“Money, so they say, is the root of all evil today.” –Pink Floyd, paraphrasing and misquoting the Apostle Paul.
Money. Is there anything we love to and hate to talk about as much as money? In the workplace, money can be viewed as anything from a taboo topic, to a necessary evil, to the only reason we even show up. Here are five ways I’ve seen different perspectives on money cause problems in working relationships.
Early in my career, I was bugging my VP to hire a summer intern. I couldn’t understand why he couldn’t sign off on a $ 7-an-hour resource. He explained about social security and unemployment, and onboarding and payroll and background checks and I thought he was just being a cheapskate.
Denny, wherever you are now, I’m sorry. You were right.
In 2022, we paid about $14,000 per employee in healthcare, dental, and vision insurance, 401k fees and matches, wellness plans, social security tax, unemployment tax, and other hard costs. That doesn’t include training, software licensing, laptops, or other variable costs.
As an employee, we are all used to seeing big chunks of our salary get eaten up in taxes and our share of healthcare, as well as our 401(k) contribution.
The result? To an employer, a $50,000 salary is $64,000 in hard costs. To an employee, $50,000 is about $36,000 in their pocket. That leaves close to $30,000 in “missing money.” As an employee it’s easy to think of your $50,000 salary as only $36,000 and as an employer, you have to budget $64,000 for that $50,000, creating a huge gap in perception between the two parties.
Why Am I Working So Hard?
Go to any bar in America after five o’clock and you are bound to hear a table of co-workers complaining about how they are only working hard to make their boss and investors rich.
Over the years I’ve talked to many small business owners who said something like this “I keep working harder and harder to pay my employees more and make my investors more money, but my quality of life keeps going down.” I know many small business owners who cite this as one of the main reasons they end up selling their businesses.
Likewise, investors get frustrated when they see their investments go up in smoke while employees and founders collect guaranteed salaries. When times are good, they can be really good. But when things get scarce, we tend to look inward at what we don’t have and outward at what others do have.
What is a lot of money?
Years ago I was talking to a first time founder. I showed him a path to funding and an exit and said in five years he could personally pocket $3 million or more. He dismissed the number immediately, saying he wanted to make substantially more money from an exit. When I asked him to come up with $10,000 of his own money to help seed the company, he told me that $10,000 was a lot of money.
Another time I was congratulating a sales rep on a close and her corresponding commission, which I referred to as a “nice big check.” She shrugged it off saying that wasn’t her definition of a big check. Not long afterward, she came into work complaining about an unexpected car repair that was going to cost her a few hundred dollars- much less than that commission check.
When money comes in, we tend to downplay its value. When money is going out, we tend to exaggerate it.
When it comes to pay equity, clearly defining job salaries from the very start of the recruitment process, and not negotiating salaries, I’m 100% on board. We were doing these things before it was cool.
When it comes to ongoing salary sharing, I’m a lot more skeptical. I remember a happy hour early in my career when everyone had a few drinks and shared our salaries. We all sat down feeling good about our company at the start of that night and left mad. Twenty years later, I still remember those numbers and how a few thousand dollars made a lot of people bitter with each other, their bosses, and the company. We all got distracted and obsessed with the number.
Public employees have their salary available to the world. I’ve heard tales of when these reports are updated annually, coworkers spend hours pouring through each others’ salaries.
I’ve seen people obsess over this topic. One employee, a first-time professional and recent graduate who had never been responsible for managing payroll, sent me a five-page manifesto explaining why he should have access to everyone’s salary. Another first-time person declared to me unequivocally that sharing salaries was best for everyone and that was “proven.”
To me, financial information is like health or voting data. If I’m willing to disclose what I make, my medical history, or more political affiliation, great, that’s my personal decision. But my employer does not have the right to make that decision for me.
Conversely, with company financial information, we are more transparent than any privately held company I know. Every month every employee sees our revenue, expenses, and net income. Is it risky? Sure. I once debated this topic with a group of small business owners and the general consensus was that if you have a great month, everyone will ask for a raise. If you have an off month, everyone will be afraid they are getting laid off and start job hunting. If you are on budget, everyone is bored. There was also concern that the information could get out through a disgruntled employee.
My philosophy is that if team members are informed the big decisions make more sense. Yes, we’re holding off on spending for that tool, but everyone knows why. Or we are making a big investment because the time is right. We also take the time to explain accrual and cash and gross profit and cash flow, understanding that not everyone comes into the workforce understanding the nuances of financial statements.