YOU WinONLY HAVE a limited amount of money to pay your employees, I understand that.  As a result, you’re probably going to pay people differently, spending the most money where you think it will give you the greatest benefit.  Primarily, you’ll pay your most valuable people more than the others.

There’s other factors too, yes, but the effect is the same.  Most likely you have some workers who feel adequately rewarded, while others feel slighted.  Even if you try to be cagey about pay levels – especially if you do – people will pick up on the fact that they’re paid less.

This is one of the biggest quandaries about running a business.  Given that you only have limited resources, how on earth can you pay everyone what you’d like to?

First, realize that pay is only a strong motivator if everything else is weak.  I sometimes explain this with my “paper towel analogy.”  I have no particular attachment to paper towels – my criteria are fairly simple and I don’t much care what color it is or how loudly its features are declared in advertising.  I go with the cheapest.

In the same way, if you haven’t given your people a reason to care about anything else other than pay, you’ll get a high sense of focus on that one measure, and you’ll constantly be disappointing people because of your inability to be as generous as they’d like.

Second, realize that it’s not a linear curve.  A dollar means much more to you if you’re scraping by than if you’re living comfortably.  A 5% raise means a lot more when you’re struggling with making car payments than when you’re mostly using it to buy a new car.  Check out this great HBR article which delves into the current conclusions from research.

This logic might argue toward paying everyone the same, at a level where employees can survive in reasonable comfort.  The problem is that there’s plenty of other expectations at play.  This may well lead with no exceptional workers at all, as they leave to work for the competition.

There’s a way out of this bind.

It’s to increase the importance of the non-pay aspects of peoples’ jobs.  Sure, you can fiddle around with benefits, but those are taking money out of the same pot.  You have limited flexibility, but at least it helps people to develop a broader relationship with your business.

But I’m really talking about the intangibles.  When you hate your boss, almost no amount of money will make you happy.  When your work hours seem arbitrarily strict or unpredictable, you’re going to go to bed every night resenting it.  And when your colleagues are miserable, they’re going to take your spirits down too.

Your role as the leader of this company is to create an environment which is supportive yet challenging.  Where workers feel they’re among interesting and capable people, doing work which is inspiring and important.

This doesn’t substitute for a paycheck, of course, but it can become more important than the pay.

If you’re looking for inspiration, check out all the volunteer groups that people are involved in.  Why do they spend their free time in sports, in social groups, or at church?  They’re not getting paid for it!

It’s because it’s engaging, inspiring, and purposeful.  When you have that, then everybody can win together.