By Ken Keller
Economist Milton Friedman divided spending into four categories, each one impacting owners, employees, vendors, and organizational culture:
-You spend money on yourself and in doing so you’re interested in buying whatever you want most at the best price.
-You spend your money on other people, and because someone else will be the recipient, you are less invested or interested in pleasing them.
-You spend other peoples’ money on yourself and price is no longer an objection.
-You spend other people’s money on other people, and no one really notices or cares.
Steve owns a business. Even when he struggled in the early days to get his business off the ground, his attitude was that he always deserved the best.
He acquired debt with what others believed to be over-the-top spending, but Steve had always believed he was ultimately the one who should get full credit because it was only due to his efforts that his business was successful.
Even though he said he treasured his clients, in reality he only valued the revenue they generated. Despite his professed love, Steve was always negotiating for higher prices and didn’t cut any deals.
Steve fell into the first category of spending. Not only could he never distinguish between a want and a need, negotiating is how Steve chose live his life. In his mind, everything was negotiable.
Steve wasn’t impacted by the second category, spending his money on others, until the business grew and he was forced to hire employees. These were people that Steve brought on board to take care of ‘His Clients’ (emphasis added).
Steve never had any interest or desire to splurge on his employees. His attitude was that people were replaceable and loyalty was something you bought.
Annual raises were non-existent. Given his tendency to negotiate, Steve waited for employees to approach him about getting a raise and even then, he stalled.
He actually held off doing anything until an employee generated enough courage to ask him a second time about a pay increase.
Steve believed his people were weak because they did not engage to negotiate with him. The raises he did give, he gave grudgingly.
The third category of spending is a rare occurrence, but when there was a windfall of money, such as a rebate from a vendor (something Steve had negotiated), or an unexpected tax refund, he splurged. That largesse, however, never extended to his employees.
Steve took that “found money” and used it for things he would never have spent his own money on. He traveled the world, staying at the finest hotels and eating at the best restaurants, going first-class all the way.
Because Steve was seen as a successful owner, he was approached to run for his local city council and won. At this point, spending category four kicked in, and Steve had no issue at all voting to spend money that wasn’t his for people he didn’t know.
Does Steve’s business make money? Yes. The business is profitable. But this success comes at a price.
Only a few of Steve’s clients like his approach of constant bartering. Vendors like the volume that Steve’s company purchases but they do not enjoy dealing with Steve. When Steve calls or pays a visit, people dread it because the only reason he is there is because he wants something.
As a result, the loyalty, work ethic and care of clients by Steve’s employees extended only to their paycheck and not beyond it.
Employees were disengaged and saw no reason to change their mindset.
The employees that could actually have made Steve’s business better left and those who remained were those who wouldn’t be hired anywhere else.
Steve is not about “win-win” but “Steve must always win.” What a legacy.
Ken Keller is a syndicated business columnist focused on the leadership needs of small and midsize closely held companies. Contact him at [email protected]. Keller’s column reflects his own views and not necessarily those of this media outlet.