Saturday, February 7, 2009

Compensation and job performance

The opinion page at WSJ was always a steaming heap of crap, but it looks like under Murdoch the rest of the - once very respectable - paper is moving fast to close the gap. Here's the recent "gem":

It starts with a tearful personal story of a former investment banker.

"I was a 35-year-old, nonpartner investment banker then and was horrified to learn that my annual take-home pay would be limited to my small salary, which accounted for about a quarter of my previous year's income. Fortunately the partners decided to pay a small bonus out of their capital that year to help employees like me get by. The next year was no better. Several colleagues with good prospects left the firm and the industry for good. We learned that strong pay-for-performance compensation incentives could cut both ways."

Which actually begs an outright question - how much was this "small salary" anyway? What does it take for an investment banker to "get by"? $200k? $300k? $1m?

This idiotic idea that once you start paying less, the smart people will either leave or automatically become dumber was somehow sold to our populace, but it is belied by an every day experience.

When a person comes to a job interview and his/her answer to the question "why are you in this industry" is "because it pays a lot", the interview ends right there, right? How many companies did you see where this would not be true?

Studies upon studies show that there is NO direct correlation between job performance and the salary. There is a lot of correlation between overall level of happiness, and a dollar spent on benefits achieves far more towards that end than a dollar spent on salary.

Google is an ideal case in point. It employs some of the top engineers, but it pays slightly below the industry average. Almost everyone who works at Google could get more money elsewhere. The same is true for Microsoft.

When I interviewed at Google, I had a competing offer from Wall Street. Between the much higher cash and bonus, it was twice as much as what I'd be making at Google - and 50% more than what I was making at Microsoft. I chose Google, because while the salary was important, job satisfaction was even more so.

When I went back to Microsoft, I could have gone to Wall Street instead, and, again, get more money. I am sure that my original offer was still standing. But I went back to Microsoft, not to Wall Street.

Now, to hell with us mortals. Here's what correlates best with the CEO salary, and it's not the company performance. It's the golf scores:


BadTux said...

This idiotic idea that once you start paying less, the smart people will either leave or automatically become dumber was somehow sold to our populace, but it is belied by an every day experience.

It's what's been sold to the plebes though. They see all these investment bankers making these high six and seven figure salaries and bonuses, and don't have any resentment because they've been sold the notion that those bankers deserve that money because, well, they're smarter than everybody else. My own experience is that most of those folks are dumber than rocks and got their position because they went to the right school and their daddies knew the right people (i.e., through nepotism, not ability), sorta like our past pResident, but most of the folks on the bottom steps of the income tier have never had any actual interactions with these Lords of the Universe and thus are easy prey for the notion that, well. these Lords of the Universe get paid more because they're smarter than everybody else.

Which, of course, the current problems of the banking industry should have disproven, but never misunderestimate the ability of Americans to believe things that are utterly contrafactual.

Regarding correlation between salary and job satisfaction and productivity, yeah, money is nice to have, but isn't everything. I like having my name on patent applications as a co-inventor of new technologies, heh. I.e., get to work on some cool sh*t, in a hot area of research. And I could probably get paid more elsewhere, but I already make more money than I need, so why?

Cliff said...

I think the truth is somewhere in between, especially as everyone has different goals. You can't deny that there are people who got into their fields for the money, and there are people who work purely for the enjoyment of what they do but the vast majority of us are right in between.

Personally, I enjoy my job. Do I LOVE it? Absolutely not, but I do like it, but I wouldn't do it for free. Interestingly enough, I also work at Microsoft, which is part of the reason I stumbled on this blog while looking up tricks/tweaks for my HTC Fuze. There are two things I look for in my role: a sense of satisfaction and accomplishment and career development which, especially at my level, comes in the form of compensation, especially relative to where others I know are at and where I was in the past. I feel that, so far, this was probably my best year at Microsoft and, while there is satisfaction to be had there, I won't be seeing any progress in terms of merit increases or promotions and, while I can understand that, given the economic situation, I'm not going to pretend that I'm not a little disheartened given that I already feel that I was on the low-end of the salary totem pole.

I certainly agree that compensation should not, and for the most part, does not affect most peoples job performance, but it does factor directly into job satisfaction otherwise we'd do what we do for free.