Every businessperson knows the more you can reduce your labor cost, the better your bottom line.  Well, that is a true statement, yet it is a simplistic statement that overgeneralizes.  In reality, many factors affect the bottom line, and labor cost is just one of them.

We also must consider the ethics.  When should a company pay its workers more, not because it must but because it can?  And if it pays them more, then how much more?  These are economic, business, human resources, and ethical questions for which easy answers do not always exist.  Nevertheless, when it comes to paying employees, some principles ring true:

1—Pennywise And Pound Foolish.  This one never seems to die.  I think it has something to do with our flawed humanity.  It seems every company I have ever seen that paid its workers as little as possible has been a company that eventually failed.  Many positive dynamics occur when employees are well paid.  As a result, quality, performance, employee engagement, the customer experience, and productivity all tend to improve.  Granted, pay is not everything, but it is an important component for an employee.

2—Business People Are Ethicists.  The very dynamics and challenges of business translate to serious ethical dilemmas and issues almost daily.  Every businessperson must not only engage with business situations daily, but recognize they often come with ethical considerations too.  Handling business absent the ethical mindset eventually harms everyone.  Therefore, as a businessperson—a successful one—you must also be an ethicist.  We have to think about what we do in business ethically.

3—The Sleep Test.  I like to sleep at night, don’t you?  We tend to do that best when our consciences are clear.  Infusing a solid ethical framework throughout our business decisions does wonders for a clear conscience.  Therefore, if you are having difficulty sleeping, perhaps it is symptomatic of a flawed or a neglected ethical framework.

Knight Kiplinger writes a Money and Ethics column in Kiplinger’s Personal Finance.  He recognizes supply and demand enter into the labor equation, not just ethics.  He also recognizes well-paid employees spawn benefits to many people and institutions (June 2013, p. 13):

Ultimately, the price of employee compensation is set by supply and demand.  Companies don’t have any general moral obligation to pay more than the market dictates, but it often makes good business sense to do so if they can.  Strong compensation helps attract and retain the most-talented staff, boosting performance and reducing the cost of turnover.  It benefits society, too, because employees are everyone’s customers.  Henry Ford, a hardnosed capitalist, said he paid higher wages because he wanted his workers to be able to afford the cars they were building.

About James Meadows

Currently I serve as a training team manager for Johnson Controls at a customer-care center in Kansas City. Additionally, I am a business consultant, a freelance corporate writer, an Assembly of God ordained minister, a Civil Air Patrol chaplain, and a blogger. I believe we are living in the most fascinating times of human history. To maximize the opportunities these times present, I have a passionate interest in leadership development and organizational success, both of which I view as inextricably linked.

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