Do you own a business? Do you run a business? Then I recommend you follow me through this simple math and some reasonable conclusions.
Assume you have a person making a $50,000 gross salary. Assume their true cost — including health insurance, overhead, work space, computers, Internet, electric power, payroll taxes, etc. — is $80,000. That person costs your company about $40 per hour.
For that calculation, I divide the $80,000 by 49 to calculate the weekly cost of $1,633 (I take off two of the 52 weeks in a year for vacation and another for national holidays). I divide that weekly cost by 40 to get $40.82 per hour. And then for convenience I round that to $40 per hour.
So, with that hourly cost in mind, I’d ask myself these questions:
Thinking about computers and Internet connections: Do I really cut costs by having employees working with old technology?
Books and magazines: I’m betting $15-20 per business book, or annual magazine subscription, on saving my people some time, generating good ideas, helping them work better. So the marketing books for the marketing team, programming magazines, business magazines, how expensive are they, really? How much do they have to help to pay for themselves?
Meeting expenses: how much does it cost me to start a meeting 10 or 15 minutes late? Is it worth it to bring lunch into a meeting to save my team members the time of going out to lunch?
My conclusion: spend the money. Keep your technology up to date, encourage employees to get whatever books and magazines or website subscriptions help them, and combine meetings with meals a lot.
The most important-but-forgotten salary negotiation tip is: finish well. In sports they call it the follow-through. When it’s over, be happy.
So you wanted more, and you pushed for it, which made you nervous when you did it, but they gave you more than they originally offered, although it was also less than what you’d hoped for. And at this moment you know that this is what you’re getting. Further pushing isn’t going to work.
Scene one: you shake your head, look down, grimace a bit, sigh, and say something related to how that’s the best offer, but you’re still disappointed. You walk away leaving your boss wishing he or she hadn’t given you that extra bit.
Scene two: you look them straight in the eye and thank them for the extra push. You show relief. You mention how you hate salary negotiations with people you like, and you’re glad that’s over. You tell them how much you like the job and the company. You leave your boss glad he or she added the extra.
Either way, you got what you were going to get. Even if you are disappointed, and looking for another job, or deciding to start the new business, keep that to yourself. In the meantime, whatever it is that you’re doing in the current job, do it well. The people you deal with as you go through jobs will remain with you, as friends and references, for a long time … or not.
I was lucky. As Palo Alto Software grew up it found some good people along the way. Some of them stuck with us, and some were related to me, a second generation. We had a sense of community that seems, now that it’s grown, vital to that growth.
But I’ve never really understood about managing employees. When I was in business school, oh, so many years ago, what they taught was organizational theory, which we called “touchy feely,” and it didn’t relate well to what happened to us as we built a company.
You work shoulder to shoulder with people and you care about them. It’s hard to give good feedback on both sides (negative as well as positive) of the performance. It’s hard to stay at arm’s length, even though that’s what all the texts and literature and common sense suggest.
So here is some of what I take out of 25 years of building a company, points related to being an employer and having employees:
Choosing people to fill jobs is really hard. People are unpredictable. Resumes don’t work very well, and job interviews don’t work very well either. And the legal advice all companies get from good attorneys, like all the questions you can’t or shouldn’t ask, make that even harder.
“Fit” as in employee fit, is vital but also overrated, and too often used as a rationalization. You want people unlike you, not people like you. But you like people like you.
People change. Long-term loyal and trusted employees grow in and out of the job, sometimes. Sometimes people find themselves and grow and get better and need more. Sometimes they get tired and stop caring as much.
Sometimes you hire the right person for the wrong job. If so, you’re lucky. You find the right job and that problem is solved. Sometimes you hire somebody just for who they are, not how they fill the job description.
When family business works, it’s great. When it doesn’t, I’m told, and we all know the stories, it’s hell. But it’s worked for me and Palo Alto Software. As the company grew up some family members grew up as well, finished college, worked in the industry, and came back to be a second generation of management. When that happens and you have a smart, loyal, trustworthy second generation, its great. How sad that some people assume there’s something wrong with that. Why?
English doesn’t have formal and informal like Spanish and German and French. One of my mentors would never use the informal you. “Because I might have to fire you tomorrow,” he would say. There’s wisdom in that, I think, but then one day he jumped out of a high hotel window to his death.
You can change the job, or move the person to a different job, but you can’t change the person. The people change on their own.
Suspicion, hearsay, jumping to conclusions is dangerous. You don’t get to act on the smoke. Wait for the fire.
Firing people is the hardest thing you do. And the hardest firing is the loyal and honest and hard-working employee who just doesn’t get the job done, or keeps making the wrong decision, and doesn’t fit another job. You were supposed to stay arms-length, remember? I still don’t know how people do that.
It’s easier to fire five people in a single day than just one person ever, except when that person’s had a bad attitude.