Why Do You Pay What You Pay?
Introduction:
The new pay transparency laws were designed to help job applicants and narrow pay disparities. But they’ve also had an unintended consequence: Employees now have far more information about what other people are making—and that can raise some uncomfortable questions for business owners. How do you decide what a job is worth? How much should you pay compared to the market? How much should employees know about what their co-workers earn? This week, Jay Goltz, Jennifer Kerhin, and Ted Wolf compare notes on compensation.
Jennifer explains how her philosophy has evolved from offering below-market pay and maximum flexibility to providing competitive salaries, benefits, and career paths. Jay discusses the challenges of determining what employees are truly worth—and why a bad bonus plan can be worse than no bonus plan at all. Ted makes the case for paying above market—not because he wants superstars, but because he believes well-paid employees become more committed, more flexible, and ultimately, more productive.
Along the way, they discuss paying for health insurance, contractors versus employees, hiring mistakes, and the sometimes overlooked reality that while employees crave stability, business owners are the ones taking the financial risks. The result is a candid conversation about one of the hardest questions business owners face: What is the right way to compensate the people who help build your company? Plus: How concerned would you be if your employees found out how much money you, as the owner, are taking out of the business?
— Loren Feldman
Guests:
Jay Goltz is CEO of the The Goltz Group.
Jennifer Kerhin is CEO of SB Expos and Events.
Ted Wolf is CEO of Guidewise.
Producer:
Jess Thoubboron is founder of Blank Word.
Full Episode Transcript:
Loren Feldman:
Welcome, Jay, Jennifer, and Ted. It’s great to have all of you here. I want to start today by talking about the pay transparency laws that have been spreading, state by state, across the country. We’ve talked about it here before a little bit, but Fortune recently reported that the laws have caused problems for some businesses with their existing employees, because these businesses weren’t prepared to explain why they pay their employees what they pay them. And the more existing employees learned, the more problems these businesses had. So let me start with you, Jennifer. If someone accidentally emailed your payroll, names, and salaries included, to everyone at your company, what would happen? Would that be a problem?
Jennifer Kerhin:
Well, that person would get fired, whoever sent that email out. [Laughter]
Loren Feldman:
Okay, after that?
Jennifer Kerhin:
No, I think maybe years ago, but we’ve gone past that. Any small business, when they start and they hire people, you have legacy employees. And those legacy employees, either sometimes you pay too much, because they’re so important to you early on, or maybe you don’t pay enough because your company is so small you can’t afford it. And then you don’t catch up with them.
So every company goes through a phase, I think, where you have to play catch up with legacy employees and consider what market rates are. We went through that a couple years ago. That’s not an issue anymore, so I don’t think—no, the answer to your question now would be. But I understand that is a very typical phase that small business owners go through.
Jay Goltz:
What is the span between your top employee and your bottom employee? How many times more does the person at the top make?
Jennifer Kerhin:
Me included?
Jay Goltz:
No, let’s say, not you.
Jennifer Kerhin:
I’m gonna say $60,000, the difference.
Jay Goltz:
So it’s maybe 100-percent different?
Jennifer Kerhin:
Yeah, yeah.
Jay Goltz:
Okay, there are companies like mine where it could be six times. I mean, it’s a problem. People that are doing manual labor—more than minimum wage but not much more. And you’ve got people that are overseeing, you know, 50 people, and blah, blah, blah.
Loren Feldman:
I want to come back to you, Jay, but first, Jennifer, I just want to make sure I understand. You’re saying people understand why they’re paid what they’re paid, and if everybody got everybody else’s salary, you don’t think there’d be people knocking on your door complaining?
Jennifer Kerhin:
I mean, sure, but we’re talking about smaller amounts. It’s not like somebody’s getting paid $50,000 or $40,000 more than somebody else, right? Like, I think, first of all, pay is such a—it’s like a third rail, right? Like, you don’t always want to talk about politics or religion.
Loren Feldman:
Somebody’s always going to be unhappy.
Jennifer Kerhin:
Right, somebody’s always going to be unhappy. But I feel like I can justify very easily—like I won’t feel guilty at all to have that conversation with why your salary is what it is, why your performance review is what it is. I couldn’t have said that five years ago, or four years ago, really. But there’s no sense of: This is why you’re getting paid what you are.
Now, if people have left, very few people have left our company due to salary, but if they have, sometimes the grass is not always greener on the other side. And I have taken people back. I have many—not many—several employees who left and came back, because pay is just one metric to evaluate. Like, if you’re an employee and thinking about your happiness, well, I’ll pay you five times as much, but you’re going to have to work 200 hours a week. Would you do it? So I think, to answer your question, Loren, I think maybe there’d be some discussions, but I could justify every single one across the board.
Loren Feldman:
Jay, it sounds like that’s not the case for you.
Jay Goltz:
Well, no, not necessarily. I could absolutely justify it and not feel guilty. That doesn’t mean they’re going to buy it, though. I mean, there’s no question, I’ve got extremely clean hands on how we’re paying. I think we’re paying everyone market rate, paying people fairly, blah, blah, blah. But that doesn’t mean that someone who’s making $22 an hour isn’t going to not have a problem with someone who’s making quite a bit more—even though they’re generating $2 million worth of sales, or they’re overseeing $10 million worth of business.
It’s like, it gets to a point that it’s the opposite of transparency. There’s some things that are just none of their business, and they don’t really have the business acumen to understand it. So, like, I don’t think anybody can go through the business and expect everybody to understand everything and be happy about it. So, I think that is a problem.
Loren Feldman:
Don’t you think it would be a healthier situation, though, if people knew what to expect and what it takes to get a raise and how to advance in the company?
Jennifer Kerhin:
I mean, you have that with the government. Does that create unbelievable efficiency, productivity, and happiness for government employees? No.
Jay Goltz:
When they get a raise review, which I don’t get involved with, they certainly know what they need to do to make more money and a path, but that doesn’t mean that someone who’s important, who takes care of customers, is going to have the same effect on the company as an outside salesperson who generates $2 million worth of business. I mean, they’re just two different jobs, two different things. And I can tell you, in most businesses, people are pissed at the outside salespeople.
Loren Feldman:
Ted, how about you? What would happen if everybody found out what everybody else is making at your business?
Ted Wolf:
Oh, we’re a fairly new business, so we don’t have the legacy problems that Jennifer mentioned. And across the board, what we’re looking for, I’m going to honestly say that the pay isn’t the most important thing. We’re after technology people, so that means people are our product, and we’ve got to get the best we can. So when it comes down to working remotely, we’re really open to that kind of thing. Some jobs, some organizations, you can’t do that.
What we’ve done is we’ve implemented more of a bonus situation: Here’s everybody’s base. Here’s how we keep it in line, I’ll say. And then, here’s how we calculate bonuses for people. You still, at the end of the day, still have some people that are saying, “He’s making more. Why was he making this? I’m not making enough.” You’re always going to have that, but I think the way to counteract it is: What’s the quality of the environment they’re working in? What’s the quality of the culture that they’re working in?
Quality of life: I mean, when you start a business, you don’t have quality of life, and you don’t have that quality of balance everybody’s looking for. Let’s face it. But it then comes down to hiring the right temperament in a person. Some people are more entrepreneurial than others. You’ve got to be able to define: What’s the mix that we want to surround ourselves with to keep everybody motivated?
But the actual physical compensation, it’s a double-edged sword. In a growing economy, you put bonuses in place, everybody makes a lot of money, they’re happy. But I’ve lived through, what, four or five recessions in business now? That same bonus structure disappears. Everybody says, “Well, I’m not happy with what’s going on here.”
So I think it’s just a balancing act. And I think it’s even going to get more intense in the future with AI—how it’s going to change all kinds of things, the agent, the agentic workforce. That’s going to come into play in a big way. And I think you’ve got to have many tools in your tool chest now to respond to that compensation concept, other than just money.
Jay Goltz:
I will tell you, I don’t have a problem with this on an ongoing basis. I can’t think of the last time—first of all, very few people quit. I’ve got 115 employees. I think we’ve got it under control. I think people know what they need to do to make more money. And with that being said, do I think it’d be a problem if, all of a sudden—yeah, sure. I think it’d be a problem. How it would manifest itself? Who knows? This isn’t that difficult, if you have some structure.
And I’ll tell you the way to get in trouble. It’s kind of the opposite of what Jennifer said. The people who’ve been here a long time, “Oh, they’re nice. Oh, inflation was 3 percent, but that’s not—I’m gonna give them 5 percent.” Well, do that for 15 years. I’ve got lots of people with me for 20 years. Do that for 15-20 years. It becomes a mathematical problem. I’ve been in business a long time. I learned a long time ago that you better keep an eye on that, because it’s very easy to get out of control if they stay around.
Jennifer Kerhin:
Of course, Jay. I agree, because you can’t tie salaries to inflation. It’s just not possible. I had a conversation about this a few months ago, and someone asked me why. And I said, “Because health insurance is not tied to inflation. That’s my cost. Workman’s comp is not tied to inflation. My costs go up.”
I can’t tie salaries to inflation. It depends on all my other costs and the revenue coming in. I think Ted has some good points about a bonus structure, which I don’t think we have a great structure on that. I’m working on it, but I think many employees forget the cost structure underlying. I’d love it if my health insurance only went up with the cost of inflation.
Jay Goltz:
Health insurance is a huge problem, and I’ll tell you, it’s much bigger when you’ve got the employee making $50,000. When you divide the health insurance into a $50,000 salary, it’s very different than dividing it into a $100,000 salary. It’s a significant number, and it’s been out of control. And it stays out of control.
Loren Feldman:
I am curious about how you handle the inflation discussion, Jay. I take your point that if you raise somebody’s salary every year by 4 or 5 percent, you’re going to end up in a very different place. But how do you explain to the employee, who also has to deal with inflation, that their salary isn’t keeping up with inflation?
Jay Goltz:
Well, there’s two issues: One is, we do use the cost of living increase as a guide, but if the market changes and we have to pay more—I’m telling you, I don’t lose people. I can’t think of the last person that quit that said, “Listen, I like it, but I found a better job for more money.” So you’ve got to balance it out and keep an eye on it, because markets change. And I’ll tell you, the huge thing that changes: the whole Baby Boomer generation. That has an effect on everything. 10,000 people a day are retiring, so the labor force is changing, and it’s an ongoing moving target.
Ted Wolf:
I think the key is being able to balance what keeps people in their jobs. Jay, I just think you intimated that by saying, like: When was the last time somebody left your organization for money? It’s not just money everybody’s looking for. There’s other compensation that goes with that, and I think that’s offering people multiple ways to make money, versus just depending on a salary.
Loren Feldman:
All right, you guys are all business owners. You’re 100 percent right that it’s not just about the number. It’s not just about the salary. I think most employees, at some level, realize that, but it’s important, especially in an environment like we’ve been in lately. So, I don’t want to gloss over too quickly, “Well, you’ve got to do all the other stuff.” Yeah, that’s true, but you’ve got to pay competitively for people. How do you keep track of the market? How do you know what you have to pay?
Jay Goltz:
Well, when you interview people, you find out what—this is where it gets back to the original discussion. Is it a problem you can’t ask somebody they made in their last job? Yeah, it’s a problem.
Jennifer Kerhin:
We’re going through this now, a company compensation analysis. So we’re hiring a consultant to help us, and we’ve done a lot of research. ADP is what we use. They have a lot across the country, as well as researching job postings. And somebody who I talked to in this field said, “Well, the first thing you have to do is define your compensation philosophy.” I said, “I’m sorry, compensation philosophy? What does that mean?” [Laughter] And she said, “Well, if you think of it as, ‘I pay little, but I offer extreme flexibility.’ Or, ‘I pay very high, above the market rate, but this is a hard job. You’re working tons of hours. You’ve got to get it done. I don’t care if it’s 2 o’clock on Sunday morning.’ Or if you’re in the middle: middle market rate, middle benefits, you know, standard sort of things.” She goes, “Identify where you are,” and she goes, “and realize where you think you were and where you’re going.” And I would say, “Huh, okay.”
So, when I first started: totally bottom-of-the-barrel prices, complete flexibility. I hired a bunch of moms from where my kids were in daycare together: Come in as you want, wear whatever you want. If your kid’s sick, bring them in. Or if your kids come, sit here and my kids will all watch TV together. Or stay at home. You’re not going to get paid a lot, but you’re guaranteed a job when you can. My philosophy was an extreme amount of flexibility that fit around a mom with toddler children, and not very high pay.
And it has gone up now, so my compensation philosophy has changed. I’m offering market rates with good benefits: 401(k), health care, things like that, with some percentage of travel, with some expectations of that, but also flexibility. About a third of my company started one job and moved over. So you can grow your career here. You can move. It’s not so big like a bureaucracy. I don’t know what I’ll be like in five years, but I thought that was really intriguing to think about where you are in compensation philosophy.
Loren Feldman:
Do you have questions about where you want to be going forward in terms of your philosophy, or are you comfortable where you are now?
Jennifer Kerhin:
I’m very comfortable where I am. Where I want to go is—Jay, I’m going to say, I think I might have heard this from you a while ago on one of the podcast [episodes], but it was something like: “You want your leaders to all think entrepreneurially. And to do that, you’ve got to change your compensation philosophy for your leaders.”
Jay Goltz:
It wasn’t me.
Jennier Kerhin
It wasn’t you? Okay, It was on a podcast here. And so I started thinking about that, like, how do you train and motivate leaders to think entrepreneurially, and, you know, high risk, high reward? Most employees do not want high risk. They want a stable job where they’re going to get paid every two weeks. I think sometimes employees forget—when I tell them I didn’t take a paycheck for six months one year, that kills them, right?
Jay Goltz:
The reason I know it wasn’t me is because every time I hear the word “entrepreneurial,” I’m not sure there’s such a thing. You’re either an entrepreneur or you’re not an entrepreneur. And now risk? Okay, you’re right. Can people take risk? But I don’t know that we need employees who are entrepreneurs, or why are they working for you? They’d be starting their own business. So the word “entrepreneur” means taking risks, but I agree with you: There are some people who take risks in their pay.
Jennifer Kerhin:
Like outside salespeople, right? Outside salespeople are very high risk/high reward-type people. Most employees do not want that. But so I would think, Loren—to answer your question—I’d like to get to a point where my leadership has a little bit more risk and reward built into their compensation package.
Loren Feldman:
The risk being whether they get a bonus or not, depending on performance?
Jennifer Kerhin:
Yeah. Exactly right.
Loren Feldman:
Ted, do you have a compensation philosophy?
Ted Wolf:
Here’s the way I start: Everybody wants safety and security, as Jennifer just suggested. Not a lot of risk, or they would be doing it, as Jay said. But I think what makes sense for me in a business, I take a look at it, and I say, “What kind of person do I want to surround myself with?” I can start out with high flexibility, as Jennifer said, and low pay. I’m going to get a different type of person for that. I don’t know if I can build a business around that and really scale and sleep at night and scale at the speed that I want.
So I think what you need to do is be able to identify: Here’s the people I want, here’s the compensation that’s going to be required, and how do I go about putting that in place? Because as Jay said, if I give them cost of living increases every single year we have inflation, well, what happens to the years we have a recession? I don’t take it back. It’s tough taking it back if I have to.
So I think it just comes down to being able, to some degree, letting them know the effects of the business. Here’s where we are: Are we stable or aren’t we? I can’t give everybody maximum money. I need profits to reinvest in the business, which means I’ve got to have career paths, but career paths aren’t important to everybody. To some people, that’s a form of compensation, I found. They want to know where they can get ahead. Other people, they don’t care about it.
So, I think you’ve got to just say: Here’s the type of person, the work environment, the culture we’re going to put together. And here’s how they need to be compensated fairly, so they’re motivated. I mean, I’ve had people come in who are outlandish in the way they want to be compensated, and what they write into it, and what they want credit for, and they get all the upside and I carry all the downside. Well, that’s not going to work either. So I love that whole concept of, “What’s your compensation philosophy like?” And I think that’s what you’ve got to start building around.
Jay Goltz:
I have a phrase for that: There’s no teamwork in losing money. [Laughter] You know, everybody wants teamwork until, “Wait, oh, you want to share in the loss?” Oh, no, they don’t want any part of that. So, like, there is something to be said for owning the business and accepting all the responsibility. I will tell you, the whole bonus/profit-sharing thing is tricky, and it’s not as simple as it sounds.
I would say there’s three choices: have nothing, have a bonus plan, or have a bad bonus plan. And there’s no question, the bad bonus plan is the worst of the three options. Having nothing is better than having a bad bonus plan. And I don’t have one at the moment, because I haven’t figured out how to do it that’s not going to cause more grief than it’s worth. Because I’ve got so many different positions, and I’ve got three different companies mushed together. And it’s just tricky. But I certainly respect somebody if they figure out how to do it, and it works.
Loren Feldman:
Jennifer, what prompted you to hire a consultant to come in and assess your compensation?
Jennifer Kerhin:
I think we’re out of the valley of death, right? We talked about this in an earlier podcast [episode], moving on, and I’m thinking now: What do I want to be when I’m double in size? And really, what that means is we created, years ago, a career matrix, which really talks about the skills that you need for this job.
So we created just a spreadsheet of technical skills you need for your job, and like the job above you, and then two jobs above you, to get an understanding of how you can grow and to put some compensation around that. And I was struggling to do it myself, and I asked, “Wow, there’s got to be a consultant for this,” and of course there is, right? Not for now. I want to put it in place for when we’re double the size, so putting in structure now to help people grow and stay here.
Jay Goltz:
It makes sense that there are people that are out there that know stuff about that, though. Where’d you find that? How do you find somebody like that?
Jennifer Kerhin:
So, I’m a member of Vistage, and I typed into Vistage, “Career Consultant,” and I got about 20 names that popped up.
Loren Feldman:
You asked for a career consultant?
Jennifer Kerhin:
I’m sorry.
Loren Feldman:
Compensation consultant.
Jennifer Kerhin:
Yeah, compensation consultant. About 20 names popped up. I also—this is my naivete—I didn’t realize that Paychex and ADP, all these platforms collect all this data on salaries. And they collect a significant amount based on the U.S. labor classification of the job. And they can give that to you for free, too. And they can filter and go through a lot of that information, and then you need someone to help you think through it. Like, if you offer full health care benefits, that changes the compensation, too. If you’re remote, that changes the compensation.
Jay Goltz:
Did they give you a feel for how many small businesses are paying full health insurance these days? Because I wouldn’t think many.
Jennifer Kerhin:
They did not. They did not at all.
Jay Goltz:
I’m at half, and I’m comfortable with that, and I feel good about that.
Jennifer Kerhin:
Me too. I’m at half. Nope, they didn’t talk about that.
Loren Feldman:
Can you give us a sense of how much you paid for the consultant?
Jennifer Kerhin:
I think it was like $12,000.
Jay Goltz:
It’s always $12,000. [Laughter] I swear. It’s just funny. That seems to be the magic number.
Jennifer Kerhin:
It was just enough not to have me say no, but a little more than I wanted to spend.
Jay Goltz:
It would take very little to pay for itself. All it would take is, you know, a couple of salaries that you’ve figured out a better number, and that would pay the 12 grand for sure.
Jennifer Kerhin:
Absolutely, absolutely.
Ted Wolf:
So, while we were talking here, I went to Claude, and I asked them about compensation consulting, prices availability, and things like that. They’re saying consultants typically run $150 to $400 an hour. Expect to pay between $15,000 and $50,000. That’s a full compensation plan design. And then executive compensation starts at $25,000 and goes to $100,000. So it’s a pretty wild market out there, and you know, when you get a lot of changes in the environment and in the economy, like you have, you’re going to go one of two ways. You’re going to go back to basics—here’s what you get paid on a salary—or you’re going to open up with a lot of flexibility.
Jay Goltz:
I would say the number one thing for us to adjust it is simply so you put an ad out and you start interviewing. And you see whether the ad pulls. And if it doesn’t—I’ve done this—I’ll go, “We’re obviously not paying enough. It’s clearly a number thing,” and we adjust how much we put. Because we do put it in the ads now, and there’s no question, there’s a direct correlation between the number you put in the ad and how many people apply for the job.
Loren Feldman:
Jennifer, are you adding headcount this year?
Jennifer Kerhin:
No. Mm mm.
Loren Feldman:
Jay or Ted, are either of you adding headcount this year?
Jay Goltz:
No, very careful.
Ted Wolf:
I absolutely am. In fact, we’re going so far as we’re now getting interns from technology colleges, universities. We’re hiring right out of school, because they’ve got the best technology brains right now. They’re really tied into it. And I don’t know, I’ve been in technology my entire life. This whole thing is transforming so fast that, Jennifer, I would challenge you to do a parallel study on your own using Claude. Put it together, see what it comes back with, get as detailed as you want.
Jennifer Kerhin:
Great idea. And you know, to be honest, I don’t know why, I’m most disappointed in myself that I didn’t think of that to begin with.
Loren Feldman:
Ted, earlier Jay said that he thinks the pay transparency laws are a problem, because you can’t ask somebody what they were making in previous jobs. Do you find that to be a problem as well?
Ted Wolf:
Absolutely. I think that’s absurd. You’ve got to be able to understand: What does the person need? And you need flexibility when you’re running a business. Now, everybody’s got to live by the letter of the law, the spirit of the law, and everything. I certainly want to overpay what my people would be making if I can, because I want the best people out there. With the best people, I don’t want superstars. I want a systems-driven company that I can plug, I’m going to say, your average person into. But I make them better, because they’re more thankful, they’re more flexible.
We’ve all had superstars working for us, and they just want to tell us everything we’re doing wrong, because they know better. And I just don’t even look for that type of employee anymore. I can read it a mile away, and I think that you still need to be able to understand a person’s—how could you say—the needs they have to live the life that they want. I feel totally different if somebody’s driving the latest car, they’ve got a boat, they’ve got an airplane, they’ve got a vacation house, what their needs are versus the average person walking in the door.
Jay Goltz:
But there’s another part to it. If somebody was paying them a certain amount of money, there’s a good chance they’re worth that money. So it gives you one more metric. For instance, you hire a graphic designer. A graphic designer could make $40,000, $50,000 a year, or can make $100,000 a year. And they can show you a portfolio, but some people are much faster than others. So, if somebody else is paying this person $90,000 a year, and they’ve been there for four years, there’s a pretty good chance they’re worth it. Without knowing that, though, it makes it that much harder.
Loren Feldman:
Jennifer, do you agree?
Jennifer Kerhin:
No, I don’t. I don’t really even care what they made before. Whether they’re taking a pay cut or whether I’m giving them a $50,000 raise, this is what I want. This is what I can offer. What do you want? Like, why do you want to work here? I can usually tell by the answer what it is.
So, for example, “I want to work in a company that is growing, and I am close to the leadership—unlike a big bureaucracy.” Okay, well, then salary is irrelevant. What they’re looking for is hope to become their own leader. Salary is not as big of a deal to it. If I’m looking for a person right out of college, who is excited to learn about this industry and move up, again, salary is irrelevant. I don’t really care what they made before, because: Here’s what I’m offering you, and tell me why you want to work here.
Ted Wolf:
Jennifer, I think there’s a lot of business owners who get themselves in trouble to some degree doing that, and here’s what I mean by that. A lot of times you bring somebody in, and you pay them a lot. They can’t produce, because, like Jay said, well, they’re just not that fast. They don’t have the technical acumen, or they don’t get along with people as well as they need to, whatever it would be. So all of a sudden I’ve got this high-paid person, and they’re not delivering. So I’ve got to let them go. So I’m going to bring in a contractor. I’ll go out to the gig market, if you will, bring somebody in that way, and then potentially bring them on. I think you need to have open conversations, but there are rules that you’ve got to live by today.
Jennifer Kerhin:
I totally agree with you on that. And I made a lot of those decisions hiring people poorly, and we changed our hiring process because I did hire a lot of people at a higher amount than I should have. One person lasted two weeks with us. It was a terrible fit, and I take total responsibility for that. Our hiring process was not good on that. I think if you change your hiring process, you can get there.
Ted Wolf:
Well, hiring process and accountability are the keys.
Jennifer Kerhin:
Yes, yes. I agree.
Loren Feldman:
Ted, have you adjusted the way you hire? Do you do something different, now that you can’t ask what people made previously?
Ted Wolf:
Hire more contractors. Bring them in, see how they’re doing, test them out. I mean, that’s the way most people are doing it, particularly in the technology area.
Loren Feldman:
Well, that can be tricky. I mean, it can be harder to hire someone who has a full-time job to take a contract position.
Ted Wolf:
What I’m finding, in our markets that we’re dealing in, people are pretty much in demand, and they have the skill set, the people skills, and things like that. So bringing somebody over for a full-time basis, I’m certainly not against doing that, but I do know there are inflated risks with that. And I have to be careful and be very aware of that. But I can find an awful lot of people on that contracting basis.
Loren Feldman:
Jay, you think very strategically about hiring. I would think you would figure out ways to learn what you need to learn about a potential employee without being able to know what that salary is. I totally understand why—
Jay Goltz:
Right. No, no, we deal with it. It’s not the end of the world, but it makes it a little bit more difficult. But we’ve learned to ask the right questions: “Oh, tell us about a time that you had a customer who was mad at you, and how did you deal with it?” Or you know, there’s all kinds of questions, and I can’t emphasize this enough. And I say it every time to everybody I can: We always check references. I can’t emphasize: Nine out of 10 times, a complete waste of time. And that one time out of 10 times? You found out you just missed hiring Charles Manson. Does that date me at all?
People will, in fact, tell you things on a reference call that you’d be surprised, or they just give you a dead silence, which is always a clue. “Oh, what can you tell us about so and so?” I mean, it’s been extremely helpful, and our success rate in hiring now is probably in the 80-some percent range. And back when I was doing it 30 years ago, it was 30 percent.
Loren Feldman:
Jennifer, you talked before about hiring remotely. If you’re hiring for a position where you’re willing to hire someone who’s going to work remotely, do you set a salary and pay it regardless of where they are? Or do you adjust it based on the cost of living where they are?
Jennifer Kerhin:
I put a range, a pretty high range, a pretty broad range.
Loren Feldman:
How broad?
Jennifer Kerhin:
I would say about $30,000 to $40,000 range. And to be honest, there’s certain areas that I know that are high cost of living, that if there’s 10 candidates and five of them in a lower cost area and five are in a high, I’m always going to try to hire the one in the lower cost of living. Because if you’re remote, what difference does it make, right? And your ability to live with that salary, you’ll be happier than someone—and so, look, with more remote work, it’s going to be really hard for those high cost of living places, because it’s the same for me to hire in different areas.
I can’t hire from every state. It’s very, very complicated for states. We’ve talked about that before on this [podcast], and that makes it even harder. Maryland just put in a whole new requirement, a compliance requirement. Even if you’re under 50 employees for FMLA, they’re putting in a mandatory tax, I guess. They won’t call it a tax—a fee that I have to charge. So why am I going to hire people from—I live in Maryland right now—why would I do that? I’m just getting killed with more and more costs that the government wants to put on employers.
Loren Feldman:
I’m sorry, just to make sure—that fee is on the employees you have who do, in fact, work in Maryland, where you’re based?
Jennifer Kerhin:
Yes.
Loren Feldman:
So that’s a further incentive for you to hire people elsewhere in the country?
Jennifer Kerhin:
Absolutely right. It’s called the Maryland FAMLI program, and I know it’s meant well. I’m sure it’s absolutely meant well, but as a remote employer, that’s just one more cost of my system. Why wouldn’t I hire somebody from West Virginia or in a different area?
Loren Feldman:
Ted, how do you think about compensating people who work remotely?
Ted Wolf:
I’m gonna do whatever I have to do to get the best people who are out there, because I’m in the technology area, if you will. So, I’m gonna do what I need to to find those people. But I think what we’re all circling around to some degree is, you hire for your culture. That used to be the old saying, “Hire for your culture,” and I think a lot of that’s gone away. But I still think it’s valuable.
I’m looking for a person who’s going to fit the culture, and for that person that does the best fit, I’ll pay what I need to to get them in and test them that first 90-day period. That’s where you’ve got to make your accountability, your decisions, but have an onboarding plan that’s good. But I’ll do whatever I need to to get the person who I need, but that doesn’t mean just technology know-how. I mean people know-how. They’ve got to have presence around people. They’ve got to understand business. They’ve got to understand the technology. So it goes beyond just that single skill-set that I’m looking for.
Loren Feldman:
Do any of you have an employee right now who you think you’re not paying appropriately, either too much or too little?
Jay Goltz:
I don’t.
Loren Feldman:
Ted, how about you?
Ted Wolf:
No, no, I don’t. If anything, honestly, I’ll look at it and say, “Well, I’m looking to get a little bit more return on what I’m investing in.” Maybe I’m overpaying them, but I’d rather do that than underpay, because the overpay situation can’t last forever. And if you’re being honest with the individuals, show what the performance is, what the results are, etc., it’s pretty obvious. And everybody knows if they’re being overpaid, just like they know if they’re being underpaid. There’s no secrets in business. between employees, and—
Loren Feldman:
I’ve worked for a lot of companies, with a lot of employees, and I’ve never known anybody who thought they were overpaid. Very few, anyway. I know a lot of people who thought other employees were overpaid.
Ted Wolf:
Yeah, well, I know I’ve already talked with people and had to part ways because they weren’t doing what they needed to. And they said, “Well, I knew this was coming. I knew I was overpaid, but I was letting it run out as long as it could.”
Jennifer Kerhin:
You know what’s interesting, too, is that mass feeling out there in the world. A couple years ago, we had that summer of—what was it called? Where everybody was quitting?
Loren Feldman:
The great resignation.
Jennifer Kerhin:
That’s right, that’s right, the summer of the great resignation. Now, what is it? The year of job hugging? There is sort of a sense that that’s just out there, and people are just nervous. They see a bunch of layoffs in the tech world, and so they get concerned. I don’t want to say mass hysteria, because it’s not a hysteria. It’s just a consumer vibe, an employee vibe.
Loren Feldman:
It’s a reaction to the market.
Jennifer Kerhin:
Yes, it goes up and down, and people get concerned about that.
Jay Goltz:
One of the metrics I didn’t mention, that is why I think some people are hanging around: I give everybody their 40 hours. I know they need to live, and they need to pay their rent. And you’d be surprised how many people look for jobs, because one week they’re getting 25 hours, and the next week they’re getting 38. And like, it’s having job stability. There’s a word, just having job stability is very important to most people, and that’s part of the mix as to why I think there’s very few people who have been quitting, because that’s not normal out there. These big retail places? They just think nothing of cutting back hours, and I don’t know how somebody can live like that.
Loren Feldman:
To what extent do you think the people you hire benefit from being good negotiators? Do you think you end up paying people who are good at that more than others? Or do you pay what you think you need to pay?
Jay Goltz:
We tell them when we interview them, “Here’s what we’re offering for the job. And I just want to tell you up front: This is what we think the job’s worth, and we’re happy to offer you this. If you think you want more, don’t negotiate, because it’s not going to go well for you.” And it stopped. We very seldom had it. We had one person, actually, who’s turned out to be a very good employee, very good. And she was young, and she came in, and we offered her—we had a range. It was whatever it was, $50,000 to 60,000. And she had no experience, but we still paid her $57,000 because we liked her. And we thought she had a good skill-set.
She came back and asked for more money, and we said, “We’re giving you more than the average, and you have no experience. And no, we’re not going to give you more.” She actually apologized and said she got some bad advice from somebody. I think her mother told her, “Ask for more money.” And she actually apologized, because it didn’t come off well. I mean, we told her the range, we gave her the high end of the range, and she was clearly not that experienced. So, we don’t have a lot of that. I have very little of that.
Loren Feldman:
Has she gotten a raise since then?
Jay Goltz:
Yeah, absolutely, and she’s doing a very good job. And she’s actually involved with human resources, so it was kind of a funny position to have that in. But no, we don’t have that, but I’m not in technology. I’m in the polar opposite of what Ted’s dealing with, probably.
Loren Feldman:
Jennifer, do you think your people get paid differently based on their ability to negotiate?
Jennifer Kerhin:
No, I don’t think so. I mean, people have negotiated, but there’s very small amounts. And then if it is, we put in some sort of metric that says, “Well, tell me why you think you’re worth this. What are you going to do to get this extra money,” right? It’s not just, “Okay,” or it’s not just based on money. We try to put some more discussion and metrics around it, some conversation around it. We’re not talking big changes. We’re talking $1,000 or $2,000, usually.
Loren Feldman:
How about you, Ted?
Ted Wolf:
No, we don’t seem to have that problem. I think part of it is because we talk so much about culture and what we’re doing in the culture. You know, the core values—how you implement them, how you use them to make decisions. I think if you have those conversations and try to move your company’s culture into the forefront, it changes the nature of financial conversations.
Again, I’m going to go back to what we opened with. In my mind, there’s a smorgasbord of different things that you have to offer people as compensation—not just financial. You’ve got to be able to have the environment. You’ve got to be able to have the culture. You’ve got to have the career path, if necessary.
And I think a big part of that also is how you let people go. If you’re indiscriminately just firing a lot of people, word gets around. People will know it. I think you’ve just got to treat people with respect. You’ve got to make sure you have empathy in what their situations are. But everybody’s got to be contributing, or the business suffers in the long run, and individuals suffer.
Loren Feldman:
Jennifer, if you think that somebody deserves a merit raise, do you typically go ahead and offer it to them, or do you wait for them to ask? How does that work?
Jennifer Kerhin:
So our annual reviews used to be when you started, your anniversary date, and we would do a performance review, and any increase would be based on that. And we’ve just recently gone—we’re starting this summer—where all the reviews are at the same time. I’m sure most companies do that. We never did that. It was really hard with budgets, really impossible.
So now we’re all doing all of our reviews over the summer. It’s going to be an eight- to 10-week process: performance reviews, and then raises that are attached. The raises are not automatic, and they are not the same. They’re completely based on merit, and so we’re going through that. We also have promotions. If somebody gets promoted, they get a whole different raise on that.
Loren Feldman:
Jay, I think I saw you grimace.
Jay Goltz:
Yeah, I have the opposite philosophy to that, but I’m in a very different situation. I’ve got a lot more employees. We do it once a quarter, and it makes it simpler, because my production manager once told me this, he said, “Jay, if we do them all at once. They’re all going to be talking about it all day. ‘Hey, how did you do? How did you?’” And it’s like, we really don’t want the bathroom conversations, and I believe he was right. And this has worked out very nicely. We round them up, so there’s just bunches of them, but we have found that doing them four times a year is a better strategy.
Jennifer Kerhin:
This one, though, we’re pretty excited about it, because it was really hard for us to figure out the financials of it. What if somebody starts strong in February, and that’s when the review is, versus, “Hey, we have a slowdown in the summer.” Then what? Keeping a sense of the budget.
Jay Goltz:
To what Ted said, I do believe in the big picture. It’s a package. It’s the money. It’s the vacation time. It’s how much slack you cut people if they’ve got a problem at home. It’s how you treat other employees. It’s whether the boss is yelling all the time, whether somebody got fired and no one understands why. There’s 20 different things that go into the business environment, and it’s clearly not just all money.
Jennifer Kerhin:
And I will tell you, I get a lot of people—unfortunately, many people are putting up job postings and lying about remote to get more exposure. And so when they find out it’s legitimately remote, they are absolutely willing to take a little less money if they know that they are fully remote. And that’s the kind of people I want: great people who maybe don’t want an hour-long commute. With today’s gas prices.
Ted Wolf:
And I gotta say, the cultural thing is pretty strong, if you keep that forefront. Because you can go back to the ‘90s and 2000s and everybody would say, “Here’s our core values,” and they’d put them in the picture frame, and hang it in the office, and it turns into a picture, but they never use it—
Jay Goltz:
Not that there’s anything wrong with putting things in a picture frame. I just want to make that clear. [Laughter]
Ted Wolf:
I agree with that. I wanted to plug your business for you, Jay. I do recommend you do that. [Laughter]
Jay Goltz:
Yes, absolutely.
Ted Wolf:
I also recommend you actually use them, and you learn how to use them to make decisions and evaluate the company, because they will see it’s a different type of business. The feel, the posturing, the politics seem to go away.
Loren Feldman:
I’ve got one last question, and it goes back to the question I started with, where I asked what would happen if your employees got an email that listed everybody’s names and salaries. How would you feel if your employees found out what you are taking out of the business?
Jennifer Kerhin:
I think they think I make a lot more money than I do. I think they’d be like, “Man, that’s all she makes as a CEO? That sucks.” I don’t think—I can’t imagine any of my employees being amazed.
Jay Goltz:
No, same here. With that being said, it doesn’t mean that I don’t think I should be making more money, but at the moment, that’s what I’m pulling out. And yeah, that one wouldn’t bother me.
Ted Wolf:
It wouldn’t bother me. I say that because, I mean, I’m in this for the long-term. I want people to be able to say, “Hey, it’s an opportunity to grow. We’re open.” In my past businesses, we gave equity out to people, so they actually took ownership. So that doesn’t bother me at all.
Jay Goltz:
I can tell you, from being in business groups for years, people talk about their bottom line, and I always say, “Wait. Wait. Wait. How much are you pulling out of the business?” Because there’s a lot of people who are pulling out next to nothing, and then they say, “Oh, I had a 7-percent bottom line.” Except they’re paying themselves nothing, so that’s tricky. What the owner’s pulling out is not necessarily the market wage for that job.
Loren Feldman:
Well, that’s why I asked what you’re taking out of the business, whether it’s a draw or a salary. It sounds like that’s not a big concern for any of you, which makes me just curious. Have any of you shared that, for any reason at any point? Do people know at your companies?
Jay Goltz:
Unfortunately, at some point, like me, I have an HR department, they know. But it is what it is.
Loren Feldman:
Were you uncomfortable when you first had that situation?
Jay Goltz:
I’m not thrilled about it, frankly, but it goes with the territory. What am I gonna do?
Loren Feldman:
My thanks to Jay Goltz, Jennifer Kerhin, and Ted Wolf. And a special thanks to our sponsor. This episode was brought to you by Grasshopper Bank. Thanks for listening, everyone.
