them to stay focused on the clock. You are telling them that their time is more valuable than their output.

When you pay employees for their results, you reward them for their effort and creativity. This type of motivation leads to a more productive and engaged workforce.

Many years ago, I had involvement with a company that manufactured box trailers. The company’s general manager had a creative idea. He told the factory workers that current customer demands required eight perfectly built trailers every day. Then he said, “When you get the eight trailers perfectly built — go home! You’ve accomplished the results we require.”

Next, something unique happened. After the workers realized their compensation wouldn’t be reduced because they were working fewer hours, the trailers were manufactured much more rapidly. 

However, the other fascinating result was that the quality of the construction improved.

This meant the company sold more trailers — and increased the compensation of the team building them. It created a “win-win” for both the organization and the employees. Workers were paid for results — not for time.

When you pay employees for the results they produce, you are telling them that their effort matters. In addition, paying employees for results is a better way to evaluate your employee experience.

As I stated as one of the “5 Factors of ICONIC Performance” in my recent book, everyone needs to be rewarded and respected. This means respect is not just for those who are in the office every day and it is not merely based on how many hours they work.

Why do you pay your employees? My great friend, Randy Pennington, said it best with the title of his book: “Results Rule.” 

• Customers don’t really care about how much time your employees put in. 
• Customers care about the results delivered by your products and services and their experience with you and your team.

When results drive compensation, your organization gets better results.