Imagine that Denise Owens is the owner and CEO of Extreme Routes, an indoor rock-climbing gym. She needed to clear her head and wanted to do what she does best—climb a really difficult route, at least a 5.11 on the Yosemite Decimal System and, preferably, with a difficulty suffix of c or d.

“Kitty, will you set up a new route for me? And make it hard.”

“Sure thing, boss. Is 5.12d okay?” Kitty, the route setter and instruction manager, has been at Extreme Routes for 7 years and is one of Denise’s closest friends.

“Perfect!”

Knowing a treat would be waiting for her that afternoon, Denise turned back to the spreadsheet in front of her. What was she going to do about these expenses? She has good staff, and she wants to keep them, but she isn’t sure she is spending her budget for salaries and benefits most effectively.

Denise has a basic compensation plan in place. Route setters are paid the most, because without new routes, the gym’s clients wouldn’t keep returning. Climbing instructors have the next highest take-home pay, and front desk staff are paid the least. Everyone who works for Denise has medical, dental, vision, and life insurance. During the last staff meeting, both Kitty and Misha, the front desk managers, mentioned that some of the employees weren’t working as hard as they could and that there wasn’t much teamwork among the staff.

If Denise decides to pay above market wages, she will discover that

She will lose employees to turnover

The gym’s overall costs will increase

Profitability of the gym will decrease

She will attract and keep better employees