The Real Cost of Executive Pay

First let me say I’m not sure I should be writing this post; I don’t think it will make either side of this “issue” happy because I have no intentions of taking sides. It is an issue that pops up too often and I’ve been encouraged to write on this subject so I will…. sort of.

Go ahead and call me a weasel but I’m not taking sides because frankly I’m not qualified to say what different levels of organizations should be making. I might be qualified to say what I should be making and perhaps those who work directly for me but that’s about as far as I go. 

I will say however that everyone would be better off if they worried less about what other positions in their organization earn and worried more about how to make their own position more valuable.

So I’m not going to write about how much highly paid people are paid. I going to write about the actual costs associated with being highly paid. Those of you who read this blog on a regular basis will likely not be surprised that I would look at this from a different angle than most. 

Let’s begin with a true story from a long time ago. Years and years ago I worked for a small business with around 15 employees. It happened that there was an opening for an office assistant and since she apparently didn’t have a lot to do, the wife of the owner of the company took the position. 

She was a wonderfully friendly person. She seemed genuinely interested in people and I think most who knew her would have said she had a caring heart. She was simply a nice person. 

One of her tasks to complete twice a month was payroll. She would compile the necessary documents and forward them to an outside payroll company that would take it from there. 

One winter the owner and his wife went on a well deserved two-week vacation. That wouldn’t have been much of an issue except that she hadn’t had time to complete her payroll work before they left. When payday came there were no checks and no direct deposits. 

That was a problem for many of the 15 employees. Since I was at the time the highest ranking manager around they all came to me to ask where their paycheck was. I ran it down with the payroll company and discovered there were no checks because nothing was sent to them. There was nothing we could do but wait for the owner and his wife to return.

When they returned I immediately shared the “mood” of the team and asked what had happened. The owner’s wife was very defensive and said she didn’t see why “it was a big deal.” She said “surely everyone has a money set aside for just such an occurrence.” 

She was absolutely dumbfounded to learn that no, not everyone could afford to miss a paycheck. She truly and sincerely had no idea that there would be people employed by her husband’s company who lived check to check.

It wasn’t that she didn’t care, it was that she didn’t understand.

She just didn’t understand. 

Money had become the great separator. She had all the money she needed, they were wealthy by any standards and she couldn’t understand the thinking of those who weren’t. They had been wealthy for so long that she couldn’t remember what it was like to not be wealthy. She assumed that everyone was like her and that their thoughts and abilities were like hers too. 

Here’s my point to “highly compensated” leaders: You may not have allowed your income to change you but your income has changed you. The fact that you don’t see the change doesn’t mean that the change has not happened. It doesn’t mean you don’t care about people, it doesn’t mean you think you’re better than anyone else, but know it or not, “things” are different now.

That’s the real cost of executive pay. It’s the separation in thinking between levels of compensation. It really has nothing to do with money at all. It really has nothing to do with executives either. If someone is making $10 million a year and their boss is making $100 million there will be separation. If the boss is a mid level manager making $80,000 a year and their direct reports are making $60,000 a year there will be separation, not as much perhaps but it is still there.  

No matter how much money you make or how high you go in an organization you will never be able to afford the high cost of separation from your people. You MUST know what they are thinking and why they are thinking it. 

Every leader needs a mentor but the higher you go in an organization the more you need an additional mentor from the ranks. This is a mentor, or maybe a better word would be “touchstone” who you allow and encourage to tell you the truth and to tell you what’s happening in the organization. This person (or hopefully, people) is your bridge to reality. This person ensures that you don’t let your title, position, or income level keep you from knowing what’s really happening around you. 

When you let anything come between you and your people you lose the ability to lead. You become so “different” from your people that they can’t understand you and you can’t understand them. When that happens leadership stops. 

I don’t have to tell you what happens when leadership stops.

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