Millionaire CEO: Are you paying your employees too much?
In this YouTube monologue, Shanli Liu, CPA, CTP, shares personal lessons from scaling multiple businesses (including Gym Launch) and explains why many fast‑growing companies make costly compensation mistakes. She recounts overpaying staff, the entitlement and turnover that followed, and identifies three common, harmful beliefs that drive poor pay decisions: (1) assuming higher revenue automatically justifies higher salaries; (2) granting raises pre‑emptively when workload spikes are anticipated; and (3) believing that offering a high salary guarantees hiring suitably skilled talent. Liu argues that compensation should be anchored to fair market value, not emotions or guilt, and advocates creating a formal compensation philosophy or methodology—using market data (e.g., PayScale, Salary.com), defining pay bands, and aligning raises with proven performance—to avoid second‑order consequences such as demotions, pay cuts, or employee exits. The talk concludes with a call to develop a structured pay framework and to be aware of personal money beliefs that can distort compensation decisions.
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What is up? In this video today, what I want to talk about is one of the most painful mistakes that I see companies, and I have also made on the way to $10, $30, $50, $100 million. So that mistake is how you compensate your employees. And I actually feel really passionate about this subject because it is one that I atrociously messed up. And I have seen over and over again that people tend to overlook this and not understand the importance of it in the beginning. And I wish I had known sooner. And right now, actually, with one of our portfolio companies, they are learning it the hard way. You know, we came in and the setup that they had with a lot of their employees, they are realizing now does not make sense and is creating behaviors in their employees that they do not want. And so I want to talk about the struggle of this and just kind of share my story. So when we first started Gym Launch, which is the first company that we started together, I had never managed people before, I'd never led people before, I actually had no experience. And I especially didn't know how to pay people. I knew what I had gotten paid in jobs prior and I understood based on Googling things, but what I didn't understand is how much your personal beliefs about money and your personal stance on money and maybe how you grew up, et cetera, affects how you pay people. In the beginning. And so what happened was a lot of overpaying and a lot of paying people who didn't have experience and a lot of, oh, we're making more, we should pay people more, et cetera, et cetera. And so what ended up happening was a couple of things. One is that what I realized very quickly is that there were people who were being compensated maybe 40% above what they should have been. And when I say should have been, I mean what fair market value is for their services that they are providing to the company, right? And unfortunately, what happens is that eventually you realize or you come to the realization that your desire to pay people well and to take care of people has actually created behaviors in those people that are less than desirable. And so what I've seen time and time again, I experienced myself, was that, you know, as soon as someone gets paid or overpaid, they develop a sense of entitlement, they develop a little bit of an ego, and they often get a different air about themselves. And so it's something that I never could have anticipated because that's not how I've been. And so we always assume that people are going to act how we would act if we were overpaid or given more pay, right? Where like, I would be super grateful. I would be like trying to do everything possible to make sure I like rose to the occasion. That is not how a lot of people act. And especially if you don't know them well, your company's new, they haven't been there for years, This can completely distort their behavior. Suddenly they're like, that's below my pay grade. I don't want to do those things, et cetera, et cetera. And the funny thing is it's not their fault. It's your fault for not considering this. It's a second order consequence of paying people inappropriately. And I see this really often in companies that explode. And that is exactly what we did and exactly what I see a lot of companies that we work with do. The second thing that happens is that once you realize this and you realize that it's actually not nice to pay people more, You're setting improper expectations for your future self and their future self. Then you realize, crap, like, they're not a director, they're not a manager, and they're really overpaid. And so I need to probably demote them and I probably need to change their title and I need to pay them less, or I can't give them a pay raise for like 5 years. So you're like, crap, what do I do? And then you have to have the conversation with them. You're like, listen, I overpaid you and now I'm realizing I overpaid you and it was because of my feelings, because I don't have a methodology behind it. And now I need to cut your pay back to what is normal. And you know what happens most of the time when you do that? They leave. And so it's really funny because in doing what we are— what we're trying to do is keep people and keep them incentivized and keep them feeling taken care of. We're actually just setting them up for failure in the long term because your expectations are going to change. It is very common for people who are new in business and who have just attained a ton of success very quickly in business to want to do these things. But it is not what you want to do because it just creates this distorted behavior and a very weird relationship with money. And so what I've noticed is a couple of things. One is that how you pay your employees is always going to be tied into your personal beliefs about money. And so a lot of the times we don't even know what those are until we have to deal with money so often, especially when you suddenly receive a large amount of money, which, you know, we work with a lot of companies who just expand explode overnight and then they're like, what do I do with all this money? It actually, the money, it used to be stressful not to have money and now having the money and not knowing what to do with the money or how to pay people with the money feels even more stressful. And so what happens is you just default to your most primitive beliefs and feelings and emotions and those often don't serve your business. And so the biggest reason that big businesses have policies, procedures, and methodologies for around how they pay people is because paying someone and what you pay someone should never be tied into how you feel or your emotions. And often that is exactly how people pay people in the beginning. It is based off their feelings and emotions. I feel like they deserve. I feel like they should. I feel like we owe them. That is a lot of the things I hear people say, but those beliefs don't serve you. And so I've kind of honed in on the 3 biggest beliefs that I have seen that tend to just bite people in the ass if they don't work on those beliefs and understanding why they are not serving their business and ultimately not serving their employees because you are setting them up for failure in the long run. The first one is the belief that if the business makes more money, I should pay people more money, which is absolutely false. Just because you have a large influx of money, should you spend it on everything? Should you act as if it will never end? Should you— and a lot of people may say, well, that's not thinking abundantly if I don't want to pay people more. And I'm like, this isn't about abundance. This is about what is fair market value for their services. You can look at the size of your company, the years you've been in business, the revenue you have, and the skills that they have. And then you can see on many websites online, you can go to PayScale, you can go to salary.com, and you can see what fair market value is. And then you can develop a methodology. Which is, okay, how do I pay fair market value? Do I pay at the middle end of the spectrum, the end, or the high? Right? Maybe if you pay at the lower end of the spectrum, it's because you have a lot of perks, flexible hours, work from home, lots of benefits, paid time off, unlimited vacation. And if you pay at the high end of the spectrum, maybe it's because you don't offer those. You don't yet have benefits set up. You don't have PTO set up. You don't have vacation set up, which is the case for a lot of companies that are starting off. And so that's the first one, is that if your business makes more money, that doesn't mean you should pay people more money. The two are not intertwined. Because here's the other thing is that your business making more money is going to— it is not finite. That's not the end decision. And so what do you do? Pay them less when the business makes less money? No, you get paid more when it makes more money and you get paid less when it makes less money. And maybe some of your top-level executives, when you decide to do profit sharing or something like that, if they've been there for X amount of years, etc., etc. But employees should be paid fair market value because the business is volatile and most people want security. And so you're going to pay them a salary that makes sense in accordance with their skills they're providing to your business. The second piece or belief is that if there's a sudden increase in workload, direct reports, or an influx of clients, I should give them a raise. And this is very dangerous because again, this is volatile. What I see happen very often is that someone says, okay, well, we're about to launch this new thing. They're going to have way more responsibilities. I need to pay them more. And I'm like, you don't even know if the launch is going to go well. Let alone like how many customers are going to come from it, and you're going to pay them more in advance? Like, this doesn't make any sense. And the reason that it doesn't is because what do you do when it doesn't go well? What do you do when you realize that they're not a leader and they have to have less direct reports, right? What do you do if the launch goes off and it's a complete bust? What do you do if all those clients you're expecting to have come in don't come in and you've given that person a raise? Now you have to revoke something. But wait, you don't want to revoke it because that feels very uncomfortable. Instead, they're just going to be overpaid. And again, creating this distorted view in their mind that they should get paid in advance for work that has not yet been done. And so it never works out because then what ends up happening is you resent the fact that you're overpaying them. They're not doing the work that you anticipated. And so what's more reasonable to say is that I anticipate we're going to have an influx. I'm going to wait until we have normalized numbers. Or until I see that you are the right person for this job to have this many direct reports. And then we're going to revisit you getting a raise again in 90 days. Fair. And I explain to people, I'm like, listen, it's because I don't want to give you a raise and then realize that this thing that I thought was going to contribute to your workload, a large increase in workload, isn't going to exist in 90 days. And so we're going to wait 90 days and not make any changes because I don't want to do that to you. And people are very amenable to that. They're like, thank you. I don't want that to happen either because you know what people think? Sometimes people will think, okay, well, if they overpay me, then I'm also at risk of getting fired. And then they get even more insecure about their role. So the third belief is that if I offer more money, I will get better and more experienced people. True. Also not true. Okay. This is what I've seen is that there's two kinds of people that will apply for a role. One is the person who says, that looks like the job I want. It is similar to what I'm doing now. It is a typically like a slight increase in pay and responsibility, it is my next step. Right? And so then they will apply for the job. The other kind of person is somebody who says, why not? I'm getting paid almost half of that. I have no experience, but hey, might as well give it a try. Like, if you don't ask, the answer is always no. And those are always the two kinds of people that are going to apply for a job no matter what the pay is. And so again, it's one of the things that I've seen is that people assume if they put a high pay out there, that they're going to get people whose skills match the pay. And that is just not the case because there's a lot of people who are just trying. They're just like, there's some sucker out there that I'm going to get to pay me twice what I'm worth because they don't know, right? And they can talk up their experience and all these things and all of that stuff. But that is again something that you cannot be enamored by the fact that they applied for the position to look past, hey, what is their past experience? Hey, what were they paid in their last job? Hey, you know, what if they— what's their career trajectory right now is this the next step for them. And so those are the 3 beliefs that I have seen that do not serve you in terms of how you pay employees. And they're the ones that are most commonly made. And so you have to stay hyper-aware of them. Now, what I would suggest, and I'll go over this in a different video, is that you make a pay methodology. Okay. It's a, or a compensation philosophy, you could say. And so you basically decide how you're going to pay people and this protects you from your emotions. Because oftentimes you're going to at times feel guilty, especially if, again, like I'm mentioning, you're in a business that exploded and makes a lot of money. You're going to have this guilt feeling like, I should be giving money away. I should be doing more with it. I should be paying people more because I have more of it and I have a feeling of guilt. But other people in your business are not responsible for, you know, obeying the feeling of guilt that you have. And so whether you feel bad or feel good, that should not affect how you pay people. I say this because, seriously, it sounds like I'm almost against paying people more, and I am not by any means. I am pro-paying people more. What I am against is when you pay people more in the wrong way and then you set them up for failure because you say, "I'm paying you to do this, and now because I made the mistake of doing it too early or doing it the wrong way or doing it out of emotions, now you're here. And so now I either have to fire you or pay you less." and both set you up for failure. They're going to feel terrible. And so it really comes out of the fact that I think it all comes from really good intentions, but the outcome is less than desirable. And so you can have good intentions, but the impact can be detrimental to the business. And so if you are experiencing this, just really work on the beliefs you have around the money. Understand that just because the business makes more money, you should not be paying people more. Understand that just because there's a sudden increase in workload or responsibility, you should not immediately give someone a raise. And also understand that if you offer more money for a role, you will not always get people whose skills match that compensation and you should be diligent about doing your research. And so I hope that this video made sense and broke some of your beliefs about why you should not use your emotions to dictate how you pay people and you should come up with a compensation philosophy, and I will definitely cover that in one of the coming videos. So if you like this video, go ahead, hit subscribe, and I will see you on the next one.
