(Extracted from Double Your Profits: In Six Months Or Less by Bob Fifer)
Setting salaries in superbly-run businesses requires three rules:
- For groups or levels of employees who have a direct impact on your company’s bottom-line performance, average pay should be far more generous than for similar positions in other companies. These are the employees whose presence and enthusiasm you must retain at all costs.
- For other groups of employees, you should be more generous than most other companies, but don’t need to be “off the map.”
- Within any level or group of employees, there must be wide disparities in salary, tied to demonstrable differences in performance and contribution to the bottom line.
… Now many of the pieces of your company culture are beginning to fall in place: We believe in profits and efficiency, and not waste. We believe in hard work, but not long hours. We believe in a meritocracy—you’ll be rewarded if you deserve it, but not if you don’t. And we’ll get rid of unnecessary perks (you’ll get used to flying coach and using a former employee’s furniture), but we’ll pay you very well.
Above average people will love working in this culture, and those are precisely the people you want to attract and retain.