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Cheap is rarely a bargain

by | Nov 25, 2019 | Improving Competitiveness, Management Issues, Profit Improvement

Are there any bargains when it comes to employee salaries? There are certainly low-priced employees available, but in my experience, cheap is rarely a bargain.

Taking a new look at a bargain

A large company had four people doing complicated analytical work on pricing new projects. One person produced only about two thirds as much work as the others, frequently made mistakes and cost the company lots of projects because he was careless and always hid behind big cost cushions.

I asked the CEO how he could put up with such poor performance. His first response was “Well, maybe he’s not so good, but we’re not paying him very much…”

For once, I didn’t know what to say. It doesn’t happen very often, but that answer stopped me in my tracks.

You get what you pay for

In our capitalist society, people are fairly free to move around — seeking jobs that offer decent working conditions and pay enough to sustain their lifestyle.

It’s true that many people don’t change jobs out of sheer inertia, but there’s a general leveling within job categories in a certain market. There are rarely bargains in hiring or retaining talented people.

You’re unlikely to find a real bargain. And I think you ought to be willing to pay more if you have to — as a premium for better performance, because even if you’re paying more, your results will be better. That’s almost always a good trade-off.

Good people. Great impact.

I have a client in the logistics business. She has good capabilities and excellent operating systems. But they don’t make a competitive difference.

Her clients say that her project managers are the reason why they love doing business with her company. The project managers set her company apart.

Those first-class project managers were among the most difficult employees to find, and they’re among the company’s most highly-paid employees. And sometimes they’re a pain to manage — as many unusual employees might be. But they make all the difference in ensuring that clients feel good about doing business with their company.

Are you putting up with bargain employees?

How many of your managers require your continuing attention and intervention when issues pop up? How much time and effort are you expending in managing their shortfalls?

How much extra work are other employees doing, fixing their mistakes or checking to be sure normal things are getting done?

The cost of lost opportunities

The biggest cost of ineffective employees is the opportunities you’ve lost because of their poor performance.

The biggest cost of all

The biggest cost of ineffective employees isn’t the extra effort or expense when they aren’t up to the task. The biggest cost is your lost opportunities.

Ineffective operations people will reduce your competitiveness in terms of productivity or delivery times. Ineffective customer service people will reduce the quality of your customers’ experience. Ineffective salespeople will get between you and your customers — losing sales that you should have had.

That’s why it’s so clear that cheap is rarely a bargain.


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