This Is The Wrong Way To Control Personnel Expense

Just this last week, one of my daughters asked me to help with the business portion of a presentation she was creating for a school project. She certainly does not realize it, but that was one of the greatest things she could do to excite me – being sincerely interested in something I love and could teach to her! I was on cloud nine!

Wrong Perspective On Personnel Expense?

Since I was out of town at the time, we spent the next 45 minutes or so on Facetime as I led her through generic layout for a pro forma income statement. As I went through the typical expense categories for her income statement, I told her about what are typically the largest single expense categories for our business – Advertising, Personnel, and Inventory expenses. I explained how each of these would apply to the business she was describing in her project, including ways to keep them under control.

As I described to her how Personnel Expense works, I realized how delicate this expense category can be. I am not sure how your particular business works, but I would bet Personnel Expense is a major expense category for most businesses. It is also one that Christian business leaders and owners may look at from the wrong perspective at times.

Controlling Personnel Expense

As business people, we are taught we must control expenses to generate the profits our business should produce. There are various effective strategies for controlling expenses, so I will not presume to tell you there is only one right way or even challenge the method you use. What I do want to address is what I believe the Bible says is the wrong way to control Personnel Expense.

Read the following passage from James 5:4-6:

Look! The pay that you withheld from the workers who reaped your fields cries out, and the outcry of the harvesters has reached the ears of the Lord of Hosts. You have lived luxuriously on the land and have indulged yourselves. You have fattened your hearts for the day of slaughter. You have condemned—you have murdered—the righteous man; he does not resist you.

Not Biblical To Withhold Fair Wages

When you first read this passage, you may not think it really applies to you. And it may not. However, I do encourage you to stop and think about it. Pray that God would reveal to you any areas where you are withholding from your employees or team members for the purpose of increasing your own personal gain. Ask Him to search your heart and to make clear to you whatever must be done to correct current issues and/or avoid these issues in the future.

I take two key points from this passage. First, it is not biblical for us to control our Personnel Expenses by withholding fair wages from our employees, even if they will accept it and stay. Regardless of their options, we are called to pay them fairly and not withhold for our gain. Some might argue that they can always leave if they don’t like it, but that logic does not hold up when placed side-by-side with the passage above or these others:

Shepherd God’s flock among you, not overseeing out of compulsion but freely, according to God’s will; not for the money but eagerly; not lording it over those entrusted to you, but being examples to the flock. And when the chief Shepherd appears, you will receive the unfading crown of glory.
1 Peter 5:2-4

The Lord said: “Who then is the faithful and sensible manager his master will put in charge of his household servants to give them their allotted food at the proper time? That slave whose master finds him working when he comes will be rewarded.
Luke 12:42-43

Your Compensation Can Be Related

The second point I take is that there is a clear, but sometimes forgotten, relationship between how we compensate ourselves and how we compensate our employees. Maybe it is obvious to anyone reading this post that the best leaders are those who seek out high-level performers and compensate them well for their results. No surprise there.

But it may not be as obvious to say that sometimes this requires us as leaders to sacrifice our own gain for the sake of these we are leading. There are times in our businesses when we do not have the necessary supply of money with which to pay everyone what they are worth. Therefore, during these times, something (or someone!) has to give.

Leaders May Need To Sacrifice

This same topic came up recently in a book I have been reading. In What Makes A Leader Great by Russ Crosson (President/CEO of Ronald Blue & Co.), Crosson tells how he approached this idea:

I’ve also found that leaders may need to sacrifice by giving up scheduled increases in income to make sure those following after them are taken care of financially. You may have to sacrifice in this area so that others will benefit from appropriate increases. There are times when I stopped taking raises in my salary so that the managers who reported to me could be better rewarded for their efforts.

I didn’t do this with the idea of receiving personal gain but rather to make sure I kept my team motivated. I knew if I lost key people it would be difficult to keep the company’s mission fire burning. I would run the risk of ending up with a pile of cooling embers instead of a vibrant message. I wanted my leadership team to be red-hot with drive and determination to live out the principles of our mission statement.

Solid Reasons To Pay At High Levels

Crosson’s motive for his sacrifice is one that many leaders fail to consider. He understands there are several principles at play when it comes to Personnel Expense. If you will stop to think about it, I think you will agree that there are a number of solid reasons for making sure we pay our people at the highest levels:

1. We are responsible to God for those under our leadership.
2. It takes top compensation to attract top performers.
3. It incentivizes them to strive for continuous improvement.
4. Top pay reduces likelihood of them leaving for more lucrative offers.
5. It ensures we will hold them accountable to high-level results.
6. Less than this violates the principle James 5:4-6 warns against.
7. God will take care of us, even reward us, in the long-term.

What has been your approach to controlling personnel expense?

Do you see the need for a change in your perspective?

Have you needed, and been willing, to sacrifice your own compensation?

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