3 Reasons Why One Company’s $70,000 Minimum Wage Hurt Everyone Who Got It

At Payment Systems, Inc., everyone now gets $70,000 a year minimum. But people are quitting, and others are sharing complaints heard in factories a hundred years ago. Shouldn’t everyone be thrilled?

There are three big reasons why this is destructive, and such a bad idea for the people who work there.

Dan Price, the CEO, thought he was giving everybody a great gift great four months ago. Everybody loved it up front. But big cracks are appearing in the idea, because giving everyone a $70,000 minimum wage simply continues the archaic wage practices of the Industrial Age. And it has the same effect—destroying the human spirit. Here’s why.

Reason #1—People Want to Make Meaning, Not Money
In her research on Generational Differences in Work Values, Jean Twenge found that Millennials to Baby Boomers are all motivated by the same thing—Making Meaning. A recent Salary.com survey also found that people who are focused on the size of the paycheck are less motivated.

Semco is a billion dollar company with 3,000 Stakeholders. They require people to determine their own pay. Every six months you go to a computer and plug it in. You would think chaos would ensue. But the company regularly has to adjust pay UP as people fall behind the industry average. Why? Because Semco leadership is focused on ensuring everyone finds their work extremely meaningful. For the last 30 years, Semco’s retention has hovered around an unheard of 99% per year. And almost no one makes more than the industry average. Meaning trumps money every time.

Another study by Sylvia Ann Hewlett, on attracting and keeping the best people, shows that at least three things motivate people more than money; flexible work schedules, praise and recognition, and breaking up the work day with walks, bike rides, swims or other non-work activities. A simplistic $70,000 pay raise addresses none of these more important meaning-oriented motivations.

Reason #2—Meaningful Work is Results-Based, not Time-based
This $70k minimum wage is a throwback to an archaic system.

For thousands of years people got paid for how many shoes they made, and how well they were made. The better the shoe, and the faster they made it, the more money they made. They were solving problems and Making Meaning, and money came to them as proof.

Along came the Industrial Age Factory System and all that changed. For the last 175 years, and for the first time in human history, we have paid people simply for time spent working. How dumb is that? Gravity Payments fell victim to the Industrialist’s mindset—paying people without regard to production.

In an interview with the New York Times, Price said, “I want to fight for the idea that if someone is intelligent, hard-working and does a good job, then they are entitled to live a middle-class lifestyle.” Interesting quote, because his solution does not reward people for that hard work or for doing a good job.

Alan Wyngarden owns a mortgage company and went results-based. He reduced his loan processor’s base pay from $55,000 to $24,000, then incentivized her for how many high-quality mortgages she produced each month. Within a year she was producing three times as many mortgages at a higher quality, and making $135,000 or more per year. When pay is disconnected from results, people find it hard to be motivated to do great work. It’s basic capitalism.

You can see the angst creeping in. People know that getting paid without regard to performance is a bad idea. Stephanie Brooks, an administrative assistant, said, “Am I doing my job well enough to deserve this? I didn’t earn it.”

Reason #3—Raising Everyone’s Pay to $70,000 is LCD Management
Lowest Common Denominator Management levels everyone with broad, sweeping policies that ignore individual performance and team contributions. Everyone “gets an A” (or an F) no matter how they perform.

Marisa Mayer, CEO of Yahoo, found some people not working well from home. So she just herded everyone back into the office day care center to be supervised. In this case, she gave everyone an “F”, even those who deserved an “A”. Motivated people got the same “reward” as the lowest common denominator.

Dan Price at Payment Systems has given everyone a de facto “A”, which treats lazy people the same as top performers. Grant Moran, a web developer who got a $20,000 pay raise but quit after the $70k minimum wage was enacted said, “Now the people who are just clocking in and out are making the same as me, It shackles high performers to less motivated team members.” LCD Management—the great leveler.

Maisey McMaster quit because, as she put it, “He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump.” Everyone gets an “A”.

How to Fix This
People are motivated differently, and one size does not fit all. Great incentives include a variety of rewards and take into account individual motivations. Bad incentives are simplistic, focused solely on money, and imposed by a top-down hierarchy (Industrial Age LCD management) which assumes it knows better what you need, without including you in the solution.

Tying income directly to production helps people love their jobs. At our company, nobody will ever get a pay raise because they hung around another year. They get them because they add more value than they used to—a very capitalist idea. As a result, people are more motivated to work, create, solve, and innovate, and get pay raises that reflect those results. We’ve had zero voluntary turnover in nine years. Why would people leave a results-based system that focuses on making meaning, and doesn’t shackle them to people who aren’t as motivated?

Great companies focus first on:

a) building meaning into their work,

b) tying pay to results, and

c) creating a Highest Common Denominator workplace that celebrates great contributions and reaching for the stars.

People will raise themselves to our lowest expectation of them. The most motivated achievers with brains are leaving Price’s company, and over time, only the least motivated will stay. Play a game that motivated adults want to play, and great achievers will rise to your greatest expectations of them.

Making meaning, and results-based incentives always attract great people. LCD Management makes them leave. Your choice.

Article as seen on Inc.com

The Post Office Can (and Will) Sell Your Stuff, Even Before the Delivery Date

Caveat emptor.

The U.S. Postal Service makes a profit from selling your lost stuff. It auctioned off $3,100 worth of my books before they were even supposed to be delivered, and continued to sell them long after it was made aware of the issue. “Fascinating!”

I regularly tell business owners that regardless of the circumstance, whether you perceive it to be good or perceive it to be bad, it all deserves only one response—“Fascinating!” My recent experience with the U.S. Postal Service was about as fascinating as it gets.

Considering what happened, there might have been a few other F-words early on, but we got to “Fascinating!” as fast as we could. It’s really a much healthier place to work from. You have to have a sense of humor about this stuff because life is really too short to be little. But this is so bizarre that I think as a public service, others should know about this obscure, but extremely common practice by the USPS.

Where’s Waldo?
In May we shipped 20-plus cases of books to a conference where I was supposed to be in front of thousands of people for a keynote. Four cases of them, 88 books, never arrived. They were the very first books out in public from our new, second edition of Making Money Is Killing Your Business. We filed a claim with the USPS, but knew the chance of ever seeing them was negligible. We went ahead and reshipped them via FedEx (they all got there). The P.O. losing stuff isn’t new, but what follows gets goofy.

A week later one of our staff was finalizing our new Amazon.com account for the second edition and found “used” copies for sale by multiple companies on Amazon. This made no sense since the only books that were public from this new edition were on their way to that conference. The online resellers told us they had bought the books at a U.S. Postal Service “Mail Recovery Center” auction days earlier, before our books were even supposed to arrive at their destination. “Fascinating!”

Hello? Is anybody home?
For over a week we contacted everyone at the U.S. Postal Service we could think of, from the local station manager, to Consumer Affairs, to the Postal Service Inspector’s Office. The responses ranged from versions of “tough nuggies” to “it’s not my job.” After a Denver TV station ran a lengthy news segment on it, USPS people started coming out of the walls, not apparently to solve the problem, but to contain the PR damage. But at least we learned what was going on. And you should know as well; it really is fascinating.

Sold to the man in the lime-green leisure suit!
Ever wonder where your lost packages end up? According to the Colorado Consumer Affairs Office for the Postal Service, they sell stuff all the time when they can’t find the owner, or in our case, before they attempt to find the owner. This is true whether it’s insured or not. For decades it used to be a live auction at a few locations around the U.S. Then the whole auction thing was moved to Atlanta to something loosely named the Mail Recovery Center, or MRC (“recovery” may not have been the best choice for the title).

Now the whole thing is online and you can buy my stuff every day. And the profits all go to keeping the Post Office solvent, so you can feel good about that. Consumer affairs said the MRC sold my stuff because anything valued (by them) at under $25.00, and books that arrive in lots of 10 or less, can be sold immediately.

How cool is that? Great profit center for the P.O. Except my books are clearly marked $28.95 each and arrived at the MRC in one lot of 88 books. They were auctioned off that way—again, before they were even supposed to arrive at their destination (I keep saying that because the whole story is more “Fascinating!” that way.) They’re supposed to hold everything for 30 to 180 days, but apparently that is only in theory. Consumer affairs had no explanation for why the books weren’t held for any length of time, or why they didn’t try to find the guy whose name was splashed across all 88 covers.

After weeks of waiting, we finally got the Post Office to buy back some of the books from the online resellers and send them to us. But as of yesterday, almost three months later, those same resellers were still selling some of my new books as “used,” on our own Amazon.com account, and one claims they bought more of my books from the P.O. just last week. Bizarre. The Post Office made a tidy profit selling our $3,100 worth of books, and the third-party dudes were making a killing as well. At least someone was having a good time.

Can I have some of that?
I asked the P.O. if they were going to give me the profits they made from my books. Consumer affairs gave me a flat “no.” I’ll check with my accountant to see if I can take their profit as a deduction on my taxes, but I’m guessing I’ll get another flat “no.”

It ain’t over till it’s over
I tried for another month to get the P.O. to pay enough attention to buy back the rest of the books still being sold online, but they had already sent me a letter in June that my situation was resolved. Many emails and phone calls since have come and gone without a response. I guess sending the letter makes it resolved.

Going, going, gone!
They’re probably all in the Bahamas living off the profit from my book. Who could blame them? I guess maybe me, but again, life is too short to be little. But I thought you all needed to know the Post Office has found alternative profit centers auctioning off your stuff, in case you wanted to ship with more reliable and responsive services that make their profit off getting your stuff where it’s supposed to go.

“Fascinating!” (But not surprising, right?)

Article as seen on Inc.com

I regularly tell business owners that regardless of the circumstance, whether you perceive it to be good or perceive it to be bad, it all deserves only one response—“Fascinating!” My recent experience with the U.S. Postal Service was about as fascinating as it gets.

Considering what happened, there might have been a few other F-words early on, but we got to “Fascinating!” as fast as we could. It’s really a much healthier place to work from. You have to have a sense of humor about this stuff because life is really too short to be little. But this is so bizarre that I think as a public service, others should know about this obscure, but extremely common practice by the USPS.

Where’s Waldo?
In May we shipped 20-plus cases of books to a conference where I was supposed to be in front of thousands of people for a keynote. Four cases of them, 88 books, never arrived. They were the very first books out in public from our new, second edition of Making Money Is Killing Your Business. We filed a claim with the USPS, but knew the chance of ever seeing them was negligible. We went ahead and reshipped them via FedEx (they all got there). The P.O. losing stuff isn’t new, but what follows gets goofy.

A week later one of our staff was finalizing our new Amazon.com account for the second edition and found “used” copies for sale by multiple companies on Amazon. This made no sense since the only books that were public from this new edition were on their way to that conference. The online resellers told us they had bought the books at a U.S. Postal Service “Mail Recovery Center” auction days earlier, before our books were even supposed to arrive at their destination. “Fascinating!”

Hello? Is anybody home?
For over a week we contacted everyone at the U.S. Postal Service we could think of, from the local station manager, to Consumer Affairs, to the Postal Service Inspector’s Office. The responses ranged from versions of “tough nuggies” to “it’s not my job.” After a Denver TV station ran a lengthy news segment on it, USPS people started coming out of the walls, not apparently to solve the problem, but to contain the PR damage. But at least we learned what was going on. And you should know as well; it really is fascinating.

Sold to the man in the lime-green leisure suit!
Ever wonder where your lost packages end up? According to the Colorado Consumer Affairs Office for the Postal Service, they sell stuff all the time when they can’t find the owner, or in our case, before they attempt to find the owner. This is true whether it’s insured or not. For decades it used to be a live auction at a few locations around the U.S. Then the whole auction thing was moved to Atlanta to something loosely named the Mail Recovery Center, or MRC (“recovery” may not have been the best choice for the title).

Now the whole thing is online and you can buy my stuff every day. And the profits all go to keeping the Post Office solvent, so you can feel good about that. Consumer affairs said the MRC sold my stuff because anything valued (by them) at under $25.00, and books that arrive in lots of 10 or less, can be sold immediately.

How cool is that? Great profit center for the P.O. Except my books are clearly marked $28.95 each and arrived at the MRC in one lot of 88 books. They were auctioned off that way—again, before they were even supposed to arrive at their destination (I keep saying that because the whole story is more “Fascinating!” that way.) They’re supposed to hold everything for 30 to 180 days, but apparently that is only in theory. Consumer affairs had no explanation for why the books weren’t held for any length of time, or why they didn’t try to find the guy whose name was splashed across all 88 covers.

After weeks of waiting, we finally got the Post Office to buy back some of the books from the online resellers and send them to us. But as of yesterday, almost three months later, those same resellers were still selling some of my new books as “used,” on our own Amazon.com account, and one claims they bought more of my books from the P.O. just last week. Bizarre. The Post Office made a tidy profit selling our $3,100 worth of books, and the third-party dudes were making a killing as well. At least someone was having a good time.

Can I have some of that?
I asked the P.O. if they were going to give me the profits they made from my books. Consumer affairs gave me a flat “no.” I’ll check with my accountant to see if I can take their profit as a deduction on my taxes, but I’m guessing I’ll get another flat “no.”

It ain’t over till it’s over
I tried for another month to get the P.O. to pay enough attention to buy back the rest of the books still being sold online, but they had already sent me a letter in June that my situation was resolved. Many emails and phone calls since have come and gone without a response. I guess sending the letter makes it resolved.

Going, going, gone!
They’re probably all in the Bahamas living off the profit from my book. Who could blame them? I guess maybe me, but again, life is too short to be little. But I thought you all needed to know the Post Office has found alternative profit centers auctioning off your stuff, in case you wanted to ship with more reliable and responsive services that make their profit off getting your stuff where it’s supposed to go.

“Fascinating!” (But not surprising, right?)

Article as seen on Inc.com

A Business Plan Is More Likely to Hurt Your Business Than Help It

Not a single Fortune 500 was started with a business plan; not one. They understood that the second worst thing someone starting a business can do is create a traditional business plan, and the worst thing they can do is follow it.

Exhaustive Pre-Planning Is a Disease
Highly detailed pre-planning is a business disease of the Industrial Age that became popular as companies grew to giant proportions and as educators began imposing their cognitive world view on an otherwise intuitive business world. They forgot how they got there and started telling everyone else to do something they would have never done—plan out the next five years of your business in detail before you get started.

 

How it Really Works
Jason Fried, co-founder of 37Signals tweeted, “Unless you are a fortune-teller, long-term business planning is a fantasy.”

Bill Hewlett said of the early days of HP, “When I talk to business schools occasionally, the professor of management is devastated when I say we didn’t have any plans when we started.” With $500 and no clear direction at all, Hewlett and Packard built the cornerstone company for Silicon Valley.

Dick and Mac McDonald opened a hot dog stand in 1937, which didn’t become the McDonald’s we know until eighteen years later, when Ray Kroc bought the rights to it. Just about every successful business has followed a similar path to one of these three; no fancy business plan and a lot of groping around to find the right formula.

Pre-Planning is a New Thing
Pre-planning wasn’t a hallmark of business before the Factory System of the early 1900s. But when you’re propping up a giant factory or trying to take over an entire industry, it lends itself to a lot of senseless pre-planning.

Business plans really only became popular recently, and the rest of us have caught the disease. It has become an obsession in business schools and with government organizations like the SBA. Ironically, it has only picked up steam as the Industrial Age which spawned it fades behind us. This obsession is a natural (but unhelpful) outcome of an Industrial-based education system that relies more heavily on cognitive and didactic lecturing than on real-world learning.

Pre-Planning Is Unsupported By The Facts
In 2011 a website posted an article about Fortune 500 businesses that had started in a garage or other interesting places. They listed the top five, then gave the seven lessons you should learn from these startups. Number one was “Develop a business plan”. This was a strange conclusion, since there was nothing in the history of these startups that would lead anyone to conclude a business plan was a good idea. It was a giant, illogical and biased leap, and completely ignored the history of these companies. But the obsession with exhaustive pre-planning that we inherited from the Industrial Age is so ingrained that we see it even where it doesn’t exist.

Pre-Planning Favors Lawyers, Not Business Founders
The roots of this obsession go back to the late 1800s. Judge Lord Esher, an Englishman steeped in the Industrial Age, expressed the need for pre-planning in every facet of life. His teaching has evolved into what is called the Precautionary Principle, which generally states that if you can think of something that might go wrong, don’t do anything until you have a contingency in place to cover for every paralyzing possibility. If you do something without having covered all possible contingencies, according to Judge Esher, you’re criminally liable.

Lawyers, who are largely Industrialists, love the Precautionary Principle. It cost McDonald’s millions of dollars because someone spilled coffee on herself that already had a “hot” warning label. The Precautionary Principle says McDonalds should have never served hot coffee without knowing that some judge would find their warning too small, or that someone would try to open the cup one-handed in between their legs while driving.

Pre-Planning Kills Creativity
That all sounds pretty reasonable, except it is sucking the life out of our willingness and ability to create, innovate and take the risks necessary to build great things. The cleaned up world we inherited from the 19th and 20th century Industrialists have nearly sterilized the creativity right out of us. We are becoming so risk-averse that it is a national epidemic. The education system, the government and big business all are teaching us to live by the Precautionary Principle; don’t move until you have everything figured out.

Great Founders Do Very Little Pre-Planning
Great businesses don’t start that way, regardless of how much professors and the education system extol the virtues of pre-planning and the sacred cow called “The Business Plan”. Bill Hewlett’s version of planning rules, “We were just opportunistic. We did anything to bring in a nickel. We made a bowling alley foul-line indicator, a clock drive for a telescope, a thing to make a urinal flush automatically, and a shock machine to make people lose weight. Here we were, with about $500 in capital, trying whatever someone thought we might be able to do. So we got into this thing not by design but because it worked out that way.”

That’s how real businesses start, including virtually every business you can think of today that has been highly successful – they made it up as they went along, and planning was something they did as they moved, not before they moved.

Detailed Pre-Planning Doesn’t Work
While speaking to thousands around the world, I find that somewhere between 3-6% of business owners who did not need a bank loan to start, created a business plan anyway. But I have yet to find a single business plan at any level that worked out the way the plan said it would three to five years later. It’s like taking snapshots of traffic lights from one place to another and then trying to actually drive using the photos. Nothing good will come of it.

Movement Creates The Plan
I’m not against planning – we should be doing it at every step along the way as we are moving. I’m not even against a little bit of pre-planning. But massive pre-planning has a near 0% effectiveness at doing anything but killing innovation.

Successful companies do it more like HP. They come up with a very simple idea, get moving, then evaluate and plan as they go. They don’t stop to plan, because successful entrepreneurs understand that planning never creates movement, but movement creates the plan. Every Fortune 500 is a testimonial to this. I’ve started ten successful businesses that way. Stop planning. Get moving.

Implement Now. Perfect As You Go.
Massive pre-planning is a business disease of the Industrial Age. Dump the business plan. Implement now, and perfect as you go. If you do, you have a much higher chance of success than if you plan it all out before you get started.

Article as seen on Inc.com

Turn Everyone Into a Capitalist and Watch Your Company Grow

Turning everyone into a capitalist is essential for creating a Stakeholder’s culture, where everybody brings their brain to work and takes responsibility to build a great company, not for you, but with you. And it will make you more money.

Next to owning a piece of the company, incentive-based pay is the highest form of ownership. Leaders understand that if everyone shares in the fruit of their labors, they will take ownership of the entire process and of the company itself.

 

Why Not Invite Everyone to Be a Capitalist?
You cannot preach ownership to people at the task, job, process, and result levels, without tying incentives to those results. What you are saying is, “You work harder, but I’m keeping the fruit of your increased labor for myself.” Founders and CEOs are incentivized to grow their companies and reap both the monetary rewards and the satisfaction of having added value to the world around them with a great product or service. Smart businesses are now giving everyone the same motivation.

Traditional Bonus Plans Don’t Work
Many arguments have been made in the last couple decades against things like profit-sharing and bonuses, but most of them assume a worn-out approach that is easy to discredit; top-down plans focused on individual performance, and with little regard for the intrinsic motivators that make us tick.

In the 1990s, HP instituted a disastrous incentive-based pay program that was dismantled three years later. It was doomed because it was top-down, focused on individual performance (not team), and was changed as soon as people starting to hit it.

A number of years ago, Harvard Business Review ran an article on Why Incentive Plans Cannot Work but it made the same assumptions as the HP plan and assumed that incentives were all about the individual’s pocket book.

In both cases, and in the case of almost every incentive plan in place today, the focus is solely on extrinsic rewards (making money), without any attachment to intrinsic rewards (making meaning).

The Key – Extrinsic Meets Intrinsic
Incentive plans only work in companies with great culture, where the primary focus is on Making Meaning, and ensuring everyone is growing, learning, and contributing by doing things that they find personally satisfying. In most companies, incentive plans are put in place because the intrinsic value of work and of each person’s contribution is not the top priority. In that case, incentives are an attempt to buy off the abused. The leadership is unmotivated to change the way they value people, so they hope money will do the trick.

If great value is placed first on Making Meaning, then incentives are a powerful way to build on those intrinsic rewards. To work, we think they should be on three levels:

1) Personal—I want to know that I am recognized for being as good as I am.
2) Team—I should be heavily incentivized to make others successful, not just myself.
3) Company—If I’m not working hard to make the company better, I’m not contributing the way I should.

Rewards Include Time, Experiences, and Recognition
All three of these should be in the form of either more time off after hitting goals, or more money, rewards, recognition, and experiences for exceeding them. And they should be distributed as close to the good performance as possible. That is partly why profit-sharing by itself doesn’t work—it just functions as part of an annual salary—nobody knows exactly why they got it.

Incentives Have Worked For Thousands of Years
How do we know incentive-based pay coupled with intrinsic rewards is the right thing for everyone? Because it is the same thing that drives every business owner, founder and CEO—capitalism. If you told a leader to double the size of their business next year and they would only get a 2.8% pay raise, none of the great companies we know today would exist. We’re all driven to solve problems and make meaning (intrinsic rewards) and to be compensated appropriately (extrinsic time and money rewards).

Let Them Design the Plan
Get people involved in building their own incentive plan (time and/or money/rewards/experiences). Make sure it rewards them by being great team members and Stakeholders in your company. And don’t move the goal-posts once the deal is made. You wouldn’t put up with that as a capitalist, and either will they.

More and more companies are learning to reward both intrinsically and extrinsically. If you focus first on Making Meaning, incentive-based pay will attract the best and the brightest, and they will stay. If you focus on old-fashioned bonuses and profit-sharing, people will just sense you’re trying to buy them off for treating them like extensions of machines. It’s both/and.
Turn everybody into a capitalist. You’ll both make more money, and your Stakeholders will want to build a great company, not for you, but with you.

Article as seen on Inc.com