Today, four years later, Sally’s business employs 15 individuals and generates about five million in gross sales; her salary is generous. Yet, among the growing pains of a small business, achieving equitable pay scales for her employees has been challenging.

It’s not difficult for entrepreneurs to decide what and how to pay themselves, but it’s more challenging as you build your team. How much should you pay employees? How can you keep salaries fair and reflective of experience and contribution? How do you prevent your company from overspending on payroll?

Your first employee comes on board, and you think, hmm, I have about $40,000 remaining in my budget, so that’s what I’ll pay this person. That can work, but then your second, third, and eventually tenth and eleventh employee comes along. The $40,000 you pay your current employee isn’t enough to attract new talent, so you pay them more. This cycle perpetuates itself, and before long, you have a valuable and experienced team member who’s been with you for two or more years, making less than the new person with less experience. Payroll is a mess, and when word gets out, morale is even worse.

Use equitable pay scale ranges to solve this payroll dilemma.

Is it time to grow your team? There are many things to consider, and most entrepreneurs fail to look at the future financial picture before they take this important step. After all, you don’t know what you don’t know, right? Here’s a simple plan to help prevent a division in your culture and a negative balance in your business bank account.

Create an organizational chart.

Looking three to five years into the future, what positions will you hire for to achieve your projected growth? Create a list of job titles (not names of existing employees).

Research pay scales for each listed position in your geographical area. If you are a remote business, you must research the areas where your employees live. Some websites, like payscale.com, charge a fee to keep national and local averages up to date, but as a small business owner, you can use ziprecruiter.com or indeed.com to do your research. There, you can find a scale for the job you intend to fill, from low to high.

Create a pay range for each position.

Now that you know the salary range, separate it into three sections so you have three pay ranges within each pay grade. For a pay grade with a $50,000 salary limit, it might look like this:

$39,000 – $43.500

$43,501 – $47,000

$47,701 – $50,000

Now, assess what skills, experience, and qualities are for each range in your pay scale. For instance, say you’re hiring a coder. You will pay someone right out of school a different wage than someone with three to four years of experience. You’ll pay someone with eight to ten years of experience, eager to help your company grow, and a great fit for your culture, far more than you’d offer the newcomer to the industry.

Now, list the levels of experience. Identify,

• How applicable must the experience be to your industry and goals (how much training is necessary)? Will a software engineer from the banking industry seamlessly fit into your software development company?
• What level of education is the bare minimum your new employee needs?
• What skills would be ideal for each pay grade level? Again, how much training will they require?
• Whether they will manage other employees.

You can identify any markers that apply to your company and industry.

A pay scale will make your payroll system fair and equitable.

As you answer the questions above, you will create a clear, easy-to-understand scale with bullet-pointed qualifications, which is important on many levels. It will:

• Prevent pay bias in the hiring process.
• Take the guesswork out of your process when making an offer.
• Help you offer clarity to employees who ask for unreasonable raises (more on this later).
• Help to prevent your business from overspending on payroll.
• Create a fair and balanced payroll system.

Before you conduct an interview, use the CV and your new system to get a general idea of the pay range for your candidate.

How do you create equity if payroll is already imbalanced?

This pay scale system will prevent future discrepancies, but what if your pay scales are already imbalanced? Using the computer engineer example, what if the person you hired three years ago earns $50,000, but today, you must pay a second person of equal talent and experience $65,000? Unless you are willing to lose your original person, you will have to adjust their pay to match (at the minimum) your new employee. Keep this in mind as you hire new talent; the payroll cost will increase substantially because of this pay adjustment if one is necessary. If your original computer engineer is amenable, you can make this adjustment over time, but you would risk a morale issue.

How to manage raises and promotions.

There are many different types of raises, but I usually suggest that a small business owner focus on only three:

Cost of Living (COLA).

The US Department of Labor determines a cost-of-living adjustment (COLA). Since 2021, the increases have been on the rise since living in the US has become more costly. However, just because the Department of Labor says the COLA is 4.5% does not mean you must offer 4.5%. Offer what your company can afford; otherwise, your employees could be at risk if your company struggles financially.

Completion raises.

I often suggest that my clients begin a new employee as a contractor (1099) for about three months before converting them to W-2 status. This tests if the employee and employer are a good match, whether or not the employee can deliver as anticipated, and if the job will keep the person engaged and productive. At the 3-month mark, if you bring your contractor on board, a pay increase is a great show of faith and goes a long way to keep your culture intact.

A completion raise is also applicable to goal completion and increased education experiences. A significant raise is certainly appropriate if your team member completes a training program or returns to school for an applicable degree. When you do a performance review and offer a list of goals to an employee, a raise may be in order once they successfully achieve the goals. Large project completion may merit a bonus or increase in pay.

Merit raises.

Each time you do an employee performance review, giving them goals and suggestions for advancing skills, education, or goals is wise. This is the time to discuss how they get along with other employees and customers. As they achieve these benchmarks, a merit raise is advisable. Hitting benchmark years at your company is another reason for a merit raise.

Side note: Many small business owners neglect ongoing or annual employee feedback. Remember this: Your employees are your number-one asset. Do not neglect them or fail to acknowledge them. In terms of importance, they come first.

Promotions.

Too often, I hear that employers add to the responsibilities of their employees without proper compensation. This is especially true when an employee is asked to manage others. The salary for a manager is higher than someone whose responsibilities end at their own performance. Promotions are based on performance, need, and team members' ability and willingness to grow.

Generally, reviewing pay structures regularly is a good idea to ensure that all employees are paid at levels comparable to those for similar positions in the market. Keep your team members happy and engaged, and your life will get easier—your business will be more profitable!

The post Fair Compensation Blueprint: How Small Business Owners Can Build Equitable Pay Scales appeared first on Marla Tabaka.

Experts will tell you to hire employees to take the load off so you can focus on business growth. As a business coach, I often suggest that clients onboard employees as they scale. However, a few key components must be in place before you expand your team.

Most often, small business owners skip over game-changing business-building steps because they're too occupied to put thought into them, but this lack of diligence always backfires.

Don't be that small business owner.

You decide it's time to take the plunge and hire your first (or next) employee. You think about what that person can do and how much time a new hire will free up for you. So, you whip up a job posting or spread the word through your community, and, voila, you find someone. You ask the standard interview questions, size them up, and perhaps check a reference or two, and your new employee starts on Monday. Cool!

Or, maybe not so cool. You may think the hard part is done at this point, but that's far from true. At this point, budding entrepreneurs need to learn to think like a leader rather than someone in the trenches. Now, you not only have to protect yourself from failing but also your growing team.

3 ways to set employees up to fail.

1. You don't give your new hire a steady foundation.

You may have a job description, but you don't have any training, implementation processes, or written documentation in place. Without a solid foundation, you throw your new person into the deep end without a raft. Rescuing your employee is time-consuming and frustrating; it was easier when you were solo!

Many entrepreneurs put these oversights in the category of employee empowerment and tell themselves they will not be a micro-manager. Really, this belief only serves to make the business owner feel better, but you can't hide behind it for long. Empowerment is built upon solid training and an understanding of the company's signature goals and direction. Your employee may attempt to do things right, but without consistent guidance and processes in place, they will struggle and most likely fail to meet your needs. There's a big difference between micro-managing and providing your team with education, support, and training.

2. You're unclear about your small business's growth vision.

Entrepreneurs have plenty of ideas for future growth and expansion. The problem appears when all these ideas merge murkily, causing a lack of clarity, confusion, and overwhelm . These murky waters lead to a team that also lacks clarity and feels overwhelmed and confused by your inconsistent leadership and direction. You may hire for the wrong positions and skill sets, leaving you with one or more team members who may be decent employees but cannot grow your small business with you. They just won't be a good fit for your ultimate vision.

3. You have not designed your company culture.

You have yet to think about what you want your company culture to look like or what values will guide you to that goal. Understanding your company and personal values to design an internal and client-facing culture gives you a roadmap for everything you do, including who and why you hire. For instance, if you hold a value that indicates honesty, integrity, or trustworthiness and hire a salesperson who promises anything to get the sale, you will have very unhappy customers. This person will also cause conflict with other team members who do represent your culture of integrity.

You don't know what you don't know about growing your small business.

Leadership development is a new stage of growth for most small business owners, and this process has many layers. While it may not seem apparent, your leadership abilities need to kick in before you hire employees, not after. It is difficult for most people to figure out how to

1. Make the time to develop processes, identify culture goals, and develop a vision
2. Get your ideas out of your head and into play
3. Gain clarity about the what, how, and why
4. Implement your ideas
5. Just about everything else!

This educational piece of professional and self-growth is why business coaches and mentors exist. No, you don't know what you don't know, and you're not meant to do it alone. Surround yourself with a supportive team of non-employees before you become an employer, and you will save yourself much disappointment, money, and time!

Are you interested in growing your business to add more freedom, security, and well-being into your life? Please contact me to see if I can help. Let’s chat and learn more about one another!

The post 3 Ways Small Business Owners Set New Employees Up to Fail appeared first on Marla Tabaka.

Experts will tell you to hire employees to take the load off so you can focus on business growth. As a business coach, I often suggest that clients onboard employees as they scale. However, a few key components must be in place before you expand your team.

Most often, small business owners skip over game-changing business-building steps because they're too occupied to put thought into them, but this lack of diligence always backfires.

Don't be that small business owner.

You decide it's time to take the plunge and hire your first (or next) employee. You think about what that person can do and how much time a new hire will free up for you. So, you whip up a job posting or spread the word through your community, and, voila, you find someone. You ask the standard interview questions, size them up, and perhaps check a reference or two, and your new employee starts on Monday. Cool!

Or, maybe not so cool. You may think the hard part is done at this point, but that's far from true. At this point, budding entrepreneurs need to learn to think like a leader rather than someone in the trenches. Now, you not only have to protect yourself from failing but also your growing team.

3 ways to set employees up to fail.

1. You don't give your new hire a steady foundation.

You may have a job description, but you don't have any training, implementation processes, or written documentation in place. Without a solid foundation, you throw your new person into the deep end without a raft. Rescuing your employee is time-consuming and frustrating; it was easier when you were solo!

Many entrepreneurs put these oversights in the category of employee empowerment and tell themselves they will not be a micro-manager. Really, this belief only serves to make the business owner feel better, but you can't hide behind it for long. Empowerment is built upon solid training and an understanding of the company's signature goals and direction. Your employee may attempt to do things right, but without consistent guidance and processes in place, they will struggle and most likely fail to meet your needs. There's a big difference between micro-managing and providing your team with education, support, and training.

2. You're unclear about your small business's growth vision.

Entrepreneurs have plenty of ideas for future growth and expansion. The problem appears when all these ideas merge murkily, causing a lack of clarity, confusion, and overwhelm . These murky waters lead to a team that also lacks clarity and feels overwhelmed and confused by your inconsistent leadership and direction. You may hire for the wrong positions and skill sets, leaving you with one or more team members who may be decent employees but cannot grow your small business with you. They just won't be a good fit for your ultimate vision.

3. You have not designed your company culture.

You have yet to think about what you want your company culture to look like or what values will guide you to that goal. Understanding your company and personal values to design an internal and client-facing culture gives you a roadmap for everything you do, including who and why you hire. For instance, if you hold a value that indicates honesty, integrity, or trustworthiness and hire a salesperson who promises anything to get the sale, you will have very unhappy customers. This person will also cause conflict with other team members who do represent your culture of integrity.

You don't know what you don't know about growing your small business.

Leadership development is a new stage of growth for most small business owners, and this process has many layers. While it may not seem apparent, your leadership abilities need to kick in before you hire employees, not after. It is difficult for most people to figure out how to

1. Make the time to develop processes, identify culture goals, and develop a vision
2. Get your ideas out of your head and into play
3. Gain clarity about the what, how, and why
4. Implement your ideas
5. Just about everything else!

This educational piece of professional and self-growth is why business coaches and mentors exist. No, you don't know what you don't know, and you're not meant to do it alone. Surround yourself with a supportive team of non-employees before you become an employer, and you will save yourself much disappointment, money, and time!

Are you interested in growing your business to add more freedom, security, and well-being into your life? Please contact me to see if I can help. Let’s chat and learn more about one another!

The post 3 Ways Small Business Owners Set New Employees Up to Fail appeared first on Marla Tabaka.

When original employees don’t adjust well to culture change, tough decisions lie ahead!

You hired Sally 5 years ago, and she's been your righthand person, confidant, and friend. You are Sally were the company culture. As you grow, you'll introduce automation and new team members and identify and document the processes and procedures for a stable growth strategy. Suddenly, you're not sitting elbow to elbow with Sally anymore. Other team members may be more experienced and qualified to contribute in ways that Sally only wishes she could. She may feel threatened and displaced, even angry.

I've seen business owners hold on to original team members to the point of the employee becoming a detriment to the company. Even though you've provided additional training and have had multiple reassuring discussions, some employees can't tolerate that they are no longer your one and only. Sadly, they may need to move on. Still, the thought of this difficult conversation leaves entrepreneurs with a great deal of guilt and worry about this now underperforming employee's future outside the company.

How to determine if a long-time employee is no longer a culture fit.

You'll usually see developing resistance and something resembling a temper tantrum or the cold shoulder treatment. I've seen original team members employ emotional manipulation to sabotage a growing culture and the newcomers contributing to it. This behavior comes from a place of fear and insecurity, which frankly might be warranted. Sally may have been your right-hand person, but now there's a good chance the company's needs have outgrown her skillset. Some may consider her ways “old school” at this point.

In my experience, most business owners do an excellent job of redefining this person's role, but the employee may need more than that. They no longer feel as important, capable, and significant to your success. Soon, you and your devoted employee are miserable, which takes a toll on you and your newer employees.

Unhappy employees are often unwilling to adapt their style or grow their skillset.

The employee stuck in the old way of thinking is performing tasks using outdated technology. When asked to upgrade their skills to adapt to new technology, they may rebel, saying their way has always worked just fine, so why fix it if it isn't broken?

Employees who feel left out and threatened may treat the newcomers rudely and attempt to sabotage their success. This behavior comes from a desire to prove their worth; to you, but also themselves.

You may feel that this employee has become suddenly needy. The truth is they miss being your confidant and spending hours a day with you. They may feel like a lackey as their duties are siphoned off and given to someone more qualified to meet your growing needs.

Is it time to say goodbye?

In my experience as a business coach, it takes time for long-time employees who are stuck in their old-school ways to adapt to the changes brought about by company growth. It also takes a lot of patience and commitment from the founder.

Before you dismiss a once loyal employee who was critical to your success–and probably your sanity–make every attempt to include them in your developing culture and growth plan. Think about their qualities, what they love doing, and the areas where they thrive. Is there a place in the company where his or her skills, personality, and positive traits would be valued?

Could you allow this employee to be a part of the big-picture discussions? While you may now consider their skills outdated, the fact that they know you well and understand your idiosyncrasies (yes, we all have them) is valuable. Get creative, avoid typecasting, and discuss exciting options with your employee. Mostly though, give them time.

Then, if all else fails, the final ultimatum is presented: Find a home in this company or find what you deserve; a workplace that makes you happy.

There is one thing I can say for sure: If an original employee becomes miserable due to your growth strategy, they are as distraught about it as you are. If they are unbending, the healthiest, happiest opportunity for both of you is kindly letting them go their own way. I witness this frequently, and most of the time, both parties end up happy.

The post Culture Changes Might Mean Saying Goodbye to Original Employees appeared first on Marla Tabaka.