Years ago I had an argument with my HR director at the time. I Was hiring for a position and I said I was willing to pay what was approximately 10-15% above market for the position at the time. He said he could get me a dozen prospects at the market rate or even ten percent below, that I was wasting my budget. I said, "I don't want the people who will work for that, the people I'm looking for know they're worth more." He repeated he felt I was over paying. I said, "look at my head count, and compare it to our competitors. I have half the staff but higher metrics in every category. You don't hear about major or long lasting IT problems here. I'm paying 115% but I'm getting 150% and overall spending less."

When your people feel respected and compensated, they work far better.