Bob MacDonald on Business

Sage Advice for Superior Business Management

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It Pays to Work Overtime as a Leader

March 16th, 2014 · 7 Comments · Building Better Business Managers, Business Ethics, Business Management, Improving Your Business Leadership

If you want followers to make the extra effort for you, you have to work overtime to earn it.

You probably saw the news last week that President Obama has directed the Labor Department to revise rules pertaining to overtime pay requirements. The intent of the original set of rules was to exempt employers from having to pay overtime to “highly paid” workers, who were in a “supervisory” role. But as President Obama pointed out in his announcement, time, inflation, and abuse of the rules OVertimeby employers have caused this exemption to apply to workers making as little as $455 per week ($24,000 per year). By way of note, this amount is below what is considered to be the poverty level for a family of four. This means that millions of low-salaried workers – assistant managers at retail outlets, hospital orderlies, janitors, clerks at hotels and restaurant supervisors – who should be receiving overtime for hours worked are being unfairly excluded.

The President did not specify how high the threshold should be raised, but directed the Labor Department to develop a recommended increase that would take effect in 2015. Keep in mind, that just to match inflation since the last time the overtime rules were adjusted 10 years ago, would call for an increase to $553 per week. Increasing the overtime exemption level is within the purview of executive powers, so Congressional approval is not required, but that has not prevented the usual suspects from bringing out their long knives to complain and oppose the Obama directive.

House Speaker John Boehner (R-Ohio) leapt to the nearest microphone to proclaim that these new overtime rules would cause employers to lay-off workers and prevent companies from expanding. That, in turn, would cause unemployment to increase and damage the economy. Echoing this criticism, the National Federation of Independent Business released a written statement denouncing any rise in the overtime exemption level as “regulatory overreach” that would “crimp economic growth,” discourage employers from hiring new workers and force them to get rid of workers to avoid paying overtime. Tea Party groups have charged that this was just another attempt by the “socialist-leaning” Obama to interfere with the “free market” by confiscating money from risk-taking entrepreneurs and giving it to the poor.

I admit to being puzzled trying to follow the logic of these critics.

Here’s why: If the demand for the products and services of a company is so great that workers are required to work overtime just to keep up, shouldn’t this increased business generate sufficient additional revenues to cover costs? If business demand is high, but the employer does not want to pay overtime to workers, the option is to simply hire additional workers – even part-timers — at straight pay. Does it make sense for an employer to conclude that when demand is so strong workers have to work overtime, just to keep up with it, that rather than pay overtime, they lay-off workers who would qualify for overtime?

Of course, wiser minds might just as easily conclude that some nefarious brand of logic at work here. Is it possible that some employers could be gaming the system when it comes to low-income employees?


Absolutely. And here is how this sleazy trick looks in action:  The employer offers the worker a “salary” of $455 per week and then calls them a “supervisor” although in name only. Under this scenario the employer could require to employee to work more than 40 hours a week – at poverty level wages – without being required to pay overtime. Every extra hour of work demanded of the employee would be “free” to the employer, and the profits would go directly into his pocket. If that employee puts in an extra time 16 hours a week, the workers’ “salary” would fall below the current minimum wage.

Is it farfetched to believe an employer might actually adopt this strategy? I don’t think so, because it never ceases to amaze me the lengths that some shortsighted and greedy employers will go – supported by their well-lobbied political partners – to make a few extra bucks by ripping-off their lowest paid employees. These are employees who have the least leverage and political clout to defend them from this outright exploitation.

An Example of How its Done

Not long ago I was chatting with a guy who is a big player in the “hospitality business.” He owns resort hotels and restaurants all across the country and if owning several homes, his own private jet and a yacht the size of a small hotel is any indication, then he is very successful. (I think he viewed me as an understanding compatriot, because I had previously headed large companies.) Anyway, as we talked, he bitterly complained about the lazy, shiftless, disloyal workers who would steal from him every chance they got. Later in the conversation the subject switched to pay and required minimum wages. He proudly explained to me how he dealt with the irritating nuisance of having to pay his employees. One strategy he smugly admitted to using is that when an employee neared the top of a pay scale for a particular job (which would also qualify them for additional benefits); he fires them so he can hire new employees at entry-level wages and no benefits.

He was well aware of, and even bragged about, the way he was able to avoid paying overtime to his hintrootel and restaurant workers by putting a large number of them on “salary” at $450 per week and calling them “supervisors.” By hiring fewer workers than needed to get the job done in 40 hours and then structuring compensation that avoids paying overtime boarders on nothing more than a modern form of legalized slave-labor. It’s the kind of corporate behavior that causes employee campaigns for improved wages and rights to exist.

And this guy had the gall to complain that he has “bad” employees! How would you feel working for an employer like this? I know from personally interacting with a large number of his employees that they have no respect for him and have no motivation to be loyal or put forth any more than the minimum effort to keep the job. And these are the employees who interact with and are expected to provide good service to customers, so they will come back to his hotels and restaurants.

Some might suggest that since this guy is so successful with this “business model” that maybe the way to go is to rip-off your lowest paid employees. The counter to that is that if this guy would invest in his employees rather than exploit them, he would see turnover reduced, lower costs and workers more motivated to provide better service to customers, all causing his profits to increase.

There is an important lesson to learn here that goes beyond the abuse of low wage employees. The truth is that the government should not need to be in the business of protecting these or any other workers. And if employers would look upon workers as an investment in the future success of the company, rather than as an expense to be managed and cut, government intrusion would be unnecessary.

In the service industries – especially retail stores, hotels and restaurants where low pay is prevalent – the employees are the face of the company. The attitude and service they provide is the determining factor in customer satisfaction and whether or not they are motivated to return. The truth is that it is the employer who should be working overtime to create an environment that respects, appreciates and fairly compensates the worker in a way that motivates them to do their best, because doing so is in their own best interests.

If the attitude of the employer is that the employee is a cost of doing business and that they should get as much as they can for the least cost possible, then the attitude of the employee will be to do as little as they can for as much as they can get. Is it any wonder my hotel friend thinks his employees are shiftless, lazy and disloyal, when he treats them the way he does?

And the Moral of the Story …

Leaders and employers have a markedly better chance for success when they are willing to work overtime to demonstrate to followers and workers that they are considered as assets and an investment that is critical to future success.

The old philosophy and management rules – still held as gospel by many – that see employees as nothing more than “human resources” to be mined and worked for all their worth, is no longer effective in a competitive world. The leader or company that builds a culture designed to recognize, acknowledge, respect, challenge and compensate employees in ways that demonstrate a belief that they are critical to your success, will motivate those employees to work for your success. It may require the leader or employer to work overtime to achieve this objective, but the good news is that you will get paid for it.

 

 

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