VIDEO: Do more with less people
When Jack Welch was the Chairman and CEO of General Electric, he was constantly looking for ways to improve his company. One of his strategies focused on the belief of having less people, being paid more, with a lower total wage cost. How could this work? Only by hiring exceptionally, productive people. In my short video below, I walk through the importance of aligning your strategy for talent and their compensation and give several real world examples to further exemplify why you too should implement this practice into your company.
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Hello everyone Rob Lynch here, the question for today is “What is the strategy for talent in their compensation?”
I wrote in my April 21st blog, that certain companies believe in the strategy of fewer, smarter, more productive people being paid more. When Jack Welsh ran GE he seldom settled for the status quo, it was constantly looking for ways to be creative.
His people strategy was, less people, paid more, with a lower total wage cost. Now, let that sink in a minute, less people, paid more, with a lower total wage cost. Now, how could the strategy work, the answer, only by hiring exceptionally productive people. Fewer people, doing more better, paid well, but with a wage cost that was lower.
Now let’s take a look at some examples, I once heard the CEO of “The Container Store” say that they determined, “one great person’s productivity is equal three average people,” so they go to great lengths to hire the right people that will fit this philosophy. Applicants go through as many as nine interviews and they only hire the top 3% of all applicants and their compensation is considerably higher than competitive retailers.
Another example is Costco, they’re very focused on their selection in training and finding the right person that will fit their culture and their operational focus and when you compare them to Sam’s, the results are pretty dramatic. They pay their people a higher hourly wage, but they also expect more.
In employee productivity is measured on the revenue per employee basis is almost three times higher. In sales as measured on a per-square-foot basis is almost double and their turnover rate is over two times lower. This strategy also works for the highest paid people in the world, those that work at investment banking firms. Goldman Sachs employs a strategy and their profit per employee is orders of magnitude higher than, Morgan Stanley or Merrill Lynch.
So, my question to you is, are you following this strategy and are you getting higher revenue, higher profit and more productivity, at a lower overall wage cost than the competition and if not perhaps we should talk. Thank you.