The Hourly Wage MYTH is Killing Businesses ($/hr is a failing formula)

Hey everyone, it's Mike Andes and you're listening to the Business Bootcamp podcast. Today I'm going to be talking about a concept that can really change your life and the life of your employees when it comes to thinking long term. Before we get into today's show, a big thank you, today's sponsor, which is Gusto, if you haven't Already, go to gusto.combootcamp for a free 90 day trial of their software where you can do direct deposit. And your employees have a really easy way of seeing their pay period and how it's broken down and what federal taxes are going where. And at the end of the year, Gusto will get all your W2s and all your paperwork done for taxes. So check it out today, go to gusto.combootcamp now today I'm going to talk about a concept that I was thinking about last weekend when I was running. And a lot of my thoughts come when I'm exercising. And so what it really comes down to is the concept of hourly wages. And this is something that I've kind of fought against the past few years as we've switched our companies to pay for performance. And really, in any of my businesses, I am constantly ask myself, how can I get the compensation of the employees to more align with the profitability of the company instead of just how long they worked, you know, their hourly wage. And so I've been thinking that way for a long time, but I want today is a little bit different because I was thinking about more of a mindset that is built around hourly wages. And when it comes to labor's positions, regardless of what industry you're in, roofing, landscaping, any sort of labor type position where you're paid by the hour, or even entry level office positions or medical field is hourly. Right? I think it really puts us into a box in our mindset of being short term. Literally we're thinking about the next hour and how many dollars we're going to make in the next hour. I truly believe that the person who thinks the most long term usually wins the game of money. Alright? And so if you look at investors, the person who invests for the long term traditionally is the one who makes the most money, the person who tries to time the market, real estate, stocks, whatever, they're usually the ones who lose. And I truly believe when it comes to just earning money, that people who think in terms of dollars per hour are the ones who lose because they're not thinking about weeks, they're not thinking about months, they're not thinking about years down the road. They're literally thinking about the next hour. And I came to this thought because really it comes down to if someone is getting paid by the hour and they are willing to move to another job because that other job is paying them an extra dollar per hour or $2 per hour, and because they're making 12 and now they have the opportunity to make $13.20, they switch jobs. And I truly believe that that metric and that way of looking at life and money is really damaging. Because for all they know, that dollar and 20 cent raise that they got moving from one job to the next literally set them back hundreds of thousands of dollars if they would have stayed at the previous job and worked their way up or slowly begin to get a new position there.

A raise, get a promotion, become a manager, learn skills. I truly believe this is why interns do well is because they are forced. Their mindset is forced into like, okay, I'm not making a bunch of money. I'm like, on a small amount of money, like 300 bucks a week or whatever they get paid. And it's not about. They're not there for the money. They're there for the learning and for the education, for the experience and for the connections and the skills that they get from that internship. And I truly believe we, as entrepreneurs, business owners, employees, leaders, need to start thinking about our lives in terms of what's the roi? Not in terms of dollars, but like, what am I going to learn? What am I going to get from this experience? And this is something that we need to know as business owners so that we can then manifest in our own lives, but then also pass it to our employees. Because it's really frustrating when you're an employer and someone leaves for a dollar more per hour or $2 more per hour. It's very frustrating. They leave your landscaping business because they're going to construction for a $50 more. And you're like, what in the world? We're growing. There's more opportunity. But they're literally thinking in terms of dollars per hour. And it's so easy to calculate and so easy to compare. Like, how many dollars per hour for this job? How many dollars per hour for this job? Oh, this one's more. I should take that one. When in reality, what they should be doing is stepping back and like, okay, what's the prospect of growth for both these businesses? Is there any opportunity for me to become a manager? Is there any opportunity to become part of a profit sharing program? Is there any opportunity to Learn that I am going to get really valuable experience or connections at either of these businesses because that's the real value. It's not dollars per hour. And I think in general we're just geared in a certain way in terms of consumption that we need the money. So therefore the first thing we look at most job positions is like, how much do they pay? What's the dollars per hour? That's all we think about when in reality, if you could look at a job like, look, I'm not thinking about the next hour, the next day, or the next month or the next year. I'm thinking about five years down the road, what I could be at this job, this place of work. And I really do believe that if you talk to like a billionaire, they don't think about what they made per hour. You always see in the news, like, how much Jeff Bezos made today in, you know, he made $10,000 per minute or whatever. It is, like, crazy amount. Guess what? The billionaires, they could care less. They do not measure it. They do not measure how much they made per hour, how much they made per day. They're not even thinking about it. It doesn't even cross their mind, like, how much am I making today? Or how much am I losing today? Like the other day, Tesla drops 15, 18% or whatever in a day. Elon Musk lose like 16 or $18 billion in one day. Do you really think he was like, oh no, I better go start a different business. Like, it has no bearing on the long term future success or failure of your finances. Dollars per hour. What you got to be thinking about when it comes to business and making money in the long term is what experiences, who can I meet right now? What are the skills and the valuable learning that I can get from this job that's going to set me up for success down the road? And then the next question is like, yeah, as employers, we are generally more in tune with that mindset because we, we don't make money for four or five years perhaps in our business, or we don't make as much. And then we finally start to kind of get the, you know, bear the fruits of our labor after years of sacrifice. And so it's kind of ingrained in us a lot of times to have that sort of sacrificial, like, not short term, but long term view on our finances. The question is, how can you get employees to think like that? How can you get them to think about, hey, I'm not going to chase the next dollar per hour increase and Go from job to job to job. I'm gonna lock in with a company that I, that is going to have long term prospects for growth for me personally, for me financially and for me professionally. That's what they gotta be thinking about. And so the question is, how do you break them out of this dollar per hour short term mindset? That's what I believe it is. I believe it's a short term mindset, corresponds and correlates with a dollar per hour that we've all been ingrained in, in our mind to really focus and follow. Right out of high school, right out of college, you, Dollar per hour, like, what's your first job? Dollars per hour. And then you go to your next job, more dollars per hour. Like, yeah, I see that there's a progression here, but why not look for a position where it's like, what position can I learn the most from? There are people that work for free. There are people that are interns or they just literally will, hey, they'll spend two and three years working for someone for absolutely nothing or way below their pay grade. Why? Because they realize that there's a lot more value out that dollars per hour. There's experience, there's connections, there's relationships. These are all things that are much more important and valuable than money. And so how do you get your employees to start thinking like this? How do you get them to realize that? Look, working at this place of work, where I'm at right now, regardless of what industry, what you do, what you sell, what kind of story you do, product, service, doesn't matter. You're trying to help your employees start thinking long term where they can build their professional future, their financial future. What can you do? All right, first things first, you gotta have a great culture, and that has to be foundational in team meetings. If you do not have team meetings at least once a week, you really need to do that. Even if you have, if you have one or two employees, like, if you have three employees, you better be doing it. As soon as you start having that team environment, you gotta have weekly meetings. At those meetings, you can go over what's working, what's not working, what certain metrics are. Look at the scoreboard in terms of like certain key performance indicators that you're looking at, whether it be revenue, sales, whatever. Then have an off site dinner occasionally with your team. We do it twice a year at Augusta. We do our team meetings twice a week, Mondays and Thursdays. I'll talk about our Wednesday meeting in just a second. But twice a week we do our team meetings and then we do twice a year where we do off site dinners. This is great. And guess what? Those dinners aren't like parties. These are business meetings. We talk about goals, we talk about historic data, we talk about where we, what we did really well in the past six months. Those are really important to draw them into the culture of the business and get them to start realizing that, hey, they can learn here, they can grow. Like if your business is growing, showing them that opportunity and what it can become based upon the fact that you've grown so much, that can really get them inspired and get them to realize, hey, I should drill down and make this my career instead of hopping from job to job to job getting the next 25 cent per hour raise. So team meetings, off site dinners, open book management. I don't know how many times I've said it, I will continue to say it. Opening up your books to your team does nothing but good. Everyone is so apprehensive to open up their books. And I just don't get it. If you're doing really, really poorly and the business is suffering, getting your team to know where you're struggling financially is going to do nothing but good. They are going to. Some people say, well, if you're really on the brink, then they might actually just jump ship. Cause they think you're sinking. Yeah. But unless you're literally about to go out of business next, there's a really good camaraderie that comes along with everyone buying in together. Hey, we're gonna fix this. And guess what? If you're doing poorly and you haven't told them the numbers, they don't know that you're doing poorly. They just assume that you're making tons and tons of money. They just assume that that's the mindset employees have been shoved into, is that the boss is always making a bunch of money. Well, guess what, if you're not? Which like most small business owners, we struggle along, especially when we're getting started. You need to be clear and open and honest and share the numbers. Like, look, we lost money and here's where we can improve. Here's the P and L. And they'll be shocked by how much you spend on this and how much you spend on that. And where can we cut the waste? Where can we become more efficient? And so if you're doing poorly, share your numbers. If you're doing great, if you're doing really, really well with profit and it's just now, years down the road, mature business rolling in the dough, guess what? You should still share your numbers and just make sure that their pay is corresponding with their performance and the business's performance as well. So do a profit sharing program, you know, do pay for performance where the harder they work, the more money they make. And then if the business makes more profit, they get a little extra in their paycheck. Like, that's where you can begin to develop that mindset in them of like, oh, I'm not chasing, you know, going from $15 to $16, I'm chasing, trying to work a little bit harder. So Instead of making 16, I can make $18 an hour on this paycheck because I kick butt or because the business did well and I contributed that and I made extra money. And so these are all things that we've done that we've seen really, really good results with open management, profit sharing, pay for performance. These are all things that get the employee to not think about the next dollar on the next hour. They start thinking about the next year and where they're gonna be at and where they're going to invest money. And this all goes back to learning. And your culture needs to be a place where learning is the most important thing. And I don't mean like education, like, all right, what's four plus four? This is not about education from a traditional sense of higher education, college or anything like that. It's the mentality that every single job you're on, every single crew you're with, every single client you interact with is an opportunity to learn. And that might mean getting them an Audible book membership and constantly filling it up with books. I think we have about 160 or 170 audible books in our Audible team account. And we have books on leadership and business, a lot on business autobiographies. We have just a whole bunch of marketing all sorts of books that they can learn and listen to throughout the day. We talk about it a lot in our team meeting about those books. And a lot of times it takes someone 612 months to like actually get into that, becoming part of that culture and realizing, look, like there's these people keep talking about it, but, oh, like there's actual value to this and it's going beyond what I'm making per. I might make more from the learning that I made on a four hour job than I made in dollars or on that four hour job. And that's very important. And so we've actually created on a Wednesday morning, we have an optional meeting where we literally. It's an optional meeting for the team about, you know, half the team shows up and we talk about learning. We talk about financial, personal finance and stocks and real estate and just trying to learn and get in the mindset of learning and breaking the concept of dollars per hour is what judges everything that goes on in my life and my career and where I'm going to go next when it needs to be. What can I learn from this experience? And you might be dealing with a bad employee right now or a bad customer or a poor contract or a bad supplier relationship, whatever it might be. You need to step back as the boss, the owner, and ask yourself, what can I learn from this experience? What is the learning that needs to be absorbed here in this situation that I am going to one day down the road reap the benefits from in the form of more customers or better customer service or better culture for my team because I had to go through a certain situation with an employee. These are things we've got to know as business owners. And I implore you to try to encourage your employees to think the same. They're going to stick with you longer if they see and realize that you're doing all of the things we just mentioned. If you're doing profit sharing, they want you to be more profitable so they can make more money. If you do pay for performance, they want to work harder so they can make more money and they can get ahead. And if you are creating a culture of learning and education, they realize that those things are really, really valuable and that staying in your business and it's going to lead to their success and that in turn, them staying longer does help you, it does help the business, but that can't be the main thing. It needs to be them. And you should be like, I want my employees to be successful. And we literally tell our employees when they, when they come to interview, we tell them, we don't want you to be here in the same position for more than three years. Like, we either want you to move up in the organization, or we want you to go start a franchise at Augusta Lawn Care, or we want you to go someplace and do something you love, but we want you to leave and move up the ladder, move up the chain. We want you to get more money. We want you to get a better position because of the leadership skills, because of the business skills that you learned here, learned here. And I tell them very clear, look, I say, look, the money here, we have a few dollars more per hour, probably on average than our competition. Other companies around here like ours, maybe a little bit More than that. But that's not going to be the real value of this job. I tell this I'm on orientation day, it's not gonna be the most value. The value here is what you're going to learn. Where you look at every single project as a way to hone your skills of leadership of a crew, where you look at every single week as an opportunity for you to maximize profitability on your route, where you look at every single month as a way to learn about the P and L from the open book management system. And you can one day either be a manager or help another owner or go start your own based upon the learning that you received working here. And I promise you, if you make your business into a manufacturing plan of education instead of manufacturing plant of labor, I promise you, I promise you it'll reap benefits for you, for your employees, for their future and for the business's future. I just truly believe that we need to make learning the. You can't show it on a profit and loss statement. You can't say at the bottom like, oh, we had four oodles worth of learning this month and we gained 36% market share of learning. Like it's, you can't put this on the P and L, but I promise you, I just guarantee doing the things I just talked about and improving the culture and making it where you elevate learning and their personal finances and their education around those concepts. You make that like the most important thing. What you do is not important, why you do it, the most important thing. You know the whole golden circle, right? You know what you do, then how you do it, and then why you do it. And everyone talks about this golden circle is so awesome. But yet all we do and when we talk to our employees is we talk about what we do, we talk about how we can make it better, but we never talk about why we're doing it.

So I really encourage you focus on making your business a place of learning for you, for your employees and for your customers. I promise you it'll lead to better profits, happier employees, happier owners, and more importantly, it'll be a place when you look back and people have worked for you, they'll go on to do great things down the road and you'll be super proud of the fact that you contribute a little bit to that by making sure they focused on learning and not a dollar per hour mental trap that we've been placed in in this society. You'll be listening to Mike Andes, the Business Boot Camp podcast. Until next time, be great. Nothing else pays.