Make More Money, Stop Getting Poached

Happy Friday,

It’s time to start pondering salary increases for next year.  I’ll offer a couple of thoughts you may find counterintuitive.

Before the year ends, sit down with a list of the people on your team. For each one, consider this question: Could you increase this person's hourly billing rate and (most likely) not impact their utilization? For most people, the answer will be ‘eh, not really’. But if the answer is a pretty confident yes, then highlight that name. If you find you need another opinion, pose the question to the project manager(s) they work with most. If their answer resembles a yes, highlight that name too.

It won’t be a long list, but it’s an important one. You’ve just made a list of the people most likely to leave your firm for more pay. That is, if you don't act.

I made this list every year, but for a different reason. I wanted both my firm and my employees to get paid as much as they were worth. The higher hourly rate the market supports, the more revenue each employee generates, so the more the company can afford to pay them. They earned it, and it’s a win-win.

Still, the reflexive reaction of many leaders, even ones in senior positions, is always to try to pay employees less, not more. They’re so blindly fixated on payroll expense that they're unable or unwilling to see the direct connection to revenue and income. It’s worth reminding them that consultants aren’t simply employees and payroll expense; they’re the business. BIG difference.

Salary is a function of billing rate, so it too is ultimately driven by supply and demand, i.e., what the market will reliably bear for that person. When clients develop a strong preference for a particular consultant, the supply is low and demand is high, supporting a higher rate. You either respond by increasing the rate and the consultant's salary, or you leave the door wide open for your competitors to do it, losing valuable staff and probably the client.

Punchline: The value of individual employees isn’t set by compensation surveys, made-up classifications, or years of experience. The people on your list have a superior ability to earn trust with those who control project budgets. Maybe their work is exceptional. Maybe they’re super diligent and regularly exceed expectations. Maybe they communicate extremely well and are especially likable. Whatever the reason, the supply is low and market demand is high. Increasing their billing rate and salary is a win for everyone except your competitors.

And there ya have it. Have a greaaaat weekend!

Dave

Feedback and blowback are always welcome: dave@goodnewsfriday.com

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