Take the lead when it comes to money and boundaries

By Andi Gray

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We have an employee who keeps stretching the limits. Asks for reimbursement of expenses that we don’t usually reimburse. Frequently requests salary increases. Asks for special favors regularly. Tends to take it personally, as if I’m not doing a good enough job of meeting his needs. I need to realize it’s just who he is and draw the line before things get out of hand.

THOUGHTS OF THE DAY: Talking about compensation and what people should earn can be uncomfortable for many people. Knowing your company’s limits is crucial. So is knowing what the policies are and applying them uniformly. Often fear of losing someone at a critical time results in making an unsustainable offer.

Perhaps your employee is more comfortable than you are when it comes to talking about money and how to get paid more. Or, at least more motivated to pursue the subject. Take a look at why that is. Are you uncomfortable in general discussing what people get paid or is it just this employee’s approach that is a problem?

It’s crucial to figure out what each position in the company is worth and to know what the company can afford to pay. Worth helps in goal setting. Gross profit for any position, the profit before overhead that is produced by the people who work in the company, should be at least three to four times the cost of their payroll.

Setting boundaries on expenses is equally as important. Spending because of need without monitoring what the company can afford can throw any company’s budget into turmoil. Use a budget to set limits. If spending in one area goes up, spending in another area has to come down to match.

Use policies to control both salaries and expenses. Set ground rules for how to determine and adjust both. And share the load of responsibility. For example, budgets are set annually and evaluated monthly to see if everything is on plan. Departments are accountable for staying within budget. Set up a group of people who meet to make recommendations or decisions on spending requests. In case of emergencies have a small but adequate slush fund they can draw on, but hold back on allocating funds until the spending committee unanimously decides what to do. Make sure that everyone in the company understands the company policy of annual budget requests and spending committee approvals.

Never let someone in the company get away with bullying tactics. Most people who threaten to leave if they don’t get their way, or say they can’t do their job without additional financial support, ultimately will do just that when they’ve milked the situation for all it’s worth. They’re not bought into the common good of the company and the common mission of building a company that can serve the needs of everyone in it. Be prepared to let them go. If their job is critical, make sure that others in the company can back them up and do some or all of their job. Build a plan to have a backup trained for every function in the company. That will make it much easier to get through balanced negotiations when someone decides to threaten to leave.

LOOKING FOR A GOOD BOOK? Try “Managing Employee Performance and Reward: Concepts, Practices, Strategies,” by John Shields and Michelle Brown.

Andi Gray is president of Strategy Leaders Inc., StrategyLeaders.com, a business consulting firm that teaches companies how to double revenue and triple profits in repetitive growth cycles. Have a question for AskAndi? Wondering how Strategy Leaders can help your business thrive? Call or email for a free consultation and diagnostics: 877-238-3535, AskAndi@StrategyLeaders.com. Check out our library of business advice articles: AskAndi.com.

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About the author

Andi Gray
Andi Gray is president of Strategy Leaders Inc., strategyleaders.com, a business consulting firm that specializes in helping small to midsize, privately held businesses achieve doubled revenues and tripled profits in repetitive growth cycles. Interested in learning how Strategy Leaders can help your business? Call now for a free consultation and diagnostic process: (877) 238-3535. Do you have a question for Andi? Email her: AskAndi@StrategyLeaders.com. Visit AskAndi.com for an entire library of her articles.

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