Salary discussions

Matt Buckland has an interesting post on salaries, and if they ought to be publicized. When I first read Maverick, I thought it was a good idea. This was ten years back.

Thinking about this problem, my comment was that the solution that people ask for, i.e. publicizing salaries might not be the right one. And this is because the problem is sometimes forgotten, in my opinion. Why do people ask for salaries to be made public in a company?

1. Its difficult to know what an individual is worth.

This is easier in consulting because if I were billing at $100 an hour the absolute maximum I could earn would be $100 X 2000 or whatever. Unless of course  I was adding value beyond that. But consulting is sort of like a pyramid scheme. You can’t afford to pay some people huge salaries unless you are paying others small ones.

2. Many organizations have people who are perceived to not add value, but they earn a lot of money

As a company grows, this is inevitable. But its also unfair. Making work transparent (using wall reports, with story cards) provides a good indication on what an individual has achieved. There is usually a lot of reluctance to adopt these simple techniques by management for their work.

3. Many organizations don’t take the effort to ensure that there aren’t huge variations in salary within a range

As part of the annual raise it is quite important that we take a look at people’s salaries and make sure there aren’t huge variations. You can’t penalize someone for staying in your company. Newcomers tend to be paid more.

4. Many organizations don’t take the effort to ensure that there aren’t huge variations in salary between the highest paying and the lowest paying employees

There’s something perverse about one person earning 200 times another. But thats just me.

5. The person with the best negotiation skills tend to earn more

Some people are good at it and others aren’t. If an organization keeps this in mind when recruiting, it helps solve some problems. I once was asked what my expectations were and I responded that I was looking for something equitable. I was offered a salary less than what I was earning!

My contention is that the call to publicize salaries will be muted if an organization understands the above problems and works hard at it.

But should salaries be made known to others in the company? There are many firms that run perfectly well by doing this. It works well in some industries than others.

Its easier in manufacturing than in consulting.

Its more complicated in consulting because your salary is tied to what you bring in, sort of.  For the non-billable resources, how do we determine their value? If you aren’t paid what you bring in where does the rest of the money go? If you get a raise every year, and your billing rates don’t go up, does the company lose an incentive to keep you? Does the company hire cheap labour to offset your cost? Does it make sense to manage a consulting firm the same way you would a manufacturing or a product firm?