Risk / Reward Ratio: The Most Important Perspective Lesson You Must Learn as a Business Owner
Does this scenario sound familiar? You hire a student or a student’s parent because they seem nice and really need the job. Over time, you realize this isn’t a good fit, but out of kindness, you keep them on. You rationalize, “Sally is a good person and if we fire her, these negative things will happen to her.” However, you overlook the critical thought, “If we keep Sally, these negative things might happen to our school.”
The Story of Risk and Reward
Let me share a story from a memorable lunch my wife and I had on a beautiful spring day in Dunedin last year. We met with my brother Jim and a long-distance student of his, Steve. Steve had a thriving business and rewarded his top staff with a month-long trip to Florida, which included training with Jim—a nice perk.
During our lunch chat, Steve shared an employee strategy he used long before it became popular on that Trump fellow’s TV show. Each year, his entire staff knew that one person would be fired in October or November, regardless of the team’s overall success. This approach kept everyone focused on the business’s primary goal: profitability.
Balancing Compassion with Business Sense
While I’m not advocating or opposing this method, it underscores the necessity of keeping business goals at the forefront. As the owner, you bear all the risks. Employees may lose a job, but losing everything you’ve built and saved due to an employee’s mistake is a different matter entirely.
The Heavy Burden of Ownership
I’ve had multiple employees earning over $200,000 a year. Where are they now? Living their lives. Their risk was limited to losing a job I created for them. My risk was that their actions might spark a massive lawsuit—which is exactly what happened. There was no skin off their back, but mine was laid bare.
The Simple Truth
You can’t afford to carry someone whose only risk is finding a new job if you let them go. As an owner, the stakes are much higher for you. The risk/reward ratio is not just a business concept; it’s a crucial perspective that ensures you make decisions that protect your school’s longevity and success.
By understanding and applying the risk/reward ratio in your employee management strategy, you can make more informed decisions that balance compassion with business acumen. This approach will help safeguard your school’s future and ensure it remains a profitable and thriving institution.