Your greatest potential for growth comes from your investment in quality people who are properly trained and compensated. Contractors, however, understand machines better than they understand people, so the temptation is to buy new and bigger equipment and hope this will correct efficiency problems rather than face reality and hire and train better quality employees.

Let me share a personal insight. I worked hard to always give more than full measure. Whether I liked the work or not, I always delivered. I survived all the downsizing or right-sizing or whatever you want to call it, and when I moved to a new employer, it was my choice, and I moved as the opportunity occurred.

Only once in my career did I ever get a raise that I didn’t ask for. Poor compensation administration forced me into a personal program of working to be a more valuable employee and then asking to be paid for my performance. That’s not the way it should happen. Paying for performance is rare enough to set you apart from the other contractors in town and place you high on the local “Great Places to Work” charts.

You, dear contractor, ought to be in control of your employee evolution. Compensation is an important ingredient in employee growth and your compensation program must have both internal and external parity. Quite simply, any successful business must have a managed pay scale competitive with the local labor market (external parity) and fair to all employees (internal parity).

If you do not compensate fairly and properly, you’ll find you can’t attract or keep superior employees. Your business becomes a distillation of the worst employees available, and you find yourself doing more and more of the work because it takes too long to train or explain. Your business goes into an external parity tailspin. Your personnel costs are low but your productivity is even lower. You pay little and get less. Your customers see the diminishing quality of your employees and their work and call other contractors.

Internal parity means the more important the job and the better the work ethic, the higher the pay. This should mean the president/owner with the biggest, toughest job gets paid the most. Hard to believe but this doesn’t always happen.

It is important to understand that if this No. 1 boss man also is a stockholder or the sole stockholder, there must be additional compensation for the risk of owning the company, paid either by dividend or corporate growth. It should pay more than safer, surer investments.

If you aren’t compensating yourself and all family members in the business fairly, adjust the family pay or shut down the business and get a job with someone who knows how to manage and compensate properly.

In my consulting work, I usually find more family members underpaid than overpaid. A top priority should be external and internal parity first for you and then for all other members of the family.

Without parity, you’ll lose the family member who should be your successor. The pick of the litter of your offspring will leave to get a decent job that pays him or her what he or she is worth, which is what you ought to be paying. That nonsense that you can’t “pay for performance” when a family member is involved is another example of the bad chasing off the good.

Even worse, underpaying family members so disrupts your compensation that it prevents you from paying enough to attract and motivate the talented outside hires you need to fill the ranks.

On the other side of the coin, proper pay parity means not overpaying. Not all family members make the same contribution; sometimes the bigger the mouth the slower the feet. Paying people what they’re worth can mean paying them less if that’s what they’re really worth.

Sometimes there is family pressure to overcompensate and over-promote young family members so they can avoid the trauma of learning to live on what they are really worth. It’s this indignity of capitalism of being paid what you’re worth that spurs us on to greater efforts to make ourselves worth more. It also has the fringe benefit of making some of the dim bulbs move on when they find out that you won’t overpay them.

And when it’s time to retire, it’s unfair for the over-the-hill club members to still draw the top pay. That benefit should go to the top performer.


An excitingly different training program for you and your key employees. Contractors exactly like you have increased their profits quickly using the information provided by these tapes and accompanying manual.

Schmitt Consulting Group
2141 Schuetz Rd., Suite 201
St. Louis, MO 63146
Fax 314/872-9399