Monday, December 27, 2010
Tale of Two Salary Changes
(SARATOGA SPRINGS, NY – December 27, 2010) Salaries within the horse racing business is a popular topic again. People are fascinated by what others are paid, even though how much people make should be their business only. Here the lines blur. The farther away racetracks get from becoming the source of their own revenue, or the more annoyed customers become by how they are treated, the greater having a say in compensation heads toward where it doesn’t belong.
While the latest of NYRA’s bankruptcy threats was still fresh in the wind, CEO and president Charles Hayward opened the old wound first. A couple weeks ago, on the same day that New York City Off-Track Betting Corporation closed nearly 50 locations and axed over 1000 workers, he admitted reluctantly to the public that employees of the beleaguered NYRA would be receiving a raise. To many, it was a gesture that made him appear unaware of the 40 million people unemployed – the kind of arrogant “we’ll do as we please” act that the old NYRA, before his involvement, was known for.
In contrast to Hayward’s announcement, the general manager of a small racetrack and simulcasting operation in Tulsa, Oklahoma named Fair Meadows, asked his employer, the Tulsa County Public Facilities Authority, to slice his pay amount in half. Ron Shutts makes $10,000 per month, which is about $30,000 less per month than Hayward. His decrease in pay will enable Fair Meadows, where the pari-mutuels business has been hit hard by casinos, to retain its entire staff despite budget cuts.
Hayward explained NYRA’s decision to raise salaries in terms of personnel management. He said that the franchise holder wanted to compensate properly the people who picked up after workers that were fired over the summer. Furthermore, he noted that salaries had remained constant since 2008. But “rightsizing” is the term that management consultants normally use when reducing headcount. “Downsizing” would imply making a company smaller, and they generally believe that the employees remaining on the payroll are able to complete the work of those let go. Practical experience suggests that 50 percent of the employees in most companies are able to cover the load of 100 percent.
Corporate America has been practicing wage repression for nearly 40 years. Pay increases are typically granted for merit; a cost of living increase or to honor a promotion. Outside of those reasons, it’s rare when a company provides a bump to the payroll. Companies that have rightsized during the economic downturn have learned universally that they didn’t need to hire the people they employed in the first place – thus, the slow rebound in job creation. Reduced staffing has allowed many businesses to achieve all-time high profitability.
As fair-minded as it appears, boosting the salaries of employees on the basis that they are doing more work after cutting the staff is a bad idea. Experts believe such practice sends the wrong message that those who were fired, those who remain on the payroll and those in management didn’t perform their work effectively. Moreover, it leaves the employer in the unacceptable position of having overpaid workers in jobs when staff is eventually added to.
If companies want to thank retained employees for putting up with changes in responsibility, they usually accommodate this interest with bonuses. Nobody works harder or produces more if you give him more money, and if you have someone like that on your team you don’t want him. Most companies pay employees the least amount of salary they can. The old-fashioned way of operating was to create salary budgets for positions and then decide within the range provided whether or not a candidate was employable. The modern way is to determine which people can accomplish important goals for the company and then to negotiate with them for how cheaply they can be had.
Shouldn’t the sport be worrying about whether jobs traditional to the sport 30 years ago are even necessary or, at the very least, over-compensated instead of worrying about whether or not individuals are being paid too much or too little? How much people in the horse racing business are paid is an issue when what people are doing to earn what they're paid isn't. Something's wrong.
Why should racetracks pay high salaries to general managers if their expertise is rendered useless by domineering legislatures that prohibit them from enacting the changes that would make them more profitable? Isn’t taking what comes to you an ability that suits lesser paid managers? In the world of off-site betting, aren’t the people who negotiate the contracts with pari-mutuel partners and the people involved in producing a bet-able product more important than the person responsible for customer service or plant maintenance? Likewise, when grandstands are empty, what value does one place on the marketing manager?
The field managers of Major League Baseball teams are paid less than the slugger who brings fans to the stands. Pitchers don’t command the same salaries as everyday players because they don’t contribute as often. The horse racing industry, however, clings to the rule of the pecking order. All is not what it seems any longer, so why prescribe to old-school rules?
Given what occurred, Hayward’s largesse, although somewhat unnerving, was considerably less reprehensive than Fair Meadows’s outwardly responsible decision to accept Shutts’s proposal for a pay cut. NYRA’s loosening of the purse strings will cause merely a blip on the franchise’s overall welfare. Holding horse racing meets of no consequence so that owners of a racetrack license can prosper from tribal casino subsidies is a more egregious violation of the sport’s common good than a misstep in fiscal deportment, regardless of how altruistic one man’s sacrifice appears and how shaky the other man’s excuse was.
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