Profits Never Higher, Pay Never Lower

With business profits seeing some recovery following the general economic downturn, you might think it's more positive than negative on the financial front these days. You may not realize the negative light in which many workers see these profits, considering wages are not experiencing the same bounce. With business profits gaining pace well over pay, owners and managers must take a step back to look at business strategy related to compensation, morale, and branding.

In April, BusinessInsider.com published three charts illustrating the disparate nature of economic recovery. In one chart, corporate profit margins did an uphill dance, climbing from the lowest point in the mid-80s, dropping drastically in 2001 and during the recession a few years later, and rallying and peaking at an all-time high in early 2013. Looking at the same time period, wages as a percent of the total economy played Slinky all the way down the stairs from 1970 to today.

Henry Blodget from BusinessInsider.com points out that the first two graphs are somewhat tied to the third graph he presents. The third graph shows the percent of the US population currently working; 2013 levels are on par with levels in the early 1980s. The current percentage is the lowest it's been in almost three decades. Blodget points out that domestic wages as a percent of the total economy may be low and business profits may be high due in part to the trend of outsourcing work.

In a slide show published online by the Huffington Post, Pew Research Center data is used to create another portrait of disparate pay. From 2009 to 2011, the lower 93 percent of individuals experienced a 4 percent drop in net worth, while the wealthiest 7 percent experienced a 28 percent increase. Whether you're using business profits to pad your pockets or those of top executives or you're investing those profits back into the company, you need to be aware of how these data points are affecting employee perceptions.

A business strategy that involves transparency, communication, and fair compensation can reduce the negative impact of these perceptions. Be open to providing employees with information about where the business is financially and how profits are being used. You don't have to disclose actual pay, but if staffers see that you're funneling a large percent of profits into growing the business, they may understand that you're trying to create new opportunities for them as well. When possible, use at least some business profits to reward everyone who made the success possible; some of the most effective companies leverage profits to create employee bonus programs that reach all levels of the organization.

Business profits aren't a bad thing—profits enable you to make improvements and offer new opportunities for everyone. How you handle profits, especially in such a disparate economy, can make or break employee morale and overall branding.

(Photo courtesy of freedigitalphotos.net)