Balancing Wage Pressures with Profitability Requires Thoughtful Strategy

Last fall, Florida established a $10 minimum wage, which will increase to $15 by 2026. Meanwhile, the Great Resignation continues apace, with employees from all kinds of sectors walking away from their jobs for a better deal. These two factors are putting many business owners in a pincer grip, leaving questions about how to retain good employees, how to maintain a good profit margin and how to plan for inflation.

We sat down with SBF partner W.G. Spoor to tackle some of these topics and more. “I cannot think of any industries that are not impacted by mandatory wage increases,” he said. From construction and landscaping to restaurants, retail and manufacturing, businesses of all types are trying to find their footing in what can be a challenging economic environment.

The advice Spoor gives – built around creating a quality work environment designed to keep employees for the long term – is the same as what he follows at Spoor Bunch Franz, the firm he runs with Steve Bunch and Rich Franz, and it has paid off.

With an employee turnover rate half the industry average, the results speak for themselves. “We feel very fortunate that we’re where we are,” Spoor said. “I think that’s a tribute to our staff for putting so much time and effort into making our culture what it is.”

Q: We’re hearing a lot in the news about wage pressures tied to what’s being called the Great Resignation or the Big Quit. Have you heard from your clients about any inventive ways to keep good people and balance employees’ desire for increased wages?

Spoor: Keeping good employees and dealing with wage pressures is pretty much top of mind with every single client I have talked to. For businesses, we’re hit with the double whammy of the Great Resignation and the implementation of a minimum wage hike, which has started to go into effect in Florida.

It’s important that people evaluate whether they’re paying people fairly, but also know that any time you make kneejerk reactions, you can make a bad decision. If you give everyone 15 to 20 percent raises, but that’s not the right fit for your pay scale and the economics, at some point, something’s going to have to give.

You have to make sure that you’re paying employees in line with what you can afford and what they should be making for the jobs they are doing. Then, the only other thing you can do — and this is what we’re advising clients to do — is to look at your pricing model. If you increase wages, you ultimately have to increase the prices that you’re charging customers. You can’t just have one without the other.

Q: Do you find that that passing wage-related costs along to the customer has to be the answer, since many businesses have already taken other steps to get as lean as they can?

Spoor: Cost-cutting should be done where you can, but I find that most of the time, a lot of that has already been done. There are often really no more measures that businesses can take on that.

We’re in a situation right now where inflation is at 7 percent. People are expecting price hikes all across the board. Even in this environment, it may be challenging to raise prices enough, though, depending on what your margin is. So that requires looking at your entire business and understanding the nature of your customer demand. For example, you might be able to take more margin on some products vs. others.

Q: So as you look to keep good people, does that involve more than just pay? Obviously everybody wants to be paid fairly, but do things like culture and benefits come into play even more these days?

Spoor: The focus should definitely be on providing the right work environment, because there’s always going to be somebody willing to pay somebody more. You have to look at everything: Is each individual in the right spot to have growth in their career path? And do they enjoy going to work every day?

Ultimately, many people will pass up $1 more an hour or whatever it may be, because they really enjoy where they’re at, whether it’s because of career advancement or learning or whatever it may be. You have to make sure you provide that environment so that people do want to stay.

Q: At SBF, you constantly evaluate industry norms as far as benefits and pay. Do you need to be competitive with the megafirms or is it more important that you’re competitive with firms of your size?

Spoor: All the above. I like to think that we’re unique or different than a lot of those firms. What we offer isn’t identical, so it’s not an apples-to-apples comparison of us versus the Big Four. It takes the person that’s willing to look at it and say, being at SBF is what’s best for me.

In terms of benefits, we’ve seen a big push toward 100 percent remote. Our people have decided they do not want a firm that’s all remote.  We offer flexibility allowing employees to mix in some remote work, and we have out of town employees that are fully remote. But our people enjoy being able to walk down the hall and ask somebody a question — not that you can’t do that on a phone call, but it’s not quite the same.

One of the things author Simon Sinek says is that you miss the ‘in-betweens’ if you are not together in person. Right after the meeting ends, walking out of the conference room back to your office, you miss talking to somebody about things like ‘how was your weekend? or ‘what’s going on?’ That doesn’t happen when you end up “Zooming” in. Having that personal relationship with your coworkers leads you to want to help them. When you build that personal relationship with people, it doesn’t just become my work, it becomes our work, and that’s really the environment that we want to build.