I know stories from ownership aren't popular here, but hear me out.
I graduated from university (U.S.) in late-1990's and started working in a lower-management job. Being new to the workforce I was, of course, young and impressionable. It always seemed like the company put a great deal of time and effort into trying to determine how to reward their lower level workers who made $40 to $50K per year. Should we give them 2% raises or 3% raises…maybe 4% for our star performers? And these were in good years. It seemed like a lot of effort to keep people poor.
Meanwhile, upper management was making 20% more every year. Their salaries and profit share were increasing by hundreds of thousands every year. Just cutting that in half would have funded huge pay increases for the majority of more entry level staff. The entire approach didn't make sense to me, but I assumed I was simply too young and the older ownership just knew better.
Fast forward 20+ years and it turns out I was right and the boomers in charge back in the late-90's/early-00's were just f'ing greedy.
I bought a business in 2016 for $2.5 million with $1.5 million of that financed by banks. I have approximately 20 employees. 18 make around $70K, 1 makes $120K and 1 makes $200K. I pay myself a great salary of around $400K. I pay off the loan, plus additional principal every year so that it will be paid off in 15 years (8 left). When COVID hit, I applied for the PPP loan to make sure nobody lost their job. When out business didn't suffer as badly as I feared, I spread the PPP forgiveness to my employees. My business made just under a million in free cash flow in 2017 and just over in 2018. I gave one third to my employees in bonuses, one third to myself (after taxes), and saved the other third (again, after taxes) for a rainy day or reinvestment into the business.
Free cash flow hit $1.5 million in 2019. 40% to my employees as bonuses with the rest split evenly between me and reinvestment. COVID hits and free cash flow drop to just over $1 million. Bonuses stay at 40% (largely because of the PPP). No layoffs and no salary or benefit reductions. I took a little less that year, but put a little more into the reinvestment fund because COVID created some uncertainty.
Late-2020 and 2021 were amazing years. My industry took off and I simply followed the wave. $3 million in free cash flow. 50% of that went to my employees with only 15% to the reinvestment fund because it was getting a little too high. I took the remaining 35%, but paid off more of my loan than usual. 2022 may be a bit worse, but only a bit.
Why do I succeed. First, because I'm lucky. Second, because I have awesome staff. Nobody who I want to keep or who is even average has left in the last 6 years. Businesses need to understand that their employees (not their shareholders and maybe not even their customers) are their number 1 priority. I succeed because the 20 people who work for me feel valued, enjoy the work environment, and get paid above “market.” I have no illusions that these people would rather be doing something else besides working. I would too. But, if we have to work, let's make it the best environment for all of us and let's raise the standard of living for all employees, not just the shareholders and upper management. I think we'd find out businesses, our nation, and, most importantly, our people would all be in far better shape mentally, physically, economically and spiritually.