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When a Star Employee Makes More Than You Do

Here’s why it will pay off for you, too

by on
in Hiring,Human Resources,Leaders & Managers,Management Training

There’s an old rule of thumb that says line managers should always make 10 percent more than anyone reporting to them.

This means that no matter whom you hire and no matter how good they are at what they do, you need to maintain a 10 percent spread between your pay and theirs. After all, if you’re not rewarded for the added responsibility of management, than you’re simply not a valued member of the team.

Stop right there!

The single hardest thing about running a company is hiring and retaining the best people. So really good managers will occasionally hire people who earn more than they do.

But they don’t do it because they are such charitable people—or because they don’t recognize their own value. They do it to benefit themselves.

When to break the rules

If you ever face a situation where you must pay someone who reports to you more than you earn (because they are absolutely worth it), you must understand what the real issues are.

Don’t be dissuaded from paying someone a certain amount simply because your salary happens to be lower. There’s no law that says you’re a failure or a loser if you have people who out-earn you reporting to you. (This is especially true if you manage highly skilled personnel or technical experts.)

The good ones may make more than you, but—if they perform like you know they will—their success will ultimately benefit you.

Let me give you an example. Several years ago, a manager named Steve, who headed a division of our company and reported to me, hired a technical whiz, Bob. Bob was paid $2,000 more a year than Steve.

When I first heard this, I was impressed that Steve wasn’t threatened by what he was paying Bob. And, of course, Bob turned out to be really good.

After three months, I gave Steve a big raise—more money than Bob earned and more money than he would have received had he not hired Bob. In fact, I upgraded Steve’s job.

By hiring Bob, Steve made me totally rethink his value to the company.

Steve understood that to perform his job well, he had to assemble the best team he could find. He had the savvy to put the interests of the company ahead of his own when it counted. Ultimately, he was confident it would pay off for him, too.

Nothing to fear

Don’t let the fear that well-paid go-getters will outshine you or blind you. If anything, you should feel more secure and convinced you’re doing the right thing if you’re wise enough to hire the kind of winners who merit so much money.

Being known as someone who hires great people will take you further than you can imagine. Don’t ever miss the chance.

Each month, “Z” offers insights into what it really takes to get ahead. This 20-year veteran of the corporate battlefield has climbed the ranks to head a $10 million information services company. We have agreed to protect Z’s identity in return for his promise to hold nothing back.

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