How Much to Increase A Manager's Salary

SITUATION:
You have an effective manager. The manager is evidently a good one because your Gross Profit Percentages are healthy, your inventory is under control, and you see a steady increase in store sales. Your manager takes care of most problems before reporting them to you. Largely because this manager takes good care of the day-to-day operations of the business, you are able to spend time looking into expanding. You decide to build or buy another store. You realize that you cannot easily find another manager as good as the one you have. Besides, while the store you have now can afford your manager’s salary, the new one will not so easily afford paying the same salary.

TASK:
You want to assign the new store to your current manager. You realize that the work load and responsibility will increase. In fact, please be see other articles and review just how much the management work load will increase. You want to work out a reasonable pay increase for the additional responsibilites. How do you do it?

ORDER:
Let's start with some common-sense assumptions:

  1. Your manager works eight hours a day. You cannot expect him [read "him or her," "he or she," "his or hers" throughout this article] to simply double that and work sixteen hours a day.
  2. But if you try to solve the problem by having him add "just enough" hours to manage the second store, then neither store will have a full-time manager.
  3. Most of what your manager does is routine clerical work.
  4. In order for your manager to effectively manage two (or more locations), you acknowledge that you will have to allow your manager to train another trusted employee to handle many of the routine tasks he now handles.
  5. You acknowledge that the second store will probably not be as profitable as the first one.

This calculation satisfies the above demands:

SAMPLE MONTHLY SALARY AT THE FIRST STORE

$3,000

#1 ASSISTANT 30 DATS X 3 HRS X $10.00

-900

#2 ASSISTANT SAME AS ABOVE

-900

AMOUNT AVAILABLE FOR SALARY AT SECOND STORE

$1,200

SPLIT THE DIFFERENCE WITH YOUR MANAGER

$600

INFORMATION:
This formula is expressed algebraically as follows: 


Where  C=Current salary,
and    E=additional expense at current location,
and    F=additional expense at new location, 
and    R=amount of raise,

R=(C-(E+F))/2

CONCLUSION:
It is obvious that each time you add a new store to a manager's responsibility, you would not geometrically increase his salary. If you did, a $30,000 manager would be paid $300,000 if he managed ten of your stores?

Can the manager rise to meet your needs? Hopefully the manager will be able to delegate. If so, the manager does rise to meet your new needs. As a reward, the manager gets to train his assistants and receives an incremental raise.

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