Sally Smith vs. Joe Blow

Jan 15, 1996

A/E/P and environmental consulting firms have a huge problem when it comes to retaining their best and brightest people. It’s not unusual for us to get a consulting project with a new client, and to be sitting around the table with their principals at a “get-acquainted” session when someone puffs out his chest and says: “Yup, anyone who is any good here in Tuscaloosa (or Chicago, Memphis, or wherever the firm happens to be) has worked for us at one time or another. In fact, 14 companies have been founded by former employees of ours.” My first thought is: “What’s the matter with you guys? How can you be proud of your inability to keep these people working for you?” It’s a crying shame! What a waste of time and energy to hire these people, train them, get them to the point where they finally do things your way, and then lose them to the lures of having their own entrepreneurial professional practice. To help explain how this happens, let’s take a look at the fictitious example of ABC Associates, and two of its employees— “Sally Smith” and “Joe Blow.” These two are representative of archetypal employees found in A/E/P and environmental consulting firms most everywhere: Sally Smith, P.E., is a seven-year experienced electrical engineer. She has worked for the firm for only three years. She is an “associate” with the firm, and works as both a design engineer and project manager. She is 86% billable, and puts in an average 53-hour work week. Sally managed $700K in fees as a PM during 1995. She did this largely due to her ability to sell follow-up work on existing projects. Clients love her and so do the other employees who work with her, since she is an excellent communicator and seems to grasp situations quickly. In 1995, her base pay was $45,000 per year. Her bonus in 1994 was $1,200 (the best of any associate in the firm). Joe Blow, P.E., is a 30-year experienced electrical engineer. He has worked for the firm for the past 23 years. He is a “senior associate” with the firm, and works as a senior engineer. He is 52% billable, and puts in an average 42-hour work week. He did not manage any projects during 1995, nor did he sell any follow-up work. In fact, several times during the year, clients called to ask that Joe not be assigned to their project. Employees don’t like working with Joe, since he is thought to be rigid and inflexible, and tough to deal with. In 1995, his base pay was $59,000 per year. His bonus in 1994 was $2,800 (the worst of all the senior associates in the firm). What happens at the end of the year when bonus decisions for 1995 are made and salaries (with an overall raise budget of 3.5% of salaries) are set for 1996? Sally gets a $3,150 raise (7.0%) which takes her up to $48,150. Her bonus is set at $1,800, once again the best bonus of any associate, and 50% better than she got last year, even though 1995 was no better for the company overall than 1994 was. When she is told about her bonus and raise by the company president, he gives her a little lecture on how “lucky” she is “to be at ABC Associates œwhere they really appreciate her,” that she “is the future of the company,” and that her “opportunities there are unlimited.” Joe, on the other hand, was “going to be sent a clear message that his performance and behavior are unacceptable.” As a result, he gets an $1,800 raise, which, at roughly 3%, is “less than the average raise.” His bonus is set at “only $2,200,” when he got $2,800 the year before, and the average senior associate received $3,500. With security in the accounting department being what it typically is, the day after raises and bonuses are announced, everyone in the firm knows what every other employee got. Sally, a “superstar” (ask anyone in the company who the superstars are and her name comes up) is furious when she learns that Joe, a “slacker” (ask anyone who the duds are and his name comes up) got a better bonus than she ($400 more) and only $1,350 less in raise. The result of all this is that Sally decides during the year that she doesn’t feel “as lucky” to work at ABC Associates as everyone tells her she is, and decides that she’d be a lot better off to start her own company. Three years later, she’s got 20 employees, is driving a new BMW company car, and making six figures. Joe, on the other hand, is still at his desk at ABC Associates, and management is still complaining about his mediocre performance. Sound familiar? Originally published 1/15/1996

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