January 15 , 2018

How Small Business Can Use a Higher Minimum Wage to Rethink Operations

WSJ Small Business Expert John Sullivan says that rising minimum wages can give small-business owners a chance to reassess productivity.

If you’re among employers facing a higher minimum wage, instead of agonizing over rising payroll costs, consider using the wage increase as an opportunity to rethink your operations, and to turn lemons into lemonade.

First, recognize that your new wage costs are likely to be even higher than expected. That’s because all of your hourly employees working levels above entry-level workers, will – for equity purposes – be expecting a proportional raise. Fortunately, if you use the right advanced people management tools, it’s relatively easy to improve productivity to match even a 10% increase in costs.

Raise the “productivity bar” in these areas:

Improve retention. Retention is the area with the highest ROI. Start by identifying the high-impact employees that you would regret losing. Then conduct a “stay interview” with each and let them know how important they are to the team. During this interview, ask them to list the factors that keep them working with you and any frustration factors. Spend time reinforcing the positive and minimizing the negative factors. Finally, add one or two excitement opportunities that would really energize them, like letting them pick their own short-term one-day-a-week job/project rotation.

Improve the productivity of current employees. A great best approach for increasing productivity is eliminating barriers to employee productivity. Challenge your employees by asking them “What would enable you to produce 20% more?” Ask them to identify the barriers, rules, policies, approvals, etc. that keep them from reaching that higher goal. Work together to eliminate the easiest-to-remove barriers. Your top performers want to excel, so assign each “stretch goals” that require them to perform at a higher level or to learn new areas. Measuring and internally posting individual and team performance results also increases productivity, because it creates both widespread awareness of performance problems and healthy competition.

Reduce the percentage of weak performers. Rank your employees by their performance level. Rather than trying to “fix” weak employees, realize that the higher ROI comes from releasing them. If you can’t release them, reduce their hours or move them into lower-impact jobs.

Hire better performers. Whenever an opening occurs, ask your best-performing employees to make a referral of someone that is “better than they are.” Ask all employees to make referrals of the best employees that currently work at your competitors (your firm improves, theirs gets worse). Next, identify the sources where your best new hires came from, and look there again for additional high-quality hires. Finally, use LinkedIn to reconnect with your best former employees, ask them to return as “boomerang rehires” or to refer another star like themselves.

Improve processes. A process for sharing best practices is the fastest no-cost way to increase efficiency. Develop an internal sharing website that gives everyone access to “what works” and “what doesn’t work.”

Technology solutions. Examine software solutions that reduce overtime, improve scheduling and that increase onboarding effectiveness, that is, getting new hires up-to-speed faster. Finally, audit your competitors for software and hardware solutions that can permanently replace a layer of your now higher-cost employees.

About Dr John Sullivan

Dr John Sullivan is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.