There’s an old saying in business that you can’t get a $70,000 employee by hiring two employees earning $35,000 each. While this is true, many managers make the decision every day to refuse to pay what it takes to attract top talent to their business team. When it comes to people, you get what you pay for.

Just like in pricing, water seeks its own level. The market establishes how much you have to pay for personnel with a given set of talents. Managers who violate this rule will forever be playing catch-up as they attempt to compete against higher-quality business teams.

In the early stages of a business, perhaps the founder possesses enough talent to get the business off the ground, but as the business grows, the founder quickly realizes that he or she must build a management team. The quality of that management team will ultimately equal the quality of the company.

Several years ago, I had a client who operated in rural towns. His retail business was dependent on the relationships his branch managers were able to establish with local contractors. He was the third generation to manage the business. After more than 70 years of dominating their market area, the larger communities surrounding them began to spill over into these rural communities. Large national contractors looking for affordable land bought up hundreds of acres of available land for development, squeezing out the local builders with whom my client had done business for many years.

All of a sudden, seemingly overnight, the market changed. The small-town managers who had strong relationships with the local builders found themselves lacking both the sophistication and the sales skills necessary to penetrate the larger national contractors’ organizations. As a result, the market this company once dominated was rapidly being lost to larger competitors that came into their market from nearby cities.

Quality people are an investment intended to provide a substantial return to the company. To receive a high return on your investment in personnel, managers must make sure that the people they bring on board are highly qualified to do the job at hand.

I frequently receive calls from clients looking for managers. After quizzing the caller about the requirements of the job, the next logical question is to ask about the salary the caller has budgeted for the position.

“We’d like to find someone for $45,000, but if we have to go to $50,000, we’ll do it.”

For $45,000 in today’s marketplace, you rarely get a hard-driving, experienced, money-making manager. You can find some terrific human beings who are terrific parents, hard workers and upstanding citizens who are willing to work for $45,000, but it’s almost impossible to find a manager who meets the job specifications who is willing to work for that amount.

Why?

Because the market has set a substantially higher pay level for a person who can manage a business and give stockholders top dollar as a return on their investment. Owners and managers must be realistic about what they have to pay to attract top talent.

Salespeople are almost always able to set their own earnings level based on how effective they are at making sales. So to attract salespeople who have the raw talent to grow the company’s sales, a manager must put together a compensation plan that is competitive in the marketplace. The fortunate thing about salespeople is that they typically are paid on the basis of commission, so their income is in direct proportion to their productivity..

In many organizations, executives are reluctant to allow their salespeople to earn more than key managers. When this is the case, they are never willing to put in place a commission plan that will attract anything more than a journeyman salesperson.

What are journeyman salespeople? These are men and women who already possess product knowledge, so they don’t have to be trained in the basics of the products they sell. So in this regard, they can hit the ground running. But what they don’t possess is aggressiveness, skills of persuasion, and a strong sense of urgency. They are rarely hungry; that is, they are often more interested in pursuing their hobbies than in optimizing their income.

Managers must field a sales force whose combined aspirations are equal to or greater than the aspirations of the manager. When a manager’s salespeople are content with only a modest level of income, rarely will the sales of the business soar. Instead, they will merely creep along at about the rate of inflation.

When it comes to hiring people, you get the quality and productivity you’re willing to pay for.

Bill Lee
http://www.BillLeeOnLine.com