Seattle Business offering $70K min wage is failing

[oldpink]

The problem with socialism is that sooner or later you eventually run out of other people's money.
I'm predicting that this grand experiment in generosity will indeed fail altogether, but at least it will be with his own money once it eventuates.

 

[HoughMade]

I own a small IT company. What value is produced by my security guard?

Not a question for me. A question for your CPA and if he can't answer it, you have the wrong CPA.

As one of the owners of a small law firm, I know that value can be determined.

 

[jwh20]

I own a small IT company. What value is produced by my security guard?

Some things protect value, investment, and assets. Do you also buy insurance? But if you are a small business owner and can't figure out what value you are getting from the security guard, you should probably get rid of him.

 

[GodFearinGunTotin]

Some things protect value, investment, and assets. Do you also buy insurance? But if you are a small business owner and can't figure out what value you are getting from the security guard, you should probably get rid of him.

Yeah security guards are another form of insurance. We all pay money for insurance. What value is produced by buying insurance? Until you face a loss or threat of loss, then you may not realize the value.

 

[GodFearinGunTotin]

Right. Which is why I took issue with:



1) Compensation is a factor, but not the sole factor.
2) Rewards are not always a raise, and in many instances are not the best motivator.

When I worked IT, rewards were a mixture of financial and fun/time away. Sometimes I got a cash bonus, but sometimes the rewards were tickets to some attraction and time off to do it or a department outing for the team, such as a canoe outing on company time. Once I hit a certain level of income, I'd rather have the time away from work and the fun.

From the look of this guy's company, he's not attempting to motivate solely with money, yet that's what the focus has become because now its apparently a political statement to give your employees a raise above market standards. Pepsi must not have had as good a PR team.

I think you guys are more in agreement than not. Would we be having this argument if the company owner in the OP had given everyone, whether they had 30 years in or 30 minutes in the company 6 weeks of vacation? What Jamil asserted is not necessarily wrong. It may not be true in every case but there is truth there. In general, people like to be treated fairly. Different people have different methods for coping with perceived inequity of compensation (in whatever form it may be awarded). As an example, I've seen guys decide that taking away of certain benefits while hourly people got better benefits cope by assigning "paid time off" value to that loss...and then take that time off, in addition to the vacation time they ordinarily accrue.

 

[HoughMade]

Yeah security guards are another form of insurance. We all pay money for insurance. What value is produced by buying insurance? Until you face a loss or threat of loss, then you may not realize the value.

That's true, but one way of determining the value produced would be to determine the cost of a given loss that the security guard would be intended to guard against and how much would be recouped by insurance. Perhaps the insurance would not fully compensate for the loss, especially in time down and business lost, so greater efforts to prevent a loss rather than respond to one are justified. However, without making that analysis, how would you know whether the security guards $20,000 in value vs. $100,000 in value. If it's $20,000 under best estimates, them maybe paying him $30,000 isn't a good business decision. Taking the loss on an individual security event may be cheaper than preventing the event. If he adds $100,000 in value because that will be the uninsured loss in the event that a security event is not prevented, then maybe he's the bargain of the century.

 

[MisterChester]

Paying a wage that is higher than the value of the job only ensures there's a line for positions of only the best candidates. If he's paying this wage and failing then he hired the wrong people.

 

[HoughMade]

Paying a wage that is higher than the value of the job only ensures there's a line for positions of only the best candidates. If he's paying this wage and failing then he hired the wrong people.

That's true to an extent, but not every job is worth $70,000 no matter how well it is done. My son (still in high school) works at Wendy's. He could be perfect at his job and he will not produce value to justify an annualized salary of $70,000. Based upon what I have read, there are positions at this company that fall into that category.

 

[bwframe]

The problem with socialism is that sooner or later you eventually run out of other people's money.
I'm predicting that this grand experiment in generosity will indeed fail altogether, but at least it will be with his own money once it eventuates.

This right here. The market will prove this silly move to be wrong. Does unemployment pay 70 grand a year?

 

[GodFearinGunTotin]

That's true, but one way of determining the value produced would be to determine the cost of a given loss that the security guard would be intended to guard against and how much would be recouped by insurance. Perhaps the insurance would not fully compensate for the loss, especially in time down and business lost, so greater efforts to prevent a loss rather than respond to one are justified. However, without making that analysis, how would you know whether the security guards $20,000 in value vs. $100,000 in value. If it's $20,000 under best estimates, them maybe paying him $30,000 isn't a good business decision. Taking the loss on an individual security event may be cheaper than preventing the event. If he adds $100,000 in value because that will be the uninsured loss in the event that a security event is not prevented, then maybe he's the bargain of the century.

All true. It's all about risks, aversion of risk, and benefit analysis. Another ingredient is the discount your insurance carrier might provide you on your policy if you have a security staff on duty. I'm not sure but I'm thinking in some cases, it maybe the cost of doing business to be in compliance with laws.

 

[BehindBlueI's]

That's true, but one way of determining the value produced would be to determine the cost of a given loss that the security guard would be intended to guard against and how much would be recouped by insurance. Perhaps the insurance would not fully compensate for the loss, especially in time down and business lost, so greater efforts to prevent a loss rather than respond to one are justified. However, without making that analysis, how would you know whether the security guards $20,000 in value vs. $100,000 in value. If it's $20,000 under best estimates, them maybe paying him $30,000 isn't a good business decision. Taking the loss on an individual security event may be cheaper than preventing the event. If he adds $100,000 in value because that will be the uninsured loss in the event that a security event is not prevented, then maybe he's the bargain of the century.

If by having a security guard, a computer programmer with a stalker is less distracted at work and performs better due to the reduced worry about personal safety, is that value added to the programmer or to the guard? If, absent the security guard, the programmer would have quit because the stalker knows where she works, how is that measured? Does the CPA learn how many people have such a worry? What about a manager getting death threats from a former employee who was fired and lost his visa, so is now living illegally in the US and has sent bomb threats in? How do you determine the value in having the guard in terms of productivity and retention of not just the manager, but people who are concerned about being attacked in an active shooter or bombing scenario? How does your CPA figure that in?

This isn't a hypothetical by the way, both occurred at the IT company I worked at. Prior to the stalking incident, we didn't even have access controls on the doors (swipe cards or codes, etc.)

 

[MisterChester]

That's true to an extent, but not every job is worth $70,000 no matter how well it is done. My son (still in high school) works at Wendy's. He could be perfect at his job and he will not produce value to justify an annualized salary of $70,000. Based upon what I have read, there are positions at this company that fall into that category.

At that point you'd have to add more responsibilities or further specialize current ones. You could hire a physics PHD as a burger flipper at Wendy's for $80k a year if you required him to use his skills to make the absolute perfect burger using physics and math. Silly example I know, but it's not impossible, would you pay $50 for a damn perfect burger?

 

[HoughMade]

If by having a security guard, a computer programmer with a stalker is less distracted at work and performs better due to the reduced worry about personal safety, is that value added to the programmer or to the guard? If, absent the security guard, the programmer would have quit because the stalker knows where she works, how is that measured? Does the CPA learn how many people have such a worry? What about a manager getting death threats from a former employee who was fired and lost his visa, so is now living illegally in the US and has sent bomb threats in? How do you determine the value in having the guard in terms of productivity and retention of not just the manager, but people who are concerned about being attacked in an active shooter or bombing scenario? How does your CPA figure that in?

This isn't a hypothetical by the way, both occurred at the IT company I worked at. Prior to the stalking incident, we didn't even have access controls on the doors (swipe cards or codes, etc.)

All interesting. An analysis of keeping a specific person employed with security necessary versus another person where it is theoretically not can be undertaken. Even if the dollars and cents seem not to justify it, In the end, you may have reasons to spend the money on a security guard. That's a business owner's choice, but that choice may bite into the bottom line and depending upon the margins, may be the difference. Certainly you choice to make. However, in context, are you paying him $70,000 a year? If not, why not?

 

[BehindBlueI's]

Paying a wage that is higher than the value of the job only ensures there's a line for positions of only the best candidates. If he's paying this wage and failing then he hired the wrong people.

I'd agree.

Let's clear up a few things.

1) There was no exodus of "top employees". 2 people left. One was going to leave anyway to pursue other interests, but moved up his departure date because he was afraid the money would become to hard to leave and he would never pursue that other interest. Only one person left because of pie envy, and that seemed exacerbated by a personality conflict.

2) The business plan called for him to temporarily reduce his salary and use 80% of profits to fund the raises. There is zero difference between the owner taking 80% of the profits, the owner(s) paying 80% of profits in dividends, or the owner paying his employees 80% of the profits in terms of the survivability of the business. The only difference is who is getting the money, owners, shareholders, or employees.

3) He intends to reclaim his previous salary once the company expands to the point it is making the same profit again.

4) He's getting a butt ton of publicity out of this, resulting in expansion, which he probably could not have bought for the same money in marketing.

5) He may fail, he may not be able to follow through with his promises...but that's the nature of business. What's sure is that if he succeeds it will not be entirely because of these salaries, but will be taken as such, and if he fails it won't be entirely because of these salaries, but it will be taken as such.

 

[HoughMade]

At that point you'd have to add more responsibilities or further specialize current ones. You could hire a physics PHD as a burger flipper at Wendy's for $80k a year if you required him to use his skills to make the absolute perfect burger using physics and math. Silly example I know, but it's not impossible, would you pay $50 for a damn perfect burger?

Absolutely not and not at Wendy's.

I work in a profession where my production related directly to my income. there are only so many hours in a day and so much an hour I can charge for my services. I can't just set a wage and them make my production justify it. Why? Competition. Other people will do what I do for less and be willing to make less. No matter how good I do, at a certain point (reached quickly) higher quality leads to only very marginally improved results.

Would you pay $100,000 for a perfectly built Chevy Cruze? Why or why not?

By and large- people will do the quality of work they want to regardless of wage. If you're the kind of person who gives poor effort when you're not being paid what you think is enough, guess who will perpetually think they don't make enough.

 

[BehindBlueI's]

All interesting. An analysis of keeping a specific person employed with security necessary versus another person where it is theoretically not can be undertaken. Even if the dollars and cents seem not to justify it, In the end, you may have reasons to spend the money on a security guard. That's a business owner's choice, but that choice may bite into the bottom line and depending upon the margins, may be the difference. Certainly you choice to make. However, in context, are you paying him $70,000 a year? If not, why not?

Our salaries weren't public, so no idea what our "director of security" made. I would doubt he made that much, as our company's compensation philosophy was weighted more toward benefits than pay, as I already touched on. Tuition and training, 3 month "sabbaticals" for salaried employees every few years, flex hours, subsidized home computers, that sort of thing.

I know what private security working in the Middle East made though, and it was enough that I was unemployable in private security stateside because people figured there was no way I would take the salary cut.

 

[HoughMade]

...You could hire a physics PHD as a burger flipper at Wendy's for $80k a year...

I almost skipped over that part.

$80k for a physics PhD? University of Phoenix grad with no experience and poor people skills?

$80k HA!

 

[jamil]

Which is it? There's more than one factor or human nature says they'll equalize toward the least common denominator? That comment is what brought this whole "other factors" argument out in the first place.

Maybe you've spent too much time working for the public.

This is not a binary argument. Don't make it that. Of course pay isn't the only incentive. It's the biggie though. You keep acting like most people are driven primarily by a sense of pride or ego, or whatever, more than more tangible intensives. They're not.

Work in a union shop and observe behavior for awhile. Your point doesn't get us even close to that behavior. I've worked in union factories and non union factories. Comparatively speaking, years of observing union factory worker mediocrity demonstrates that it is the logical conclusion of attempting to equalize compensation.

How does a secretary equalize with a web site designer?

It can't. At all. And that's another part of my point. If the janitor makes what I make, I'd start questioning the value of the degree I spent so much money and time earning.

So again, I can't be happy with my slice of the pie unless it is bigger than the next guys? Then how am I personally happy with my slice even though everyone else on the PD with the same seniority has the exact same base rate as me? When I get a raise, they all get a raise. Why did so few people quit, and why did the IT guy quit because the money was TOO good so he was afraid he'd get used to that level of income and not leave to pursue something else? Why were they able to hire over 30 new people?

About the IT guy. If that's really why he quit, he's probably pretty good at reading the size of icebergs hidden below the water level. Floating through that is not sustainable. That ship will eventually sink.

Concerning pies and slices, I'm not sure how to word this so that it makes sense. If it's a pie, and there really are slices, it's probably more because of the socialist aspects of the employment compensation than capitalist aspects. If it were all market based, which it certainly isn't, you'd be paid by the value you produce. If you want more, you produce something of more value. No pies. No slices. Value.

The comparison to what others' compensation only matters when it points out the inequality of your output, and perhaps more importantly, your own investment compared to theirs. I've invested a lot in my degree and honing my experience and skill set. I mean, it's not like lawyer pay--I'd have to grow a full itchy beard for that. But I'm satisfied. My degree and training are supposed to have value. If anyone can make what I do for anything, why would it be worth it to invest what I have to be in this kind of job? Said a different way, if Saul could have made the same income being a bus driver, why on earth would he have chosen to become a shyster of his particularly chosen clientele?

And in your own "slice" example you've already imposed classes of pay that aren't existent in that company. In that company there are no distinctions in seniority, job classification, rank, or whatever. There are only people who make $75K per year, and "higher ups" who make more. The "higher ups" compensation is probably still tied to a more market based salary valuation.

So to make your example closer to reality: Rookies make the same as you. The best cops, the worst cops, experienced, inexperienced, supervisors, detectives, parking ticket writers, they all make the same as you. Not even just cops. All employees. They all make the same. Janitors. Secretaries. Clerks. IT workers. Dispatchers. Everyone except the other class, "them". The higher ups. From how I've seen that kind of thing play out in union shops, mediocrity is the eventual result. Initially I would think the receptionist would be pretty damn happy. Detectives might wonder why they invested so much in their career to get to that point.

I'll say it again. Value based compensation is not evil. We are incentive based creatures. It shouldn't violate our consciences to admit that.

 

[jamil]

I think you guys are more in agreement than not. Would we be having this argument if the company owner in the OP had given everyone, whether they had 30 years in or 30 minutes in the company 6 weeks of vacation? What Jamil asserted is not necessarily wrong. It may not be true in every case but there is truth there. In general, people like to be treated fairly. Different people have different methods for coping with perceived inequity of compensation (in whatever form it may be awarded). As an example, I've seen guys decide that taking away of certain benefits while hourly people got better benefits cope by assigning "paid time off" value to that loss...and then take that time off, in addition to the vacation time they ordinarily accrue.

I don't think we are very close at all. I think that what this CEO is doing with his own company is his business. It's certainly a worthwhile experiment. I doubt seriously that it's sustainable. It's certainly not scalable. I think his heart is in the right place, but that doesn't always translate to the bottom line.

I think in my original statement, it seemed I was making a more binary argument than I am. Pay is not the only incentive. It is the most important for most people. Fringe benefits and other non-tangible incentives have a value, but there is a price that most people would take that would make them forget those. Work is a part of our lives, it's a very important part of mine, but let's not forget that we work for a reason. And most people want more than they have. I'm not saying that in a selfish sense, but people want to work towards the next thing, the next step. If you're a janitor making $75K, what is the next step to work towards? He probably doesn't give a ****. HE'S MAKING $75K!

 

[Leadeye]

The price of being stylish is never cheap.