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employees

Are You Treating Your Long-term Employees Well?

by Steve Lange on January 29, 2010

A recent post You Probably Mistreat Your Best Clients, by Tim Berry on his Planning Startup Stories got me thinking about a corollary … Do businesses treat their new hires better than their existing long-term employees?

Berry asks: Do your long-term loyal clients get the worst treatment? Do they pay the highest rates? Do you take them for granted? Do you give new customers better rates than existing customers?

Many pundits, organizations, governments, universities, authors, bloggers, and companies are proud to announce to one and all that “Their employees are their most valuable assets.” But is it really true? Do they really treat those employees as most valuable? Ask yourself the same questions, but substitute employees for clients and customers.

Do your long-term loyal employees get the worst treatment?

Do you take your long-term employees for granted? Do your long-term employees become invisible, competently doing those behind-the-scenes support roles so well that management just sort of assumes they will always be there? Do they perform their jobs so well that they are never considered for promotion or new opportunities? So necessary, yet so overlooked.

Do they get paid the highest salaries or the lowest? Have your people’s salaries kept pace with inflation and the cost of living?  Do your most senior employees have less spendable income now than when they were hired? In some companies, especially those teetering on the edge of the cash flow abyss, it is entirely possible that they are now in violation of Wage and Hour laws because Federal and State Minimum wage amounts jumped ahead of what some people make, especially as many companies chose to forgo employee raises in 2009.  That’s easy to test, for yourself: take the suspect salaries and compare them to the minimums.

Do you give new employees better salaries than existing employees? This one is prevalent in many businesses. It’s not that companies intentionally set out to short-change their long-term employees. It’s just that COL raises never keep pace with inflation, but new employees seek jobs with starting salaries commensurate with the current job market. The loyal, stable, current employee suddenly finds that the new hire, often in a lower tier in the organizational structure, is being paid more than they are, after putting in years of service building a successful company. And here’s a good test of that one: if you had to hire a new person to replace your existing one, would you have to pay more than their salary, or less?

Does it cost more to get a new employee or keep an existing one? Most companies know that the cost of losing an employee, and recruiting and training a new one, is very high. That’s in the business literature everywhere. Still, as a reminder, this is a paraphrase of a marketing axiom that it costs more to get a new customer than to keep an existing one. This can apply to employees as well. Remember, in this context, that there is the productivity lost when the employee is no longer present. Next come the costs for advertising, screening, interviewing and filling the position. Then there are the losses during training periods, where you have two people (trainee and trainer) working at less than peak performance. In some cases the company loses skills and knowledge that can never be reacquired.

Those loyal long-term employees can save you from Santayana’s Law of Repetitive Consequences, i.e., “Those who cannot remember the past are condemned to repeat it.” A “new” hot marketing program idea, for example, may turn out to be a complete waste of time and money … just like the last time it was tried … reinventing the flat tire, as it were … if there is no one left in the company who remembered when it flopped before.

Your long-term employees are the folks that helped you start up and grow your company to where it is today. They were key to the foundation of your venture, and now provide continuity between where you have been and where and what you plan to become.

Steve Lange

Senior Editor
Palo Alto Software

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A message from Palo Alto Software’s CEO  Sabrina Parsons: Steve is right! And the good thing is, as a long term employee who retires today,  Steve was a very welcome part of the team who will be missed. A message from Steve about retiring:

“What a long strange trip it’s been…” Ok, so I’m not part of the Grateful Dead –”I’m not dead yet. Too old to rock ‘n’ roll; too young to die.” — but I can certainly be one of the Grateful Retired.

Twelve years! That’s the longest I worked at any one job, and the longest I worked in any one industry. Whodathunkit.
Lots happened at Palo Alto during that time, and I traveled and learned as I participated in that journey.

Thanks to all of you for your friendship, your encouragement, and for laughing at my awful puns.

“Adventure’s out there!” — UP!

Steve

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Crucial Business Step: Adding the Second Person

by Tim Berry on June 24, 2009

One of the biggest business steps you’ll ever take is adding the second person to your one-person business. Especially if that second person is a partner, co-founder or investor, the difference can be like night and day.

After that, it’s never fully your business again.

This is a lot like the little girl with the curl on her forehead (when she was good, she was very, very good, and when she was bad, she was horrid–an old English rhyme). When they work out well, teams make businesses. But opening up to that next person also means you’ll never make another decision by yourself. You’re part of the team. You’re a player.

In most cases it’s a difficult decision, but one based on fairly obvious questions: Do you want to grow the business? Are you willing to take the risk? How will you feel if you try and fail? Can you share the work, the decisions and the company?

There are rare cases of great one-person businesses. It happens. But usually growth takes people working in teams.

There’s paradox here: On one hand, you want to partner up with people different from you, whose skills fill your gaps and make the company broader. You want different skills and different backgrounds. On the other hand, it’s generally easier to get along with people similar to you. You’ll talk about “fit,” and think about things like working habits, style and compatibility.

Don’t think majority ownership eliminates potential problems, so that you stay in charge. It doesn’t. Minority owners have rights.

And don’t think making people employees instead of partners eliminates potential problems. You’ve started a community, and even though you’re signing all the checks, you’re not alone: You’re the leader of a community. Things have changed. If you don’t care about the other people, there’s no team. And once you care, you’re no longer making decisions alone.

I’m not saying that the one-person business is better. I am saying that the step of going from one to two is crucial.

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If the Sky is Falling, Say So

by Tim Berry on November 25, 2008

(Note: I posted this earlier on Small Business Trends. I’m reposting here for the convenience of my readers at Entrepreneur.com. Tim)

A couple of weeks ago a well-known local restaurant with 40-some employees closed its doors on a Monday morning without telling anybody in advance. Employees arrived Monday to a sign saying the business had closed.

Last week a printing company with 85 employees did the same thing. The people arrived Monday morning to read signs that the company had closed.

That’s what everybody fears these days. Is it going to happen to me?

Nobody wants to be told not to worry when things are bad. If you are in charge, they want you to share your worry with them, treating them like adults.  If you do, they’re likely to feel part of the team, and pitch in and help.

And if you don’t, you have anger and resentment to deal with, as well as disappointment and worry. People who lose their job from one day to the next, without any advance notice, are very angry.

I learned this the only way there is to learn this, running a company during a recession. I laid off five of 33 people in one day in 2001. Our sales fell hard when the dotcom bubble burst. We were slow to react. When we finally did react, our people were relieved to see us taking steps. Everybody pitched in.

And it also seemed easier to lay off five people the same day than that hardest of all things an owner does, fire somebody who’s been trying but failing. At least when it’s five at once, which was about 15 percent of our work force back then, people understand that it’s a larger cause, not a personal failure.

This whatever-it-is (recession, depression or whatever) is a lot worse than 2001, but the principle still applies. If you’re running a company right now, your people want to know how you’re doing. Don’t tell them not to worry their pretty heads. They want to be part of the solution. It’s normal human nature: People naturally want to be included in things. When times are tough, they want to know.

I’ll bet every one of the 40-some employees in that closed-down restaurant situation wishes the eatery had seen the problem coming, cut costs, maybe laid off some employees but stayed in business. And I’ll bet every one of the 85 employees in the printing business wishes it had cut it to 60 or 50 or 40 employees but stayed in business.

And I’ll bet they are all angry at the surprise. Several were quoted in the newspaper. “Why weren’t we told?” they asked.

If you’re an owner, don’t think you’re doing anybody a favor by not sharing your worries.

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13 Years: A Long and Winding Road

by Steve Lange on September 25, 2008

Yesterday Cale Bruckner had his 13th anniversary with Palo Alto Software. Vie Radek had hers on April 15, Connie Muller this Thursday, and Jake Weatherly and Teri Epperly next year.

So I know that 13 years is nothing compared to Microsoft or IBM or General Motors, but what’s cool about these anniversaries is that there were only 10 or so employees back in 1995, and most of them are still with us.

That, in small business, is an achievement. Their achievement, putting up with the ups and downs of a small software company; and ours, in keeping the good people.

There are 45 of us now. When Vie and Cale and Connie started, Business Plan Pro was in its first version, and was just barely making it in retail. Today it’s in its eleventh version.

Palo Alto employees in 1996

The picture here was taken just two months shy of 12 years ago, in November of 1996, at a roller skating rink. The people shown here were more than half of Palo Alto Software’s employees at that time. The key people missing who are still with us are my wife Vange, who (I think) took the picture; and Jake Weatherly, who had just joined.

From the left, you have me, Luke Walsh (now with Right Media, a Yahoo subsidiary), Cale Bruckner, Connie Muller, Cristin Berry, Vie Radek, and Teri Epperly.

If you add Vange and Jake back into the picture, who were very much a part of it but not pictured, then the only people from back then that we’ve lost were Luke, now at Right Media; and three others, also not pictured, one who retired in his late 50s, one who moved to the East Coast when she married, and one who, well, didn’t fit. And he’s doing well on his own, in sales. Cristin, also pictured, was 13 when that picture was taken, but she’s also been a full-time employee since she graduated from Whitman College four years ago.

And I might add that it’s been more than 18 months now since the new management team took over, and Vie, Cale, Connie, Teri, and Jake are still with us. That speaks a lot for continuity, and what’s good about them, and us. That makes me proud.

Tim Berry
Founder and President
Palo Alto Software

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My favorite business by handshake deal

by Steve Lange on April 23, 2008

It was just a coincidence…maybe. But just last week, after reading Tim Berry’s True Story: Business By Handshake post on his Planning Startups Stories blog, I was watching for the umptyteenth time, the movie Casablanca and saw one scene with an entirely new light.

Monsieur Rick is negotiating the sale of his saloon, Rick’s Cafe American, to his friendly rival, Signor Ferrari keeper of the Blue Parrot.

A waiter brings tea to Rick and Ferrari, who sit alone at a table in a secluded nook off the main room.

Ferrari: Shall we draw up papers, or is our handshake good enough?

Rick: It’s certainly not good enough. But since I’m in a hurry, it’ll have to do.

Ferrari pours a cup of tea for Rick, who takes a sip.

Ferrari: Ah, to get out of Casablanca and go to America! You’re a lucky man.

Rick: Oh, by the way, my agreement with Sam’s always been that he gets twenty-five percent of the profits. That still goes.

Ferrari: Hmmm. I happen to know that he gets ten percent. But he’s worth twenty-five.

Rick: And Abdul and Carl and Sacha, they stay with the place, or I don’t sell.

Ferrari: Of course they stay. Rick’s wouldn’t be Rick’s without them.”

Rick: Well, so long.

Rick gets up, followed by Ferrari. They shake hands to seal the deal. He walks to the door, then stops and turns around.

Rick: Don’t forget, you owe Rick’s a hundred cartons of American cigarettes.

Ferrari: I shall remember to pay it… to myself.

—Warner Brothers Pictures 1942, screenplay by Julius J Epstein, Philip G Epstein, Howard Koch

Classic!! There is the business deal by handshake.

And there’s more business there. Taking care of partners. Recognizing the value of employees to the success of a newly acquired business. Squaring up of existing debts.

Watch the film again sometime. It is much more than a romantic adventure. It is filled with business. Up front business, shady business, back room business, intrigue business, political business. Business business everywhere!

Steve Lange
Senior Editor
Palo Alto Software

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