Every year, I bake my daughter a cake for her birthday. Mind you, I am not a baker and don’t really know what I’m doing. I sort of follow the directions, make stuff up on the fly; and in the end, the finished product looks more like a Pinterest fail than anything edible. Everyone takes their obligatory bites, and then I pull out the backup cake I always buy for everyone to actually enjoy.
This reminds me of the way self-storage owners handle employee compensation. Many have very little idea what type of pay or benefits should go into their package. They want to offer a delicious confection, but how they go about it can be messy. Some will hope it turns out good. Others will skimp on key ingredients. Still others will add caviar on top as a garnish.
When you consider how the coronavirus pandemic has disrupted the workforce and changed the way many businesses operate, including the self-storage industry, figuring out employee compensation can be a little like choosing salt or sugar in a dark room. Here are some things you should understand about staff pay and how to build your recipe. In the end, aim to create something tasty enough to be palatable.
It’s Quite the Conundrum
Business 101 teaches us two cornerstones: Pay attention to the bottom line, and figure out where can you reduce costs while maximizing profit. When it comes to staff compensation, therein lies the conundrum. Your goal is to continually increase net operating income, but to do that, you need the best possible team. Hiring talented people typically comes at a higher price.
Unfortunately, many companies pay their employees as little as they can, then run them like racehorses and wonder why they aren’t grateful. Though it may seem smart to save a few dollars per hour, in the long run, you’re causing immeasurable damage to your bottom line.
As a business owner, I’d love to provide my employees with unlimited paid vacation, world-class benefits and outstanding pay. That simply isn’t practical or plausible, so like most things in life, it’s best to find a middle ground. Compensating your team shouldn’t be a black-or-white concept or all-or-nothing affair. The key is to question your current practice and challenge yourself to improve. Your approach to benefits and wages should be part of a never-ending evaluation cycle.
It’s About More Than a Wage
If you haven’t noticed, corporate attitudes toward labor are changing across many sectors. For example, Target recently announced it’ll cover the full cost of college for its more than 340,000 full-time and part-time employees. Not only will it pay tuition, it’ll help with books and other essentials. It certainly raises the bar for employee standards across more than big-box retail. Many of the people who might work at Target are the same types of employees you should want to work for your self-storage operation.
So, how do you compete with a program like that if you’re pulling from the same labor pool? I’d argue that an attractive compensation package is about a lot more than wage. Pay is certainly a key component, and there are many factors that can go into determining a good starting point, including the local cost of living. I’ve paid self-storage managers in New York City and Seattle a much higher wage than someone working in the middle of Texas.
First, take a hard, honest look at your operation to determine how much labor you really need. If you own one facility, is it a busy location that needs two full-time employees, or can you get by with one full-timer and one part-timer at a higher wage?
One way to figure out a decent base pay is to find the closest self-storage facility operated by one of the real estate investment trusts (REITs) and offer at least a little more than they do. Keep in mind, though, that as with many larger companies, the REITs have the ability to add insurance, 401(k) and other programs that owners of small, independent operations struggle to match. The key is to get creative and be generous.
Focus your energy on creating very individualized compensatory perks that’ll help meet people’s needs. Here are just a few ingredients that can help sweeten the compensation pot:
- Provide flexible work schedules or the ability to work from home on occasion.
- Hand out tickets to local events.
- Provide complimentary magazine or book subscriptions.
- Hire a company to clean staff residences once per week.
- Offer dry-cleaning and laundry services.
- Offer a monthly food voucher.
- Pay for their cell phone.
- Provide a generous paid-time-off policy.
- Provide access to an emergency fund employees can use in case of death in the family, sickness, childbirth, etc.
- Pay for continued education. Though you might not be able to send staff to college, offer to pay for courses at a local community college or through an online program.
- Create a bonus structure that’s mutually beneficial to staff and the company.
Think of it like this: If your employee goes out to dinner and someone asks where they work, will they be excited or ashamed to share that information?
If you’re thinking I’m off my rocker and this is just self-storage, let me make my case with a real-world example. We recently acquired a property in the South that was plagued with issues. This facility consistently had customer complaints, low rentals, bad rates, and on and on. The previous owner operated under the mentality of “pay as little as possible to get by.” We decided to let the facility manager go, and hired a replacement at an increase of $6 more per hour, a significant jump in fixed expenses.
Once we hired a new manager, we immediately started to see favorable results. We had fewer customer issues, increased rentals, and the property looked better than ever. Honestly, you can’t invest a quarter and expect a dollar in return. Paying a productive, motivated facility manager a higher wage will offset the cost of turnover and productivity over time. It’ll also:
- Keep employees engaged. If staff is paid well and engrossed, they won’t be looking for employment elsewhere. Once someone starts looking for a new job, productivity goes down the drain.
- Demonstrate value. Not only does paying a higher wage enrich staff lives, it shows that you them as productive team members.
- Set expectations. When pay is set low, so are expectations. When employees are well-paid, the bar is raised.
If you want to set up your employees for success and longevity within your self-storage company, you need to look at all the ingredients that make for a tasty recipe. Guessing isn’t an option because staff turnover is expensive. Not only is it a drain on resources to continually hire and fire, the true damage done to your business by a poor manager is rarely front and center. There isn’t a convenient line on your expense report, but the costs are very real to your bottom line.
If you want employees to show up on time, enthusiastically rent your self-storage units and make you money, you need to seek out those types of individuals and reward them. Offer them something they’re willing and even eager to “eat,” and the results for your business will surely be sweet.
Rick Beal is co-founder of The Atomic Storage Group, a third-party management and consulting firm for the self-storage industry. His expertise includes business and management consulting, project management, marketing and pricing strategies. To contact him, email [email protected], or stay up-to-date with his publications and speaking engagements on LinkedIn.