I read an article on LinkedIn by Brigette Hyacinth reminding businesses that if they don’t take care of their employees, they won’t produce great customer experiences. (Read the article here)
It got me to thinking about how businesses operate. In my many years working for large, publicly-traded companies, some things were quite evident. In these companies, there are 4 main categories of people – customers, employees, senior leaders, and shareholders. When it comes to financial matters, a very clear and obvious pecking order emerges.
When times are good and profits are high, there is extra money to distribute. In what order does it get distributed?
1. Senior Leaders
2. Shareholders
3. Customers
4. Employees
When times are tough, and there are costs to absorb or normal monies or benefits the must be reduced, you can probably guess who gets hit in what order.
1. Employees
2. Customers
3. Shareholders
4. Senior Leaders
Said even more simply, employees are the last ones to reap the benefits of good times and the first ones hit when times are hard. In good times, senior leaders get larger stock options and bonuses, and shareholders get larger dividends. The customers might benefit from lower prices, but more likely it is a slower rate of price increases. By the time the employees are attended to, most of the profits are spoken for, and the employees might get a nice yearly bonus, but their pay increase at annual review time often is lower than the inflation rate. Should the company have a terrible year, the first things that get chopped are employee bonuses and pay increases. Customers immediately get hit with higher prices. Shareholders may get the pain of a lower stock price, but dividends rarely get cut. And as long as the company stays out of court, senior leaders are going to get the same payouts as they would if the company had performed at the highest level.
Naturally, this leads to some not-so-motivated employees. Large companies have one big advantage, though. This model is religiously adhered to by just about every publicly traded company you can think of. Employees might be disgruntled, but if they go work for another big corporation, they’re going to be facing the same revenue distribution model.
What if we had some daring company that was willing to do things differently? As Hyacinth said in the article, “If you want to get the best out of your employees – Take care of them!” What about distributing profits like this:
1. Employees
2. Shareholders
3. Senior Leaders
4. Customers
This might seem like it’s not fair to customers on the surface. When I am shopping around for a product or service, I can tell a lot by how I interact with the company’s employees. There are times when I don’t mind paying more for something when I know what I’m getting is the best quality, and I have the most pleasant experience in acquiring it. In this scenario, where times are good, prices probably still go up, but at a slower rate. Shareholders have to get a big cut; their monetary investment in the company is critical to the business operations. Senior leaders can still count on a good payout.
Left up to me, this is how it would flow. I believe such a company would have highly-motivated employees, which would increase the number and frequency of customers and sales. Everybody wins.
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