Last week I asked this question and asked for your comments on the subject. Many of you did comment. I said I’d give my thoughts the next day, but I never did! So here goes.
The best system for raising people up is one where people are free to pursue their own self-interest within a system of laws. Consumers are in charge. That means you. You are in charge of you. You make decisions based on what you think is best for you, both as a consumer, and as a supplier.
So if Mary has a company, and John works his tail off for Mary, should John get paid more than Mary because he works harder than she does, even though she is the owner of the company?
There are three stories at work in this question. Mary’s, John’s and the company’s customers.
Mary is trying to win over and please customers. She knows that if her company serves their interest well, they will come back and refer others. Mary wants to be successful herself, so she knows that to do so, she has to make her customers (successful) happy. Mary hired John to do work that customers value. If John is doing work customers love, Mary will value John and pay him more. If Mary does not pay John fairly, she knows she may lose him to another company because she has COMPETITION. It’s a free market and Mary has to compete for both customers and employees. If she cannot mix labor, materials and outside services together to produce a result customers want at a price they like, then the enterprise will perish. Competition for customers and employees keeps Mary honest.
Now for John’s story. John is a hard worker. He has decided to work for Mary’s company. He may feel if Mary notices his work he will get a raise or promoted – so it is in John’s interest to work hard. John knows if he does not work hard or messes up, that Mary can let him go. The labor market is a COMPETITION. If John doesn’t value his job, he knows that Mary can get someone else. This keeps John honest.
What the job pays is based on whether there are others who can do the job for a given pay. It doesn’t make sense for Mary to pay John far more to do a job that someone else will do for less. Afterall, she has to keep cost down so she can keep prices down. If she doesn’t, then one of her competitors will and she will lose customers. If she loses enough customers, she loses her business. Mary is willing to pay the most money to people who get the most results that her customers are looking for, and for people who can take responsibility and solve problems.
If John feels mistreated by Mary due to low pay, bad working conditions or any reason, he can go find another job. It’s an open market – there is COMPETITION.
Now for the consumer. The Consumer doesn’t care about John or Mary. The consumer only cares about what is in it for them and at what price. If the consumer loves what (the company) John does for them, then they may be willing to pay more, come back, etc.
This is the answer. People pursuing their own self-interest in an open market where there is COMPETITION on the part of company’s and workers and DISCRETION on the part of the consumer.
COMPETITION AND DISCRETION – the magic formula.
This had lead me to tomorrow’s post where I will ask you about dysfunctional parts of the economy and ask what is wrong.
I agree with paragraphs 2,3, and 4.
I disagree with paragraph 1. We the employees should not be worried about pleasing our customers rather bringing in leads converting them to buying your product or service because they can’t live without your product and the value the product or service gives them which in turn builds trust with the company and loyalty to both thus keeping customer satisfied which brings referrals to business and increased revenue and profitability to company and to the number of closing the deals the sales person brought in determines whether or not YOU are a valuable employee that deserves a raise right? Tie salary based on goal results makes employee work harder to make it. Just because we value someone that we will pay them more. I disagree here too we can value people and if they don’t produce the results we are aiming for and fall short of their goal then they don’t get a merit raise just cost of living raise right?
You spoke about what keeps Mary and John honest, but what about the honesty of the customer? The insurance industry sales products that are often abused by customers in the form of litigation, costing the industry billions of dollars per year. How does Mary or John keep themselves honest in the wake of this type of consumer activity?
Atlas shrugged, great principles described in this book!
There is also competition between individual employees that results in increased productivity and customer satisfaction. I always try to reward those who are most efficient, courteous, and work as part of the team. Fulfilling the customers expectations is the key to referrals and repeat business. We don’t try to burn any bridges!
We use a regular daily, weekly, monthly priority management system here at Spectrum — there are daily and weekly themes to meet bigger goals. Last week’s theme was:
“The Clients do not care about OUR problems”, i.e., “the consumer doesn’t care about John or Mary”.
This doesn’t mean we don’t build relationships, it just means the conversation needs to be about the client and the value of the deliverable — which is being paid for at a premium to be seamless.