Should You Pay Your Employees More?
September 18, 2015
There’s a specter haunting our modern labor force this year – the specter of higher wages.
Alright, “haunting” may be a bit of an exaggeration, but the reality is undeniable. From the increase of the minimum wage in Seattle, to the recent hike in wages at Walmart, the ante has been upped. The ripple effect of such a move affects all corners of labor, skilled or unskilled.
The line in our industry has been, “pay more for better labor.” There are jobs within the green industry that require a level of expertise, and wages have historically reflected that; but now the lines may have been redrawn. A landscaper can now make as competitive a wage as, say, a barista. So, what’s to keep your crew members from going to work in a less demanding environment for the same amount of money? Let’s take a look at the pros and cons of paying more for labor, and what it all means for U.S. Lawns franchises.
Turnover and Retention
In the case of Walmart, which just raised its minimum wage to over $9/hour with the intent of topping $10/hr by next year, CEO Doug McMillon was focused on retention. Why? Because, quite simply, turnover is expensive. McMillon says training new employees can take up to 1/5 of their salary. By increasing wages, Walmart hopes to curb turnover, increase employee satisfaction, reduce lost wages due to strikes, and improve customer care quality.
Increase in Quality Applicants
McMillon also found that the sheer number of applicants rose significantly since the wage hike took effect last April. This broadening of the labor pool means that Walmart can become more selective in their employee candidates, weeding out potential problem candidates, working in congruence with retention. This is something the ground care industry has done for years: pay more, attract better talent, and pick from the cream of the crop.
A study published by the Center for Economic and Policy Research found that an increase in wages can lead to an increase in employee performance. Employers were more apt to raise expectations on higher-paid employees, weeding out poor performers and cutting potential waste. And when everyone’s performing at a higher level, the effects are felt by the customer. Starbucks baristas provide such great service in part because they’re expected to live up to their hefty compensation. This becomes a driver of business, as customers flock to Starbucks stores for a shot of radical personalization with their lattes.
But let’s face it. Landscape businesses are not Starbucks or Walmart, and smaller businesses can feel a burden from higher overhead–particularly during the first few years.
Plus, as you may know, inflation can set in on industries that boost their wages too quickly, as businesses increase prices to offset higher wages. So, the question remains: how much above market rate, if at all, should you raise your wages as a small business?
Cost, Labor, and the Power of the Network
Vice President Mike Fitzpatrick points to the many systems available to help U.S. Lawns owners determine their costs, from estimating tools to the budget “boot camp” held at our most recent conference. “You don’t just have to guess when it comes to any of your expenses, especially labor,” Mike reminds us. “Labor is an investment in your business, and like any investment, you have to understand the cost with the associated benefit using real numbers from your books.”
For established franchisees like Ken Beasley, paying well is a worthwhile cost of business. In an earlier article, we profiled Ken for offering competitive salaries, health insurance, 401K matching and an array of performance incentives to all his employees. At that time, Ken told us, “I don’t worry about recruiting. Good people come to me, because it spreads in the community that we treat our employees well.”
Not only does Ken save on recruiting and turnover–just like the folks at Walmart–but he’s also emerged as a leader in our service revolution. Last year, he received the Customer Hero award for the highest Customer Satisfaction Scores, placing once again in the top for 2015’s finalists. Do well paid and well treated employees really perform better? In Alexandria and Natchez, it certainly seems to be the case.
For many franchisees, paying for good labor is a desired goal–as long as they can afford it. Perhaps the best advice we can offer is to remember the value of your labor, while still remembering the value of your business. As Mike Fitzpatrick reminded us, the U.S. Lawns systems and processes can help you find the balance you’re looking for.
“If you want to recruit good people, it’s not just about salaries. People have to know you are hiring. Our talent acquisition program can help you find and keep top employees,” adds Director of Brand Development Brandon Moxam. “We also have training programs and recommended best practices to become “the best place to work”. All of these are part of the U.S. Lawns model, and the support we provide you as a franchise owner.”
And of course, while salaries can help with your recruiting efforts, it’s important to remember that there’s a lot more to building a great team.
“Being the Best Place to Work doesn’t stop with a paycheck,” Brandon notes. “You must create a radically personal environment for your employees. That’s the U.S. Lawns mission, and if you carry it out like Ken Beasley has, you’ll find success with a loyal team that’s ready to give their all.”