Hello Reader,

This email is the third part in a short series that steps slightly outside my usual lane. I’m writing about the wage gap, payroll imbalance, and how we value work because it connects directly to the themes many of you know me for—time, attention, and productiveness. If something here resonates (or rubs you the wrong way), hit reply and tell me. Your feedback is shaping this series as I go.

Inside most organizations, payroll is “the controllable.” When numbers don’t line up, the reflex is to pull the payroll lever: fewer hours, slower hiring, delayed raises, frozen roles. On a spreadsheet, it looks clean and decisive.

But clean and decisive can hide blunt and damaging. Payroll cuts often feel fast and surgical from a distance, and messy and demoralizing up close. You don’t see the invisible costs yet: institutional memory walking out the door, cultural trust eroding, customer experience slipping.

The kicker? The other end of the scale—executive compensation and board-directed incentives—usually doesn’t get pulled with the same urgency. It’s treated as fixed when it’s often the most elastic part of the system.

What Payroll Cuts Really Cost

Payroll cuts plenty that the spreadsheet misses:

• Turnover math: Replacing experienced people is more expensive than retaining them. You pay in recruiting time, onboarding drag, and rookie mistakes.
• Service slippage: Customers don’t care that your ratio target was hit; they feel the fewer hands, longer waits, and inexperienced support.
• Attention tax: Remaining staff inherit extra responsibilities. Context-switching goes up, focus goes down, and avoidable errors creep in.
• Culture debt: “We cut at the bottom first” is a story people remember. It shapes how they show up—and whether they stay.

A Smarter Sequence of Levers

Instead of defaulting to cuts, leaders can sequence these levers from least damaging to most, with clear thresholds:

1. Discretionary spend pause (non-critical travel, vendor luxuries, vanity projects).
2. Executive clawback triggers (automatic when comp exceeds set thresholds or when margin dips below a guardrail).
3. Bonus pool reallocation (shift a percentage of leadership bonuses into a company-wide pool tied to shared KPIs).
4. Promotion-from-within acceleration (fill open roles internally to reduce ramp time and preserve culture).
5. Scheduling optimization (protect full-time stability; reduce reliance on expensive last-minute staffing).
6. Wage floor indexation (tie the lowest rungs to CPI or local living-wage benchmarks to avoid backsliding).
7. Targeted hiring slowdowns (with clear timelines and communication)—before blanket cuts.

Only after these are exhausted—and transparently reported—should reductions hit frontline hours. If at all.

What “Pulling the Right Levers” Looks Like

So what would pulling the right levers look like? Here are three scenarios to explore:

Airline

• Problem: Delays, cancellations, and escalating customer frustration during “cost control” cycles.
• Better sequence: Tie a meaningful portion of executive variable comp to on-time performance, safety metrics, and CSAT, then reallocate part of that pool to cabin crew and ground operations when targets are met. Protect minimum crew levels and cross-train to reduce schedule fragility.
• Result: Fewer disruptions, calmer crews, higher repeat business. The metrics that justify executive bonuses also fund frontline stability.

Grocery

• Problem: Frequent churn at checkout and in stocking leads to mispriced items, empty shelves, and slow lines—customers drift.
• Better sequence: Introduce a frontline retention dividend funded by a small reallocation of HQ bonus pools; index entry wages to local living costs; give shift leads a measurable slice of shrink-reduction gains.
• Result: Better in-aisle help, fewer stockouts, lower shrink—the quiet stuff that makes loyalty happen.

White-collar / Manufacturing hybrid

• Problem: Production defects spike when overtime becomes the norm; managers are asked to “do more with less.”
• Better sequence: Set a defect-rate gate for leadership bonuses; require monthly Gemba walk hours for directors; create a shared innovation pot that pays out when line-level suggestions reduce waste.
• Result: Quality rises, burnout falls, and the leadership incentive finally points in the same direction as the work.

THese scenarios are all well and good, but how do you put this into practice?

How to Operationalize This

Operationalizing this involves a few mechanics – but they are mechanics that can be copied:

• A clawback rule that enforces itself: When EBITDA margin falls below X% for Y consecutive quarters, executive cash bonuses above $Z are reduced by N% and redirected to a frontline stability pool. No meetings. No heroics. It just happens.
• A simple and fair company-wide bonus formula: Create a 1–3% of payroll pool funded from executive variable comp and profit. Pay it out pro-rata when two of three shared KPIs are hit: CSAT, safety/quality, and efficiency. Everyone sees the same scoreboard.
• Transparency cadence: Quarterly one-pager to staff: where money went, what was funded, what’s next. Trust loves daylight.

And there's even more that can be done...

Perverse-incentive guardrails

• Balance KPIs (e.g., on-time and safety) so no one “wins” by cutting corners.
• Cap ratio illusions (no squeezing the denominator by outsourcing the lowest-paid work).
• Audit roles and titles annually to prevent compensation relabeling that dodges the clawback.

Promotion-from-within pipeline

• Publish internal-to-external hire ratios.
• Offer micro-upskilling tracks (8–12 week sprints) that map directly to higher-paid roles.
• Track time-to-competency, not just seats filled.

Now let's look into any potential pushback arguments.

Anticipating the Pushback

• “We’ll lose top talent.”: Maybe the kind that only stays for outsized pay. But aligning leadership pay to shared outcomes attracts leaders who want to build something durable—and AI has already commoditized parts of the high-paid analytical stack.
• “Shareholders won’t like it.”: Many will—if you show the math. Lower churn, better CSAT, fewer incidents, and steadier revenue are attractive. Make the case with a clear dashboard and a 12-month before/after narrative.
• “It’s too complex.”: Not if you keep the rules simple and automatic. Think if-this-then-that for money: Margin dips → Clawback triggers → Frontline pool funds → Retention rises.

Why This Matters for Time and Attention (and not just Money)

When leaders pull the right levers in the right order, they free up attention where it matters: on customers, on quality, on the daily discipline that compounds.

The opposite—blunt payroll cuts—creates noise, interruptions, and context switching that devours focus. If you care about sustainable performance, you have to care about how the lever gets pulled.

Looking Ahead

In the next email in this series, we’ll zoom out to the generational story behind all of this—the promise that broke, what “enough” looks like, and why boundaries aren’t entitlement; they’re strategy.

For now, I’ll leave you with a question:

I’d genuinely love your take. Hit reply and tell me what lever your leadership pulls first—and what you wish they’d try instead.

– Mike

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