Pay rise and promotion pitfalls.

Bit of a mouthful.

This weeks blog is a tribute to one of the things that caused me the most problems and stress while growing my agency.

HR stuff.

Usually I can accept when something isn't my strength and make peace with the fact that I should leave it to the experts. Basically any form of DIY for example.

But for some reason, I felt confident that I could 'have a crack' at HR.

The worst thing is, the pitfalls that I'm going to describe to you were self-inflicted, expensive and absolutely unnecessary. But, if I had simply just not done anything, then we would have no blog content today. So, that's one silver lining at least.

If you're running an agency, or any people focussed business, you'll have already made at least two of these mistakes. So you can save yourself 5 minutes and stop here. Or maybe it'll make you feel better that you're not alone.

If you are about to start your own business, you will likely still make these mistakes for yourself. But, hey, at least I tried to warn you.

Lets break them down into 3 categories, in the order that they occurred.

The worst promotion I ever gave out. Me to Head of HR.

Promotions

When you hire the first person to join your new company, you want to give them a fancy job title. This is purely linked to your own ego, and probably not required by the candidate. But lets be honest, no one wants to announce on Linkedin that they've made their first hire, a Junior Admin Assistant.

No, you want to tell the world that you're going places. So instead you announce your new Head of Business Operations.

This will be closely followed by your Sales Director (intern sales person), Chief Data Officer (graduate who knows Javascript) and CFO (local accounting firm).

There is absolutely nothing wrong with this. It's a right of business passage. And causes no issues until you require the second hire in a certain department. If you're looking to keep hiring then it means that your business must be growing. So you're likely to be looking to add more experienced people in to the team.

But the mid-level sales guy that you want to bring in, what on earth are you going to call him, if the intern is already Sales Director.

Cue the start of a series of awkward conversations and un-official demotions.

As we started to scale from a handful of people into a slightly larger agency of 15 or 20 people, then the problem raised its head again. If we had a team of 3 content people and we decided to promote someone, then they would become the Head of Content. But purely to make the org chart symmetrical, I would then look at promoting people into 'Head of' roles in other departments. Often promoting people into management roles that didn't ask for it, and didn't really want it either.

The final area where this mis-titling of people caused issues was further down the line when people started to compare their salaries to other people with similar job titles (thanks Glassdoor). Someone being paid £30k a year might suddenly expect £70k a year, based on a similar job title in a large corporate agency.

That brings me nicely onto pay rises.

Pay rises

We gave out pay rises for all sorts of reasons.

Sometimes it was reactive to someone asking for one, or threatening to leave, but in most cases they were proactively offered in return for good performance or the dreaded promotions.

Nothing unusual so far you may think, and you'd be right.

I would fully support a strategy that gives employees regular incremental pay rises, rather than just waiting for performance reviews.

The issue we had was the size of the pay rises. Similar to my need to keep the org chart looking neat, our initial pay rises were all in increments of £5k.

So a £20k per year employee (don't judge me, salaries were lower back then...) would get an increase to £25k. A £25k employee to £30k and so on. That's a bloody enormous increase as a %. And this only became apparent once we started hiring people on £50k, £80k, £100k. In those cases a £5k increase looked tiny.

Once we got to 30 or so people in the team we had to start resetting expectations and introducing proper % rises. We lost some people because of it, but it just wouldn't have been a sustainable business model without doing it.

But I also managed to find one more expensive team morale destroyer. Buckle up.

Commission

I have been in sales roles for my entire career. So I was very used to the concept of a base salary and a commission based on performance.

Before I set up Molzi I was adamant that I wanted all employees to benefit from the success of the business, so we set up a company wide commission pot.

The only stipulation was that it would only get paid out each month if the company hit a revenue target.

And great news for everyone. Molzi hit the first 25 of its monthly revenue targets.

££££££££££££

All was well in the world. Each month, every employee would get their salary paid, and a nice additional lump of commission.

Until month 26.

We didn't hit target. Annoying for me. Annoying for the sales team who were used to living with the ups and downs of commission payments. Anger-inducing for some of the employees that were less au fait with commission. They had designed their life around the monthly net pay that they were used to. They weren't seeing the commission as a bonus, but a standard.

Month 26 caused me a lot of stress. It also made me a bit angry. We were paying huge amounts of money out each month in commission, and suddenly it wasn't just not being a morale booster, but it was being a morale killer.

Again we had to upset some people and reverse out of some of the policies that we had set-up in good faith, but with a bit too much naivety.

My advice to any founders that are still early enough in their journey. When making decisions around promotions, pay rises and bonuses, try to think about how it would work in a team of 200, or 2000 people. Because it's a great feeling to give more, but it's very difficult to take back.