4 ms·

It's not about what salary that engineer deserved, but what they could command. That engineer might have done $1 million worth of work a year, and deserved a $1

It's not about what salary that engineer deserved, but what they could command. That engineer might have done $1 million worth of work a year, and deserved a $1 million salary; but he couldn't go to another company and proclaim he was worth $1 million. He could probably go elsewhere and get a slightly above average salary, your company knew that, and that is why they paid him that.

qntty 10y ago
Is it rational for a a company to risk losing $1mm+ while training his replacement rather than pay him more? Assuming he would have stayed if they offered him more money. And if the same situation repeats itself with his replacements, maybe it's a matter of $1mm every (say) 6 years, which would justify paying $166k more per year (surely enough to keep him on indefinitely).
withdavidli 10y ago
This comment isn't against you, because you are right that a lot of companies calculate this way. It is also undeniably short sighted. Because value in this case is literally in the eye of the beholder. If they were worth at least million and mission critical, market rate was 100k-200k. Pay 400k-500k. Guarantee employee knows they are valued and no other company would match because the person isn't worth as much to the competitor. There was an article a few years ago about a Google employee. Competitor interviewed, offered what they thought was a great package around 500k, found out candidate was making 3mil at Google. Failure on the recruiter part not getting that info beforehand, but can understand more senior folks not discussing till the end.
- bb611 10y ago
  Presumably the article in question: http://www.businessinsider.com/a-google-programmer-blew-off-a-500000-salary-at-startup--because-hes-already-making-3-million-every-year-2014-1 http://www.businessinsider.com/a-google-programmer-blew-off-...
  - withdavidli 10y ago
    yes, exactly the one. personal note, it's bad form to have published the candidate's salary. at the 3 mil level, not even Google has many employees making that. probably narrowed it down to a dozen or so people since they even mentioned that it was a "programmer" (which I interpret as high IC level).
    - ionwake 10y ago
      What does ic mean?
      - citizens 10y ago
        Individual contributor (basically non-manager)
      - mmcconnell1618 10y ago
        Individual contributor as opposed to people manager
      - jsudhams 10y ago
        Individual Contributor
      - seansmccullough 10y ago
        Individual Contributor.
      - falsedan 10y ago
        Integrated circuit actually it's the sound a manager makes when they have to talk to their staff: "another round of one-on-ones, ic!"
battlebot 10y ago
You know what's even worse at trying to surface? When you saved your company millions of dollars! I'm not talking theoretical dollars here, I'm talking about last year X cost $Million, and this year due to my finding out some egregious mistakes and fixing them, that cost was measurably less by seven figures, and no one bothers to tell that story to the higher ups! I just wonder what these people do all day? Darn few managers I have ever worked with seemed able to even tie their shoes properly. Meanwhile, I had to sit through an all hands meeting where some dingy broad got a 5 figure award for cooking up an Access database that some asshat manager used for like a week! Franz Kafka could not dream this up!
- ajmurmann 10y ago
  Because of stories like this I am generally against publicly praising individual employees. Whenever you do that there is gonna be somebody who did something great you don't know about and aren't praising. There might even be people who think that what the person you are praising did something bad. I remember a all-hands meeting where somebody got praised for working all weekend. Later in private several people were disgruntled and claimed the person only had to do so because they had messed it up before despite being told to use a different approach repeatedly. Just praise people in private, actually trust them and listen to them and reward them accordingly comes compensation time.
  - shanemhansen 10y ago
    > Later in private several people were disgruntled and claimed the person only had to do so because they had messed it up before despite being told to use a different approach repeatedly. This sounds like every tech company ever. I used to excitedly watch youtube videos about the extreme measures startups took to scale to "massive" amounts of traffic while undergoing huge growth spurts. Now I just kind of roll my eyes and think "Yeah, obviously a message bus in a relational databse using rails wasn't the optimal solution for scaling that app". In the real world emergencies happen. The unexpected happens. But the truth is that if you actually prepare and have been around the block once or twice, they don't happen all that often. And when they do, there's usually a handy little knob to ameliorate the issue.
shawn-furyan 10y ago
There are multiple ways for firms and employees to value contributions. The 'how much can the employee command on the market' method that you outline is a commodity model of valuation, and it seems to have been a poor fit for this situation on the part of the firm, since the employee held enormous non-commodity value to the firm. Employees aren't worth the market value of their job title on the open market. They are worth the cost of replacing their contributions to the company's bottom line plus any gap in contribution that the market is unable to replace. Often early employees (regardless of objective skill level) hold tremendous non-commodity value to fast growing companies. It is ultimately very costly behavior to think of these employees as commodities. [late note: the bottom line oriented valuation method that I outline, can of course be negative. If we take the gp's assertions as given, then the employee in question is clearly worth more to the firm than his/her 'commodity' price on the market. But it is possible for the commodity value to be higher than the value of a given employee, even once the transactional turnover costs are taken into account. In such cases, it may be preferable to allow the employee to seek his/her fortunes elsewhere. I note this to make it clear that this sort of valuation model doesn't unduly bias the firm toward retaining low or negative producing employees. By the same token, it frees the firm to recognize value in excess of 'replacement value', as any reasonable worker productivity model should]
st3v3r 10y ago
I think the point is that line of reasoning is pretty self-defeating, because the guy left. But if they had paid him in line with what value he was bringing to the company, he might not have.
dikdik 10y ago
Interesting. Often I hear that you are only worth what value you can provide in any one role. Like for me working in bioinformatics, I am paid much less than if I took my skills to pure tech. There is only so much value my skills can provide in this industry, but if I went to tech my skills could provide 3-4x the value. Despite being able to show I could get paid much more at a tech-company, my company will not pay me more. However, you are claiming that the opposite is also true. You are not paid based on the value you can provide to an organization, but based on how much you COULD provide to other organizations. So I think you are wrong. These are all just attempts to justify why companies are averse to highly paid employees, but will happily spend 10x a key employee's salary on a new machine or on a month worth of consultants.

qntty 10y ago

Is it rational for a a company to risk losing $1mm+ while training his replacement rather than pay him more? Assuming he would have stayed if they offered him more money. And if the same situation repeats itself with his replacements, maybe it's a matter of $1mm every (say) 6 years, which would justify paying $166k more per year (surely enough to keep him on indefinitely).

withdavidli 10y ago

This comment isn't against you, because you are right that a lot of companies calculate this way. It is also undeniably short sighted. Because value in this case is literally in the eye of the beholder. If they were worth at least million and mission critical, market rate was 100k-200k. Pay 400k-500k. Guarantee employee knows they are valued and no other company would match because the person isn't worth as much to the competitor. There was an article a few years ago about a Google employee. Competitor interviewed, offered what they thought was a great package around 500k, found out candidate was making 3mil at Google. Failure on the recruiter part not getting that info beforehand, but can understand more senior folks not discussing till the end.

bb611 10y ago
Presumably the article in question: http://www.businessinsider.com/a-google-programmer-blew-off-a-500000-salary-at-startup--because-hes-already-making-3-million-every-year-2014-1 http://www.businessinsider.com/a-google-programmer-blew-off-...
- withdavidli 10y ago
  yes, exactly the one. personal note, it's bad form to have published the candidate's salary. at the 3 mil level, not even Google has many employees making that. probably narrowed it down to a dozen or so people since they even mentioned that it was a "programmer" (which I interpret as high IC level).
  - ionwake 10y ago
    What does ic mean?
    - citizens 10y ago
      Individual contributor (basically non-manager)
    - mmcconnell1618 10y ago
      Individual contributor as opposed to people manager
    - jsudhams 10y ago
      Individual Contributor
    - seansmccullough 10y ago
      Individual Contributor.
    - falsedan 10y ago
      Integrated circuit actually it's the sound a manager makes when they have to talk to their staff: "another round of one-on-ones, ic!"

battlebot 10y ago

You know what's even worse at trying to surface? When you saved your company millions of dollars! I'm not talking theoretical dollars here, I'm talking about last year X cost $Million, and this year due to my finding out some egregious mistakes and fixing them, that cost was measurably less by seven figures, and no one bothers to tell that story to the higher ups! I just wonder what these people do all day? Darn few managers I have ever worked with seemed able to even tie their shoes properly. Meanwhile, I had to sit through an all hands meeting where some dingy broad got a 5 figure award for cooking up an Access database that some asshat manager used for like a week! Franz Kafka could not dream this up!

ajmurmann 10y ago
Because of stories like this I am generally against publicly praising individual employees. Whenever you do that there is gonna be somebody who did something great you don't know about and aren't praising. There might even be people who think that what the person you are praising did something bad. I remember a all-hands meeting where somebody got praised for working all weekend. Later in private several people were disgruntled and claimed the person only had to do so because they had messed it up before despite being told to use a different approach repeatedly. Just praise people in private, actually trust them and listen to them and reward them accordingly comes compensation time.
- shanemhansen 10y ago
  > Later in private several people were disgruntled and claimed the person only had to do so because they had messed it up before despite being told to use a different approach repeatedly. This sounds like every tech company ever. I used to excitedly watch youtube videos about the extreme measures startups took to scale to "massive" amounts of traffic while undergoing huge growth spurts. Now I just kind of roll my eyes and think "Yeah, obviously a message bus in a relational databse using rails wasn't the optimal solution for scaling that app". In the real world emergencies happen. The unexpected happens. But the truth is that if you actually prepare and have been around the block once or twice, they don't happen all that often. And when they do, there's usually a handy little knob to ameliorate the issue.

shawn-furyan 10y ago

There are multiple ways for firms and employees to value contributions. The 'how much can the employee command on the market' method that you outline is a commodity model of valuation, and it seems to have been a poor fit for this situation on the part of the firm, since the employee held enormous non-commodity value to the firm. Employees aren't worth the market value of their job title on the open market. They are worth the cost of replacing their contributions to the company's bottom line plus any gap in contribution that the market is unable to replace. Often early employees (regardless of objective skill level) hold tremendous non-commodity value to fast growing companies. It is ultimately very costly behavior to think of these employees as commodities. [late note: the bottom line oriented valuation method that I outline, can of course be negative. If we take the gp's assertions as given, then the employee in question is clearly worth more to the firm than his/her 'commodity' price on the market. But it is possible for the commodity value to be higher than the value of a given employee, even once the transactional turnover costs are taken into account. In such cases, it may be preferable to allow the employee to seek his/her fortunes elsewhere. I note this to make it clear that this sort of valuation model doesn't unduly bias the firm toward retaining low or negative producing employees. By the same token, it frees the firm to recognize value in excess of 'replacement value', as any reasonable worker productivity model should]

st3v3r 10y ago

I think the point is that line of reasoning is pretty self-defeating, because the guy left. But if they had paid him in line with what value he was bringing to the company, he might not have.

dikdik 10y ago

Interesting. Often I hear that you are only worth what value you can provide in any one role. Like for me working in bioinformatics, I am paid much less than if I took my skills to pure tech. There is only so much value my skills can provide in this industry, but if I went to tech my skills could provide 3-4x the value. Despite being able to show I could get paid much more at a tech-company, my company will not pay me more. However, you are claiming that the opposite is also true. You are not paid based on the value you can provide to an organization, but based on how much you COULD provide to other organizations. So I think you are wrong. These are all just attempts to justify why companies are averse to highly paid employees, but will happily spend 10x a key employee's salary on a new machine or on a month worth of consultants.