12/16/2024

Fix Your Company by Paying Your Employees More

Higher pay can be the solution that too many see as sunk cost

If executives believe people are their most important asset—why is payroll considered a cost center rather than an investment? Labor costs are one of the largest items on the income statement. They are often the first place managers look to manage costs and increase profits. But that instinct to keep payroll costs as low as possible can be destructive.

Too many executives look at employee compensation for low and middle-wage earners as an expense with a low to no return. They see the short-term costs but do not necessarily understand the long-term value. They miss something pretty fundamental—that investing in paying low wage earners more can actually drive measurable business value.

Turning Around a Troubled Company

In 2014, I was named CEO of CareCentrix, a troubled healthcare services company. We faced declining margins, high turnover and stalled revenue growth. Our investors were pushing for change. For many companies, that might translate into cutting costs and managing headcount. I was determined to try a different playbook. After a period of lightning fast growth, CareCentrix had lost track of what powered its success in the first place—our people.

Please select this link to read the complete article from Chief Executive.