3 ms·

This is often the natural result of older workers just being at the same company for a long time. If you assume a 5% raise annually even if you're not that gre

This is often the natural result of older workers just being at the same company for a long time. If you assume a 5% raise annually even if you're not that great of an employee, over 20 years you'll be making 50% more after inflation than a new employee would. Then if you factor in pensions, 401k matches, etc. which tend to ramp up over vesting periods you end up with long-term employees being really expensive relative to a new/younger employee. It would be nice if total compensation was always tied strictly to merit, but that's not the real world for large companies.

whatshisface 8y ago
All of the things you listed are typically justified as being incentives for employees to stick around. If the value of an employee sticking around is not that high, why are they paid so much to do it? It sounds like the root of the problem is that the company is spending years paying for something that it does not want (long-term loyalty) and then having to enact painful corrections later on down the line.
- mdorazio 8y ago
  I don't disagree with you - it often makes no sense, but this is still what I've seen after working with many large companies. My best guess is that the loyalty incentives start out as a way to retain the best employees, but the incentives are usually applied to everyone (managers generally really don't like to fire people or have to tell them they're not getting a raise). The best employees might not stay as long anyway due to better opportunities elsewhere / desire to move, while mediocre employees stay longer because they have fewer options. The numbers then play out over time and you end up with a pay/performance imbalance. Let me give you an example. A company I consulted with for quite a while moved its headquarters several states away. Informally (and of course completely off the record), they were expecting to lose about 40% of their employees in the move and were hoping that the majority of those employees would be the older (pensioned) and/or lower performing ones. What actually happened was the reverse - the majority of people who moved were the lower performers because they were unable to find other good jobs in the area prior to the move. They ended up having a lot of performance issues at the new location and had to bring in a huge number of contractors to make up the skills shortfall. Perhaps other people can provide more view points to corroborate or disprove this theory. Please note that this does not mean every old employee is bad. I've worked with plenty of amazing people who are 60+, but I've also worked with plenty of 20+ year pensioned employees who could barely work a computer, let alone do their jobs effectively. My comments are here are just to provide context for how large companies often see getting rid of older employees as an easy way to cut costs.

whatshisface 8y ago

All of the things you listed are typically justified as being incentives for employees to stick around. If the value of an employee sticking around is not that high, why are they paid so much to do it? It sounds like the root of the problem is that the company is spending years paying for something that it does not want (long-term loyalty) and then having to enact painful corrections later on down the line.

mdorazio 8y ago
I don't disagree with you - it often makes no sense, but this is still what I've seen after working with many large companies. My best guess is that the loyalty incentives start out as a way to retain the best employees, but the incentives are usually applied to everyone (managers generally really don't like to fire people or have to tell them they're not getting a raise). The best employees might not stay as long anyway due to better opportunities elsewhere / desire to move, while mediocre employees stay longer because they have fewer options. The numbers then play out over time and you end up with a pay/performance imbalance. Let me give you an example. A company I consulted with for quite a while moved its headquarters several states away. Informally (and of course completely off the record), they were expecting to lose about 40% of their employees in the move and were hoping that the majority of those employees would be the older (pensioned) and/or lower performing ones. What actually happened was the reverse - the majority of people who moved were the lower performers because they were unable to find other good jobs in the area prior to the move. They ended up having a lot of performance issues at the new location and had to bring in a huge number of contractors to make up the skills shortfall. Perhaps other people can provide more view points to corroborate or disprove this theory. Please note that this does not mean every old employee is bad. I've worked with plenty of amazing people who are 60+, but I've also worked with plenty of 20+ year pensioned employees who could barely work a computer, let alone do their jobs effectively. My comments are here are just to provide context for how large companies often see getting rid of older employees as an easy way to cut costs.