Why entrepreneurs shouldn’t cut their pay

I must admit to reading about the salary cuts of executives at large companies with some bemusement.

Just think. The Commonwealth Bank’s chief executive Ralph Norris will have his salary of $2.8 million cut by 10%. Why 10%? Why not 15%. Perhaps then the workers at the Commonwealth, who are only going to receive a 1.5% pay rise this year, might receive a little more.

Why is that important? Because this current fashion to freeze pay with no reward for hard work is going to bite us in the bum. For a start, whenever there are pay freezes, there is this thing the next year or year after called catch-up pay. Not only will companies eventually have to make good because, despite rising unemployment, there is still a skills shortage raging for the people you really want to employ.

But in the meantime you have unmotivated, resentful workers who are also burnt out because they are working harder. And this at a time when you need your people to be more passionate, focused and competitively stealing market share than ever.

The other debate raging that I find bemusing is around pay and performance. There is a move afoot to link company performance to executive pay. Boards are apparently going to attempt to bring pay back in line with performance. Which begs the question; what did executives get pay rises for? Just showing up? For staying?

Business owners whose results are going backwards should think twice about pay freezes across the board. Your staff are your competitive edge; providing superior, innovative service while everyone is cutting back.

For those who work harder than ever, let them know there is something on the table as a reward.

And don’t you dare do a Norris and cut your own salary. It is tough going, and if you are earning peanuts, you’ll wake up every morning feeling like a monkey.