Dan Martell - What to Pay Your Employees

00:00:00.320 If you're in fast growth mode,

00:00:02.000 here's why your team is asking for a raise

00:00:04.600 and how to fix it.

00:00:05.580 The other day I posted something that said,

00:00:07.680 you don't pay a CEO 80 grand a year.

00:00:09.900 You know, a lot of people make the mistake

00:00:11.600 where they're growing and they read books and it says,

00:00:13.520 well, I need to hire somebody to help me with integration.

00:00:15.760 I'm the visionary.

00:00:16.880 So they just take somebody on their team,

00:00:18.940 maybe their executive assistant and say,

00:00:20.340 you're gonna be now promoted to director of operations

00:00:22.800 or chief operating officer or head of operations.

00:00:25.600 And yet they're only paying them 80 grand a year.

00:00:27.560 The problem is, is that somebody that can actually lead

00:00:30.140 and run a team is six figures.

00:00:33.180 I mean, that's just the reality.

00:00:34.440 And what happens is once I posted this tweet,

00:00:36.740 I had a bunch of different people message me and say,

00:00:38.440 okay, well, I made that mistake.

00:00:40.280 I've hired these people and now they're asking me for a raise.

00:00:43.240 What do I do?

00:00:44.080 And I deal with this all the time.

00:00:45.700 I literally had one of my clients,

00:00:47.540 she dealt with literally growing three, 400% 0.87

00:00:50.800 for two, three years in a row.

00:00:52.380 And all of a sudden now she's got people

00:00:54.240 that have inflated titles

00:00:57.160 because that's the thing that you'd use to negotiate

00:00:59.840 when you're putting all your cash back into growth.

00:01:01.880 Then now you need to renegotiate.

00:01:03.700 You need to reset because there's nothing worse

00:01:06.360 than paying somebody for a title they have

00:01:08.980 that doesn't have the experience to actually perform.

00:01:11.880 And that's what happens.

00:01:12.860 It's not the CEO's fault.

00:01:14.460 They were like, hey, you want more opportunity?

00:01:16.680 You wanna grow?

00:01:17.680 I'll give you that opportunity.

00:01:19.180 And they're like, cool, what's my title?

00:01:20.560 Well, what do you wanna be, VP of sales?

00:01:22.100 All right, you're the VP of sales.

00:01:23.780 That person doesn't even have a team working under them,

00:01:25.920 And then that person one weekend is sitting there

00:01:27.960 going, ah, it's cool to be the VP of sales

00:01:29.720 and I'm doing all this fun stuff

00:01:30.940 and I've just studied how to build a comp structure.

00:01:33.300 And then they Google pay scale for a VP of sales

00:01:36.380 and they're like, wow, 600 grand, I'm making 120.

00:01:39.680 You're like, that doesn't make sense.

00:01:41.600 And they come back to you and the CEO's stuck.

00:01:43.920 Maybe you can feel this where you're like,

00:01:45.900 I love the person, I want to pay them more,

00:01:48.760 but they don't have the experience, right?

00:01:51.240 Here's the three strategies to essentially identify

00:01:54.440 that you have this problem and how to fix it.

00:01:57.440 The first one is having titles that are inflated.

00:02:00.560 You know, my buddy Jason,

00:02:02.180 he runs this amazing company called 360 Insights

00:02:04.940 and one day he was coaching my high-level group.

00:02:07.780 I run a very high-level group for people

00:02:10.060 that are multiple eight-figure software CEOs.

00:02:12.680 And he said something magical.

00:02:14.320 He said, look, at the end of the day,

00:02:15.960 you need to hire the right horse for the course, right?

00:02:18.700 When you start off and you need somebody

00:02:20.660 to help with marketing, it could be pretty entry level.

00:02:24.440 But as you grow, I mean, this company,

00:02:26.640 they're doing multiple nine figures in revenue.

00:02:29.020 Like that level of VP is a somebody

00:02:32.820 that thinks strategically understands brand and partnerships

00:02:36.120 and just can manage an organization

00:02:38.280 of a hundred people under them.

00:02:39.840 So there's different horses for the course.

00:02:41.960 And as he says this, he also seconds that with,

00:02:45.540 and there's also multiple titles

00:02:47.440 on your way to that position.

00:02:48.940 He said, the biggest mistake you can give

00:02:50.400 is somebody that has an inflated title.

00:02:52.120 It's like, if they start off, you can just say,

00:02:53.940 hey, you're the lead of this thing.

00:02:55.700 You know, and then you're the head of this thing.

00:02:57.200 And then you're the general manager of this thing.

00:02:58.920 And then he's like, even VP of junior, you know,

00:03:02.080 junior directors, you know, mid-level directors,

00:03:04.940 directors, senior directors, VP directors.

00:03:07.560 You have, you know, see junior vice presidents.

00:03:10.160 You have literally there's 14 different title options

00:03:14.260 that if you Google, you could use to make sure

00:03:17.640 that you give a title increase,

00:03:20.040 but also make sure it's not too inflated.

00:03:22.220 Now, if you've done this, here's the way we solve it, okay?

00:03:24.900 Because I coach people through this all the time,

00:03:26.660 is you wanna identify the roles and responsibility

00:03:29.280 for everybody in the organization,

00:03:31.240 and then map all the different responsibilities

00:03:34.240 that somebody at the highest title inflation would have.

00:03:37.660 So if somebody is a COO

00:03:38.980 and they really should be a director of operations,

00:03:41.340 go figure out what does a COO do?

00:03:43.460 They're responsible for a lot.

00:03:44.800 OKRs, financial planning and analysis,

00:03:48.520 strategic decisions around people and culture.

00:03:51.460 So you might have somebody who's just like

00:03:53.140 director of operations and they're not even thinking,

00:03:55.000 considering these things.

00:03:56.180 So what you do if you have the roles and responsibility

00:03:58.160 laid out and you have the gap of where the person's

00:04:00.980 operating at in their current role

00:04:02.600 versus what somebody at that role would do,

00:04:05.640 then you create an opportunity to negotiate.

00:04:07.840 You can say, look, I know you want an increase in salary

00:04:10.700 and I honour that and I appreciate it,

00:04:12.760 but your title is a bit, there's a separation

00:04:16.260 from where you're at today and your title

00:04:18.320 versus the responsibility and outcomes

00:04:20.540 that you should own.

00:04:22.060 See, a lot of those outcomes, you don't own them,

00:04:25.140 I own them, and I would love nothing more

00:04:27.240 than to be able to hire somebody and have them,

00:04:29.540 hey, you take over all these areas of this,

00:04:31.380 but it also means you're accountable for it.

00:04:33.640 So using that as a way to negotiate the gap

00:04:37.540 in a person's title to their salary,

00:04:40.060 that's how you start the conversation, okay?

00:04:42.420 So it's a roles and responsibility mapping

00:04:45.160 and then a gap definition between where they're at,

00:04:47.960 what their title says,

00:04:49.020 and what that person naturally would do.

00:04:51.300 They might require, you know, a COO.

00:04:53.620 I mean, if they don't have at least 12 people

00:04:54.960 reporting to them, a COO is a big title.

00:04:57.320 Like, at minimum, 12 people.

00:04:59.280 They got two.

00:05:00.600 See what I'm saying?

00:05:01.460 It's like, you're not running a 12-person organization.

00:05:03.760 So, again, your title's a little inflated

00:05:05.920 based on the roles of responsibility.

00:05:07.560 Start there and have a negotiation

00:05:09.760 to figure out how to close that gap

00:05:11.560 over a 16-month, maybe a two-year period

00:05:14.180 so they can feel better about their title versus their pay.

00:05:16.980 Number two is a compensation audit and mapping process.

00:05:20.160 See, if you're growing really fast

00:05:22.140 and you're, you know, you're little just doling out titles,

00:05:25.140 what do you wanna be?

00:05:25.980 Here you go, what do you want?

00:05:27.560 Okay, you're hiring somebody new

00:05:29.400 and they're kind of junior

00:05:30.640 and then you can't afford to pay them,

00:05:31.740 but you're like, hey, how about we give you CRO title?

00:05:34.160 Done, foosh.

00:05:35.320 Now all of a sudden they're like,

00:05:36.480 I'm the CRO of a seven person company.

00:05:39.120 Come on, but let's say that happens.

00:05:41.420 You know, and this happened to me.

00:05:42.260 One time we woke up and my head of people said,

00:05:44.980 hey, Dan, we have a disconnect.

00:05:46.760 We have some people that are at this level of compensation

00:05:49.640 and this level of experience, and it was all out of whack.

00:05:52.780 And I was like, cool, been here before, no problem.

00:05:55.000 Hire a compensation expert, dump everybody in a spreadsheet,

00:05:59.040 do an audit of based on what their roles

00:06:01.380 and responsibilities are, what they're doing today,

00:06:04.040 based on what their job requirement asked them to do.

00:06:07.780 Go figure out for where they live,

00:06:09.960 that's the other thing, right?

00:06:11.000 If you're head of operations in New York City

00:06:13.960 versus, you know, Chattanooga,

00:06:17.480 there's gonna be a different pay structure, right?

00:06:19.380 And you can go on to different websites

00:06:21.080 like Payscale or others to find out what those are.

00:06:23.780 So you create the spreadsheet,

00:06:25.140 you have everybody in there, roles and responsibility,

00:06:27.240 how long they've been with you,

00:06:28.080 what are their current pay gaps,

00:06:30.240 and then figure out what they should be paid

00:06:32.400 and start negotiating, do an audit, understand what it is.

00:06:36.200 Are you off by 50K a month,

00:06:38.000 depending on the size of your company?

00:06:39.580 You might be able to resolve that right away.

00:06:41.200 Others, you might have to like sit down

00:06:43.460 and go like, man, we're just way out of whack.

00:06:46.420 We're either paying them too much or paying them too little.

00:06:49.000 But the truth is, if we're gonna pay up,

00:06:51.200 we might wanna go back to market

00:06:52.420 and figure out what could we get for that, right?

00:06:54.760 Because at the end of the day, right horse for the course,

00:06:57.480 the right person for the role.

00:06:59.280 And just because somebody wants to make an increase,

00:07:01.740 that increase might require them to operate at a level

00:07:04.220 that's way beyond their means.

00:07:05.620 And that might require you to go out there

00:07:07.100 to figure out what you can get for that investment.

00:07:08.940 Number three is a role mapping reset.

00:07:11.900 So one of my favorite things to do,

00:07:13.720 sit down with my team and talk about people.

00:07:16.460 And one of those areas is essentially

00:07:18.760 evaluating performance over time,

00:07:21.080 figuring out what does the team look like today?

00:07:23.300 Where are we going?

00:07:24.280 What's the financial plan and analysis,

00:07:26.220 the projections to get us there?

00:07:27.900 And then map that future state.

00:07:30.260 See, most people don't know who they need on their team

00:07:32.700 because they've not asked themselves,

00:07:34.560 well, at that level of scale,

00:07:36.560 what does that organizational look like, right?

00:07:38.740 So asking the different leaders of the departments to say,

00:07:41.040 okay, well, when we're triple in revenue,

00:07:43.580 what people would you need to generate pipeline

00:07:46.020 and close pipeline and onboard customers

00:07:47.860 and develop the product or whatever it is that you do?

00:07:50.300 And once you have that,

00:07:51.540 then you can actually sit down with the individuals

00:07:54.220 and figure out, is this somebody that we coach up

00:07:57.280 or do they stay where they're at

00:07:58.660 or do we coach them out?

00:07:59.720 Because unfortunately they're not a true believer

00:08:02.840 or they don't have the skills to operate at this new level.

00:08:05.060 And it may not be now,

00:08:06.460 but essentially what I have for all my companies

00:08:08.640 is a people plan.

00:08:09.780 I have a timeline of where I'm at today

00:08:11.840 and the org structure, where I'm gonna be

00:08:13.900 at an increased revenue and complexity level,

00:08:16.560 the new titles that I'm gonna need,

00:08:18.760 and then I create a timeline.

00:08:20.700 And every quarter, we know, we put people on the timeline

00:08:24.240 and we go, okay, in two quarters,

00:08:25.760 this person's gonna be evaluated.

00:08:27.620 And then it allows us as leaders to develop

00:08:30.060 what's called a learning and development plan,

00:08:31.520 an L&D plan.

00:08:32.880 Being able to sit down with the person and know,

00:08:35.380 like, I know you have aspirations to go here.

00:08:38.060 We would love for you to go there.

00:08:39.540 We're going there, but to go there,

00:08:41.700 you're gonna have to demonstrate these three skills, okay?

00:08:44.480 And here are the books that we recommend.

00:08:46.100 Here's the training courses you can take.

00:08:47.740 We're gonna support you on that.

00:08:48.700 Here's the mentorship we can get you.

00:08:50.580 And build that plan with them

00:08:52.640 so that they have a chance to grow into it, okay?

00:08:55.360 So even if you have an inflated title today,

00:08:58.080 you can show them where there's a gap in their,

00:09:00.060 not only their pay, their responsibilities,

00:09:02.740 but their day-to-day actions or skillsets

00:09:05.040 and work with them to build a plan.

00:09:06.940 I think if people know that in the next quarter,

00:09:10.140 if I do X, Y, and Z,

00:09:12.140 that I get a first level increase in my pay scale,

00:09:14.640 and then if in the next quarter,

00:09:16.400 if I demonstrate that and I go to this, this, and this,

00:09:19.180 I get another bump,

00:09:20.380 then they're gonna be willing to work with you

00:09:22.680 over the next six months, nine months, 12 months

00:09:24.900 to build into that role,

00:09:26.620 even if you've already inflated their title.

00:09:28.940 And that's the process.

00:09:30.580 It's really cool once you have a people plan

00:09:34.460 for your current organization, the future state,

00:09:37.340 where the talent gets developed,

00:09:39.180 how you're gonna develop them,

00:09:41.180 and it just makes the whole visioning

00:09:43.660 and creation process so much easier.

00:09:45.760 So don't run from it, sit down, design it,

00:09:48.860 and be more intentional about your people.

00:09:51.020 You know, oftentimes this problem comes

00:09:53.600 because you have the desire to wanna keep people, okay?

00:09:58.020 You have like, this person's been with me for a while

00:10:00.140 and you wanna give them an increase in title

00:10:02.760 and support them and develop them.

00:10:04.880 But here's the challenge, okay?

00:10:06.480 Your business is gonna be 100% byproduct

00:10:08.720 of the quality of your people.

00:10:10.580 And if you think that it's cheaper to hire an amateur,

00:10:14.720 you should see what happens when you hire a professional.

00:10:17.720 Professional people can literally self-direct it,

00:10:21.560 create, drive revenue, drive results.

00:10:26.380 If you wanna work really hard and stay up all night

00:10:28.920 trying to fix problems, hire amateurs.

00:10:31.580 If you want to buy back your time, get incredible leverage,

00:10:34.980 and then guide people towards their drive in the direction,

00:10:38.100 go find professionals.

00:10:39.260 They come with playbooks.

00:10:40.800 It's a game changer.

00:10:41.800 So yes, I'm a fan of honouring people who've been there early

00:10:45.540 and you can always treat them good and you can love them.

00:10:47.660 It doesn't mean they're the right person

00:10:49.340 to be on the team today.

00:10:50.920 So take that in consideration as you're remapping,

00:10:53.920 you're auditing, you're restructuring the compensation

00:10:56.860 to build the team that you're gonna need only for today,

00:10:59.600 but for your future.

00:11:00.840 So with that, as per usual,

00:11:02.500 I wanna challenge you to live a bigger life

00:11:04.300 and a bigger business, and I'll see you next Monday.

Dan Martell - July 03, 2023

What to Pay Your Employees

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