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I hope that your philosophy of compensation is well understood by your employees. I would hate to be an employee who goes over and above work wise in such a set

by dman 9y ago

I hope that your philosophy of compensation is well understood by your employees. I would hate to be an employee who goes over and above work wise in such a setup.

danieltillett 9y ago
Why? It would only be bad if your effort was not recognised by me and compensated accordingly. This would be bad management. Your pay should be determined by what you can earn elsewhere and if you are an employee that performs above average then you will likely be paid more than the average employee elsewhere. Being able to reward high performance is one of the great things about having a smaller business. In big companies or the public sector this is often not possible, but if I want to pay someone more I can.
- dman 9y ago
  There is a subtle issue that comes into play here a. High performance employee who works at employer A has already given ample evidence of going over and above usual metrics of efficiency. b. High performance employee decides to go into the market and shop around but other prospective employers have to largely take the employee on their word and their portfolio about their performance. Since these prospective employers have not yet witnessed the said over achievements, rationally speaking they would apply a slight discount. c. Given the above, the existing employer can use the information asymmetry wrt to other employers to their advantage. They can as a pricing strategy apply the same discount to the employees compensation that other prospective employers would. What do you think about the idea about slightly overpaying for your high performance employees. This way when they go and look around they realise that they are valued.
  - danieltillett 9y ago
    This is exactly what I suggested - overpay, but not by too much. If you pay too much more than they can earn elsewhere then they become effectively handcuffed to you and feel they can’t leave even if they want to because they can’t find an equivalent paying job elsewhere.
nostrademons 9y ago
Pay in bonuses rather than salary, then. It's fairly common for top performers in both finance and big-tech for performance bonuses to equal or surpass one's base salary. That connects compensation to results, and makes it clear that you're being paid because you went over and above rather than because your employer doesn't know what market rate is.
- dman 9y ago
  I fully agree with what you said above. Please also note that I did not criticize the compensation philosophy, I just wished that it was transparent to the employees. If the deal is well understood by both parties the likelihood of heartburn goes down dramatically.
- danieltillett 9y ago
  The problem with bonuses is people just concentrate on whatever earns the bonus, not on what is best for the business. Bonuses work well when the metrics are able to be measured accurately, but if not they can create a lot of unproductive behaviour (like sucking up to the boss).
  - natecavanaugh 9y ago
    But isn't that a symptom of not being able to correctly identify what those metrics should be? I imagine that even actions that are somewhat indirectly associated with benefitting the entire business should be enumerable in some way and prioritized. I'm not saying it's easy (how do you prioritize community engagement vs new product development vs how those impact the business short and long term). But at the end of the day, you'll know best how you value those for your org, and how you want to rank them (along with the employee's actual execution of said goal), but sorting by a percentage of income instead of fixed amounts is probably the best course. Of course, my armchair quarterbacking is a lot easier than actually doing it :)
    - danieltillett 9y ago
      Yes identifying the right metrics is certainly hard, but managing the conflict between them is even harder. As you rightly point out as soon as you have a few different metrics how do you decide their relative importance and how much time and effort on each one? Managing is a very difficult skill to master. I most certainly would not consider myself any more than a little above average and only because the average manager is so bad.

by dman 9y ago

I hope that your philosophy of compensation is well understood by your employees. I would hate to be an employee who goes over and above work wise in such a setup.

danieltillett 9y ago

Why? It would only be bad if your effort was not recognised by me and compensated accordingly. This would be bad management. Your pay should be determined by what you can earn elsewhere and if you are an employee that performs above average then you will likely be paid more than the average employee elsewhere. Being able to reward high performance is one of the great things about having a smaller business. In big companies or the public sector this is often not possible, but if I want to pay someone more I can.

dman 9y ago
There is a subtle issue that comes into play here a. High performance employee who works at employer A has already given ample evidence of going over and above usual metrics of efficiency. b. High performance employee decides to go into the market and shop around but other prospective employers have to largely take the employee on their word and their portfolio about their performance. Since these prospective employers have not yet witnessed the said over achievements, rationally speaking they would apply a slight discount. c. Given the above, the existing employer can use the information asymmetry wrt to other employers to their advantage. They can as a pricing strategy apply the same discount to the employees compensation that other prospective employers would. What do you think about the idea about slightly overpaying for your high performance employees. This way when they go and look around they realise that they are valued.
- danieltillett 9y ago
  This is exactly what I suggested - overpay, but not by too much. If you pay too much more than they can earn elsewhere then they become effectively handcuffed to you and feel they can’t leave even if they want to because they can’t find an equivalent paying job elsewhere.

nostrademons 9y ago

Pay in bonuses rather than salary, then. It's fairly common for top performers in both finance and big-tech for performance bonuses to equal or surpass one's base salary. That connects compensation to results, and makes it clear that you're being paid because you went over and above rather than because your employer doesn't know what market rate is.

dman 9y ago
I fully agree with what you said above. Please also note that I did not criticize the compensation philosophy, I just wished that it was transparent to the employees. If the deal is well understood by both parties the likelihood of heartburn goes down dramatically.
danieltillett 9y ago
The problem with bonuses is people just concentrate on whatever earns the bonus, not on what is best for the business. Bonuses work well when the metrics are able to be measured accurately, but if not they can create a lot of unproductive behaviour (like sucking up to the boss).
- natecavanaugh 9y ago
  But isn't that a symptom of not being able to correctly identify what those metrics should be? I imagine that even actions that are somewhat indirectly associated with benefitting the entire business should be enumerable in some way and prioritized. I'm not saying it's easy (how do you prioritize community engagement vs new product development vs how those impact the business short and long term). But at the end of the day, you'll know best how you value those for your org, and how you want to rank them (along with the employee's actual execution of said goal), but sorting by a percentage of income instead of fixed amounts is probably the best course. Of course, my armchair quarterbacking is a lot easier than actually doing it :)
  - danieltillett 9y ago
    Yes identifying the right metrics is certainly hard, but managing the conflict between them is even harder. As you rightly point out as soon as you have a few different metrics how do you decide their relative importance and how much time and effort on each one? Managing is a very difficult skill to master. I most certainly would not consider myself any more than a little above average and only because the average manager is so bad.