We Froze The Salaries Of 20 Executives — And It Improved The Lives Of 500 Employees
Five years ago, as a newly minted CEO of healthcare services company called CareCentrix, I had a complicated challenge.
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Our margins had declined and our revenue growth had stalled. My board of directors and my investors demanded improved performance: lower costs that would lead to more growth and more profit. At the same time, I was becoming increasingly worried about our team and our turnover numbers. We are a people business and in some divisions we were losing 30 to 40% of our teammates within a year.
My HR staff suggested that we re-think our recruiting and training – which made sense – but I thought that we could do more. I thought we needed to reconsider how we supported and paid our team.
For our entry level jobs – where turnover was the highest – we paid the federal minimum wage of $7.25 an hour (or less than $16,000 per year).
Assuming nothing went wrong, and assuming that our employees were living with another wage earner or working another part-time job, $7.25 hourly wage might be sufficient.
The reality is that for many of us, things do go wrong, and I had emails from my new teammates to prove it.
One was from a customer service representative – a young mother with a family, who had lost her apartment in a fire and did not have enough money for diapers. Another email soon followed – this employee had missed a few bills and was living out of her car with her child.
This drove me crazy: how did we get to the point where one of our employees had to apologetically ask for financial support so she and her family could put a roof over their heads?
A young mother did not have enough money for diapers. Another employee was living in her car with her child
While some of our elected officials congratulated us for creating jobs, I felt that we were failing some of our employees, and the communities we were based in. The more our executive team parsed through the requests for assistance, the more we all became uncomfortable with the mismatch between what we asked of our employees and what we provided to them in turn.
Almost no one enters the infuriatingly complicated healthcare system by choice. It might be from an accident or a chronic illness, but nearly every person who needs healthcare starts from a position of vulnerability and some fear.
So, when we hire new employees, we ask that they inject their heart in every interaction – beyond just completing a task – because although it is what every patients deserves it’s not always what they receive from the system. How could we demand that our employees focus on the unmet needs of our patients, while their employer was not looking out for their basic needs ?
I took my concerns to my team. After many tough conversations, it became clear that we could not simply raise wages and hit our budget.
I came back with a challenge: what if we froze the wages of the senior team and invested the annual inflation adjustment allotted for us into raising the wages of our entry-level employees ?
I challenged the chief financial officer to see how deeply we would have to freeze wages in order to reach our goal of a base rate of $15 per hour.
The answer was that we did not have to go very deep. Over the last few decades executive salaries have skyrocketed. That translates into accelerated wage growth in the highest tiers of executives throughout American business, and it affects every company.
What that meant for our company was that if we just froze the wages of our most senior team – less than 20 executives – we could radically increase the wages and improve the lives of nearly 500 of our teammates.
The conversation with our executives was straightforward. We were in the midst of a turnaround. We were demanding much from every corner of the company. Small financial sacrifices from those at the top could be life changing for those at the bottom of our wage scale. We needed to do it to build a real sense of Team CareCentrix. They agreed. With joy, we announced in January 2015 that our minimum base pay for employees would go up to $34,000, or the equivalent of $15 per hour.
Raising wages in the midst of a business turnaround was not easy. We needed our executive team to buy into a vision of business success where every employee had a fair shot at success. It worked.
Our business has tripled over the past five years. Our minimum wage is now approaching $16.50 per hour and last year we broadened profit sharing to all levels of the company.
I share my story at CareCentrix so that politicians and the public remember the role and responsibility of the business community in contributing to the success of the American Dream, and so that business leaders understand that an investment in the workforce is one of the best financial decisions to make.
Every business has its unique challenge, but the example of CareCentrix suggests that there is plenty wealth to go around – at the very least, to make sure that the employees we ask so much of can live a healthy and fulfilling life with the wages we pay.
- In addition to serving as CEO of CareCentrix, John Driscoll is a member of the Patriotic Millionaires, a group of high-net worth business leaders and investors who are united in their concern about the destabilizing concentration of wealth and power in America