Momentum Podcast: 831
Don’t Let a Team Member “Hold You Up”
by Alex Charfen
One of the most frustrating aspects of growing a team for most entrepreneurs it's deciding how much to pay people. Even discussing salaries can create frustration and anxiety for most of us.
It makes things even worse when we have a team member with unrealistic expectations of what we should pay them. If we pay someone more than we should, we create an environment of entitlement that can spread like cancer throughout an organization.
Recently A friend of mine reached out with a situation where not one but two people on his team were trying to hold him up for outrageous salaries that didn't make sense.
In this podcast, I share the advice that I gave him, and I know it worked because I got a text message after our call that he said, “thanks for talking me off a ledge.”
Let me talk you off the ledge before you ever get there.
If you've been a listener of this podcast for a while, or even if you've just started, I would genuinely appreciate it if you would leave a review.
Full Audio Transcript
This is the Momentum podcast. Employing people is not easy. In fact, building a team is one of the most difficult things that we do as an entrepreneur. And sometimes there are people on your team who will hold you up, who will try and get more than what they really should be getting out of the company. And it's one of the most difficult situations to be in. Once you've successfully built a team, once you feel like you have the pieces in place. Having a conversation with somebody who has unreasonable demands is painful. Recently, I received a call from a friend of mine who was in this situation, and I'm going to share the advice with you that I shared with him. And he thanked me afterwards and said, I appreciate you for talking me off a ledge and giving me some clear direction. So I know it worked. I'm Alex Charfen and this is the Momentum podcast made for Empire Builders, game changers, trailblazers, shot takers, record breakers, world makers and creators of all kinds. Those among us who can't turn it off and don't know why anyone would want to. We challenge complacency, destroy apathy, and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution. Should we pay attention to their rules, but only so that we can bend them, break them, then rewrite them around our own will? We don't accept our destiny. We define it. We don't understand defeat because you only lose if you stop and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few who are willing to hallucinate. There could be a better future. And instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real. We are the evolutionary hunters, clearly the most important people in the world, because entrepreneurs are the only source of consistent, positive human evolution. And we always will be. I am proud of the fact that when one of my friends is having an issue or a challenge in their business, they will often reach out to me. You know, it's one of those situations where it's not easy to take a bunch of calls. It's not easy to help a bunch of people. But I would rather that a friend of mine reaches out to me when they're having a challenge than just feels stuck. And recently I got a call from a friend who is doing incredibly well in his business, but he had a situation that had him in a place where he was feeling anxiety. He was feeling frustrated. He didn't know what to do next. And it's one of those times where someone gets held up in their business by a team member. And in this case it was actually two team members. Let me set the stage for you. So this friend of mine who I'm not going to share their name, I don't like to, you know, put people on the spot by putting them in the podcast, especially when it's a sensitive subject like employing people and employing people on your team. And this particular friend of mine has done incredibly well in the last few years. He's grown his business from pre-COVID numbers of probably 3 to 5 million, somewhere in there to now he's hit the number of 10 million now, which is extraordinary. So few companies get to $10 million. It's always exciting for me when somebody I know hits that number. I've been there. I've helped a ton of people get there. It's one of those times where you really feel like you're succeeding as an entrepreneur. You feel like things are going in the right direction. As an entrepreneur, you feel like you're really making a massive impact and then at the same time, just like at a million and 3,000,010 million, 10 million starts feeling like things are breaking, like things are falling apart, like there's challenges everywhere. And one of the places where you will inevitably have challenges when you start approaching $10 million and you hit the $10 million threshold or shortly afterwards is where some of your team members and you know, there's this dynamic that happens with some people on a team where they see a company doing extraordinarily well and they want more. And I'm not saying that that's necessarily always wrong. You know, sometimes people have been working at a discount because the company has been growing. Sometimes people are excited to be part of an entrepreneurial business and they come in, they say, hey, you know, here's where I've been and this is where I want to be. And there's a reasonable nature to the requests, and it's something that you should actually listen to and hear. But then again, there's times where people just become unreasonable. And that's the situation, my friend. Was it? And so I'll give you a little bit more of this setup here. So he called and he told me, like so many entrepreneurs, he's really uncomfortable discussing salaries, discussing what we pay people. You know, it's not the easiest thing in the world to do to discuss salaries. It makes us uncomfortable as entrepreneurs. For a lot of us, one of the most uncomfortable parts of employing people is figuring out how much you pay them when you give them raises, how you give them raises. So he's actually working with a consultant who helped him put together a matrix of all the positions in his business with a matrix of how much you can get paid in that position over time. And he was thinking of breaking it down into three different segments. I like to see it broken down into five segments. So just to give you an example, like a customer service rep in Lois, and this is I'm just pulling numbers out of the air, but if it was five segments, it would be something like, you know, entry level customer service rep makes 26 to 32000 and then a lead customer service rep makes 32 to 36000, and then a advanced customer service rep makes 36 to 41000. And then a customer service rep who's managing people might make 41 to 55000 and then a customer service rep who is managing people and involved in decision making process might make 45 and to 55 or something like that. And he was already in that process with a consultant. Things were going well, he was going to create this or he is creating this matrix so that in the future there's a guideline for what people are doing in their positions and he doesn't have to make as many decisions, which is a great idea. By the way, you don't necessarily have to work with a consultant, but figuring out what those ranges are, what those steps are for somebody in a position in advance is great because then there's not a lot of decision making. You go to the Matrix and it saves you decision making. Fatigue saves conflict with teams, it saves conflict with people who are in individual positions. But in this case, here's what happened. He had two people on his team that were in content development, and this is an information products business. He had two people that were in content development and were helping him assemble most of the content for his company. And the first mistake that was made was they were being paid a tremendous amount for the position. They were at 90,000 American dollars each. And I say American dollars because there's a lot of people that I work with that are international. But they were getting some. Salaries of $90,000 U.S. each. And when you look at the content curation or content specialist positions in most companies, $90,000 is at the very high end of that position. And somehow the two people that he had in this position, both being paid around $90,000, came to him at the same time. And in order to move forward, they wanted $120,000 each. Now, just to give you an idea, if you go to any of the search engines and you look up content specialist or content curation or curriculum developer or anything like that, $90,000 is already at the very high end of that range. And $120,000 is for a content developer, for a university, for a curriculum developer, for a university, it would be. There's one person making that much money at a university or in a very large content business, much larger than $10 million. You might have somebody who leads that entire department who's making $120,000. These are usually positions of people who are in the educational space. And, you know, in education, we know that the payments that people get, the salaries people get are not that high. And so they go from 90 to 120000 is a massive ask on the part of the team members. And when my friend reached out, he explained the situation like I just did to you. And he said, “Well, I know I have two options and I'm hoping you have a third.” He said, “You know, option one is I paid $120,000 and keep these people who are doing well in their positions. And then I'm going to have to adjust a bunch of salaries because they'll be making more than their managers. So then I'm going to have to increase their manager's pay. And there's people that they work with that don't make anywhere near as much as managers who don't want to increase their pay. And it's going to really change a lot of the expense proposition for the business when it comes to people. Option two is I go back to him and I tell them, Look, we can't pay $90,000 and, you know, it's just not going to work. And they stay in their positions and they're frustrated by it and they're upset by it and they're looking for another position. They're not giving me full effort. They don't appreciate what they have.” And he's like, “I'm stuck.” And I said, well, you know, there is an option number three. Option number three is you have a candid conversation with each of these people. You let them know that they're at the very high end of what salaries are for their position and that it's just not going to work out. And you go find people with that salary range up to $90,000. You can find some really incredible experienced people in this category that you can bring into your company, who are going to appreciate their position. They're going to be excited to work there. They're going to give you full effort. They're probably going to be stepping out of a position where they're not making anywhere near that much. And you have people who are going to be dedicated and excited and really looking to grow the business. And he said, you know, the challenge is I just I don't know if I really need one of these people. I don't know if they're going to be crucial to the business. I don't know if they're going to affect the business. And the advice I shared with him was at $10 million, there is no one on a team who is irreplaceable. No one. And he said and I said, How many people on your team right now? And he said he has about 2 to 3 dozen people. So it's about, let's just say 30 something people. And I said, how many of them would you consider irreplaceable? And he said, you know, right now I would say zero. But if you asked me six months ago, I would have told you two. And I said, okay, well, what happened with those? What's going on with those two people? He goes, Well, one of them left for another position, and the other one decided they just didn't want to work. They had saved up some money. They were going to do something else for a while. And I said, What happened to the company? He said, Well, it was difficult, but we were able to replace them and we were able to move forward. And I said, okay, so here's what I think your business did for you. Your business showed you that even though you thought there were two people on your team that were irreplaceable, the business has now proven to you that they're not because you're still growing, you're still getting things done, you're still fulfilling your commitments to your customers. Things are moving forward. And the two people who you would have said are irreplaceable are no longer there. And so I want you to know you're in that same situation with the two people who are asking for this extraordinarily high salary to continue working with you and. Because the request is so high, because the number is so high. My suggestion would be you replace both of them and you right size the salaries in that position because you're already paying too much. And what often happens, this is the shocking thing for entrepreneurs. You know, so often I'm working with one of our clients or one of my friends, or I'm hearing an anecdote from somebody in an event where they say something like, you know, I'm paying over market salaries and my people want more money and, you know, I'm already paying them more than anybody else in that position makes. And here's what I hear when somebody tells me that is that, look, you've already created an atmosphere, an environment of entitlement on your team. You're paying more than people should be making. And when you create that atmosphere of entitlement, when you pay people more than what market rates are, when you go way outside of the range, you get people who say, Hey, I'm already making more than anybody I know doing this. I should probably be paid more because this company really needs me. And, you know, I believe in paying people what they're worth. I believe in giving people fair salaries. I believe in profit share and having people share in the success of the company. But I don't believe in going so far that you're outside of market range and you're creating an environment of entitlement on your team. Because what happens is if you create entitlement in one area of your team, it's a cancer. It will spread throughout your team. You will find other people asking for things that just are not not reasonable. You will find other people on the team having those same feelings of entitlement. And one of the things that we do as entrepreneurs to create stability on a team is pay people what they're worth, pay people fair numbers, but never go so far that we're overpaying so much that we make people feel like they're more important than they really are. And at $10 Million at a $10 million company, no one is irreplaceable. And I would say that in most companies, regardless of the size, no one is irreplaceable. You can always go out and find somebody who's going to be excited about the position. If you know how to recruit and find the right people and interview and go through that process. And so by the end of the conversation, what my friend had decided to do was replace those two people and go back to them. And because the numbers they were asking for were so high, not even go through the process of saying, Hey, we're going to pay you what we're already paying you, we're going to keep your salary where it is. Because here's the other side of that coin. But say he went with his option one, paid them $120,000. He would have had to increase the salaries for the managers out of the blue for no reason. There's no extra responsibility they're taking right now. There's nothing that they're doing that warrants that salary increase. And so he created entitlement in another layer of his company. And once you start paying outlandish numbers in one position, what I shared with him is people in the company find out you don't necessarily know how, but people in a company talk. They share information. You can't expect them not to share their salaries with each other. Sometimes that happens. In fact, a lot of the time that happens and you end up with this environment where now the entire team feels like they're entitled, like the people who are being overpaid. And when you're in this situation, when you get held up by a team member, so often the easiest thing to do and the decision that I see a lot of entrepreneurs make is just to meet the demands of the team member, to keep the peace, to keep things going to to avoid the frustration and challenges of hiring and finding somebody new and bringing them in and teaching them the position. But it's short sighted because when we're in a situation where we start paying somebody way more than what the position is worth, that entitlement that we create is entitlement that we are actively creating. It's something that we are allowing into our business. And like I said, entitlement spreads like cancer and people who work in smaller businesses, they do so for a variety of reasons. They want to see the efforts they put in today actually have an effect tomorrow. They want to have a bigger impact on the company. They don't want to be treated like just a number. They want to be able to be part of something exciting that's growing, that's changing people's lives. And in some cases, they also want to make more money than they would somewhere else. But when we start paying somebody in this case, what would it be, 30 or 40 or maybe 50% more than what that position would normally require? We start creating an environment where that becomes the expectation. And so I felt so relieved by the end of the call. You know, I get as I'm talking to you about it now, I can feel myself having the same body reactions and the same feelings of anxiety that I was feeling for my friend. I'm an empath. I can't help it when somebody starts explaining a problem to me, I feel it. And I've been in this situation myself where we had somebody. More than one time who was in a position performing while doing well, and then all of a sudden they come to us with some unreasonable requests. And I've had such unreasonable requests. I've had people come to me and want their salary doubled. I've had people come to me who are in leadership positions and want 10% of my company overnight, just I need 10% to stay here. I've had people come to me and tell me that they want a percentage of profits every single month like a royalty. And you know, the way that I always look at these decisions is how would making this decision for one person affect my business if I did the same thing for every person in the business? And in the case of doubling somebody's salary, there's no way I could double everybody's salary in any business I've ever owned. It would take most or all of the profits and put us in a position to lose. There's no way I could give every person on my team 10% of the business, or I'd run out of percentages of the business and I wouldn't know anything anymore. And there's no way that in the companies that I've owned that I would pay team members royalties on the organization. Because again, if I did that for everybody, it would take most of the profitability for the company away. And so if you're ever in a situation where you have a team member come to you with an unreasonable request, remember, if you meet that request, you're going to set a precedent in your company that is going to persist and become more challenging and you will eventually have to fix it. But if you meet that request for one person, you're making it. So you go from fixing it with one person or in this case, two people to now fixing it with an entire population of a team. And so make the difficult decision to replace that person, to go out and find somebody who's going to be excited about the position, who's going to work with you, who understands that the position is something that they should be excited about and who doesn't feel that level of entitlement. It will save you and your business and it will save you from making decisions that affect everyone. And so I hope this was helpful for you. You know, employing people is not easy. But if you're an entrepreneur who wants to go out and change the world and make a massive impact, it will most likely require a team. Unless you want to stay doing everything yourself and stay tactically involved in the business at a tactical level, at a 5000 foot, not 50,000 foot level for the rest of the time that you run the company. And I know there's people out there who want to do that. In fact, I know there's people out there whose goal is to do that. There's nothing wrong with that. But if you're a more experienced entrepreneur who wants your time back, who wants to have more time for your family, who wants to be able to take vacations in trip, who wants to be able to enjoy the affluence you've created, the income you've created? Building a team is the way that you replace yourself in your business one step at a time, methodically over time so that you can get your time back, so that you can have that freedom we all want as entrepreneurs, so that you can actually experience the feeling of success that we have as entrepreneurs. And making a decision for one person means you should all or not. Let me rephrase that. If you're going to make a decision for one person, you should always ask yourself, What would happen if I made this decision and I spread it across the entire population, a team I have now and the team I'm going to need tomorrow. And then make the decision. Thanks for spending this time with me. I hope this story and these lessons were valuable for you, especially if you have a team and I have a request. This is a formal request. If you're willing to go to iTunes or wherever you listen to this podcast and leave a review, I would truly appreciate it. 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