New Restaurant Proves Advantages of Overpaying
While at first glance it may seem crazy to “overpay” employees, Jim makes a strong case for it in his post The Competitive Advantages of Overpaying:
“Just because tons of free artistic labor is available doesn’t mean that’s what you have to pay. In fact, I believe strongly* that strategically overpaying for talent is one of the smartest things a business or organization can do.
Pay ‘market,’ get ‘market.’ Pay better than market in an area where people are hungry, and get … maybe something really special.
It’s simple economics. And that’s the good news.
* In our own organization (Goldstar), we have deliberately raised starting salaries above market in several key areas over the years, especially customer service and editorial. These are places where the difference between the bottom and the top of the talent pool is huge. As a result, we do really well in these areas, and frankly, better people can get more done, learn faster, stay longer and do everything more successfully than the people you’d get by saving a few bucks a month. I mean, just look at these folks. Worth every penny — and then some!”
Live entertainment and traditional businesses aren’t the only area where this concept can work. A restaurant in Philadelphia is also giving it a go. The recently opened William Street Common is paying its employees at least $15 an hour plus sick leave and health insurance. There’s a service charge on drinks, but tips aren’t mandatory. The result? According to SecondNexus.com:
“In its first week, ‘we’ve hit our numbers, we’re right in line with our budget,’ [owner Avram Hornik] said. What’s more, ‘it looks like there’s going to be money after the first week in the [tip] pool even though we overstaffed for the opening.’ … ‘It’s important to create a brand where we can pay people a fair living wage,’ he said. ‘That’s the challenge. If we can’t do that, then we shouldn’t be in the business at all.’”
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