By Mark Wright, OD, FCOVD,
and Carole Burns, OD, FCOVD
Oct. 12, 2022
If a high-performing employee asks for a wage increase, what should you do? Should you reflexively give them what they want? Here is how to approach the challenge of responding to requests for wage increases from employees who may be good at their jobs, but are not producing more for your practice.
More and more businesses are marketing wage offers to potential candidates. Our very own team members are seeing these as they drive to and from work. These signs are planting the idea in their heads that they could be – perhaps even should be – making more money than what they are currently being paid. How do you respond?
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The knee-jerk reaction is to just give them the raise in order to keep them. This response arises out of fear. We don’t want to lose them and have to search for a replacement plus spend energy and resources to train them.
To come up with an effective strategy, let’s drill into this more deeply. The most important question we need to answer is: What is the impact of wages on employee productivity – is there a causal link between wages and productivity? The answer is given in a Forbes article.i Researchers at Harvard Business School argue that wage hikes do increase productivity.ii
Harvard researchers point out the following facts:
- Henry Ford nearly doubled the average wages of workers at nearby manufacturing plants, calling it his “finest cost-cutting move” because of substantially increased productivity. This is called “efficiency wages.”
- Paying wages above the market rate is an important motivating force because current employees have more to lose if they move to another job. A sense of loss aversion appears to connect wage increases with productivity.
- When a company gives an unexpected pay raise, workers tend to work harder than is required. Taking this approach is roughly as efficient as hiring more workers. This is called: reciprocity.
Do other factors contribute to increased productivity? Yes. According to Aon’s Trends in Global Employee Engagement Survey, these are the top five drivers of employee engagement worldwide:iii
- Career Opportunities
- Brand Reputation
- Employee Value Proposition
Notice that pay is No. 3. It is not at the top of the list. We have yet to see any employee engagement survey that lists pay higher than third place. (More often than not, pay is in seventh place.)
So, what to do? The most effective strategy involves a combination of implementing the above five drivers combined with clear, measurable goals and a (daily, weekly, monthly, yearly) accountability reporting system. The end result needs to be positive for both the employer and the employee.
For the employee in your practice, answer these five questions:
- Career Opportunities: Does every team member have a career map laid out in writing?
- Brand Reputation: Does your practice hold the top spot for brand reputation in your area?
- Pay: Are you paying your team enough to take them out of the market?
- Employee Value Proposition: Do you have a written employee value proposition for your team?
- Innovation: Is your practice known to be the innovator in eyecare in your area?
For the employer, it is also important to measure productivity to make sure you are seeing increases. Start by measuring the following:
- Net profit
- $ collected per patient
- $ collected per team member
- # of multiple pairs of glasses sold
- # of annual supplies sold
And, anything else that you want to improve in your practice.
With this new knowledge, create a plan to move your practice forward.