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There are several factors: 1. Organizations will often see bumping up an employee's pay to match another offer as some variant of extortion and it's they view

by cletus 5y ago

There are several factors: 1. Organizations will often see bumping up an employee's pay to match another offer as some variant of extortion and it's they view this as disloyal. Never mind that the other offer clearly shows they're now below market. I didn't say it makes sense; 2. There is friction in changing jobs and companies and people will generally have a threshold for making that jump (eg they won't switch for less than a 20% raise). So over the entire pool of employees it's cheaper to let a few go than give everyone a raise when many wouldn't leave; 3. Companies have a philosophy that you do the job you get promoted to first and then you get promoted to it and paid subsequently. Worse, often it takes time for things like equity to catch up. You may get a discretionary grant when you get promoted or you might not. And it can take years of annual refreshes to get to the total comp off a new hire at the same level; 4. Organizations seem to make the standards higher for existing rather than new employees. I think this is in part to avoid level and compensation inflation; 5. Up to a certain point there is an expectation of growth. Some of this is formal (eg up to T5 at Google). Some of it is more informal. They make the determination that even though you're at a terminal level and that's fine, if you've been there for years you're probably not going any higher so you won't be one of their future leaders or stars; and 6. Diversity. Tech companies have explicit goals around having certain minorities essentially over-represented compared to the demographics of, say, CS graduates. I guarantee you such explicit goals create perverse incentives that extend to how they handle retention.

dasil003 5y ago
This is a great list, to elaborate on #4, I think there's another factor at play related to the social implications of Dunning Kruger. To be specific: ones sense of ones own productivity and value to the company is not very well correlated to actual performance. For new hires, management doesn't what their value will be, so it really comes down to market rates and negotiation based on the limited signal. If you make a bad hire you can chalk it to classic market-for-lemons problem and you deal with it via pip or letting them go. However once someone is established, their performance is more or less well-understood by their peers. It's at this point that the disconnect between ones own perceived performance and the broader perception becomes deadly, because peers talk, and if one of them gets a fat raise and the other doesn't then it becomes a whole can of worms. The merit of the situation will get lost in the individual perceptions and entitlements which is likely to result in an overall morale hit one way or another. Sure this can happen with new hires, but it's more easily explainable, especially in the current climate where market rate has shifted a lot and so you literally won't be able to hire if you don't play the game.
- dragonwriter 5y ago
  > I think there's another factor at play related to the social implications of Dunning Kruger. To be specific: ones sense of ones own productivity and value to the company is not very well correlated to actual performance. Dunning-Kroger is approximately “one’s sense of one’s own relative ability capability is tightly-correlated with actual relative ability, but shifted toward the 70th percentile from actual relative ability.” The usual misunderstanding of DK is believing it to be a strong but inverse correlation between self-perceived ability and actual ability. “Not very well correlated” not only isn't DK, its a fairly unusual misunderstandings of DK.
notJim 5y ago
These are good. I think I'd add one: 7. Tech companies (explicitly or not) are skeptical of people who don't switch jobs. People call them "lifers" as a denigrating term, for people who are just coasting. Switching jobs implies that you're hungry or ambitious (regardless of whether it's true), whereas remaining at a job shows that you are complacent.
- ChrisMarshallNY 5y ago
  There's some other words that may also apply: "Integrity," "Loyalty," "Honor," "Reliability," "Trustworthiness," "Empathy," "Honesty," I could go on... You are correct. People sneer at these anachronistic qualities. I've looked up many noses. But it's what worked for me. I'm fairly happy how things turned out for me. What was it Hunter Thompson said? "I hate to advocate drugs, alcohol, violence, or insanity to anyone, but they've always worked for me."
- savanaly 5y ago
  I think this is the main one. It's a form of price discrimination. Folks fall on a spectrum from willing to go to more trouble to get more money to not willing to go to any trouble at all. It's in the best interest of a company to pay a higher rate to the former than the latter, but you can hardly go around polling people and then adjusting their salary accordingly. So you favor policies that implicitly offer the higher salary to those who signal they demand it without having to offer a higher salary to all. It doesn't have to be that they perceive the former to be worth more. Even if both perform exactly the same it's still worth it to pursue a policy which allows you to price discriminate effectively.

by cletus 5y ago

dasil003 5y ago

This is a great list, to elaborate on #4, I think there's another factor at play related to the social implications of Dunning Kruger. To be specific: ones sense of ones own productivity and value to the company is not very well correlated to actual performance. For new hires, management doesn't what their value will be, so it really comes down to market rates and negotiation based on the limited signal. If you make a bad hire you can chalk it to classic market-for-lemons problem and you deal with it via pip or letting them go. However once someone is established, their performance is more or less well-understood by their peers. It's at this point that the disconnect between ones own perceived performance and the broader perception becomes deadly, because peers talk, and if one of them gets a fat raise and the other doesn't then it becomes a whole can of worms. The merit of the situation will get lost in the individual perceptions and entitlements which is likely to result in an overall morale hit one way or another. Sure this can happen with new hires, but it's more easily explainable, especially in the current climate where market rate has shifted a lot and so you literally won't be able to hire if you don't play the game.

dragonwriter 5y ago
> I think there's another factor at play related to the social implications of Dunning Kruger. To be specific: ones sense of ones own productivity and value to the company is not very well correlated to actual performance. Dunning-Kroger is approximately “one’s sense of one’s own relative ability capability is tightly-correlated with actual relative ability, but shifted toward the 70th percentile from actual relative ability.” The usual misunderstanding of DK is believing it to be a strong but inverse correlation between self-perceived ability and actual ability. “Not very well correlated” not only isn't DK, its a fairly unusual misunderstandings of DK.

notJim 5y ago

These are good. I think I'd add one: 7. Tech companies (explicitly or not) are skeptical of people who don't switch jobs. People call them "lifers" as a denigrating term, for people who are just coasting. Switching jobs implies that you're hungry or ambitious (regardless of whether it's true), whereas remaining at a job shows that you are complacent.

ChrisMarshallNY 5y ago
There's some other words that may also apply: "Integrity," "Loyalty," "Honor," "Reliability," "Trustworthiness," "Empathy," "Honesty," I could go on... You are correct. People sneer at these anachronistic qualities. I've looked up many noses. But it's what worked for me. I'm fairly happy how things turned out for me. What was it Hunter Thompson said? "I hate to advocate drugs, alcohol, violence, or insanity to anyone, but they've always worked for me."
savanaly 5y ago
I think this is the main one. It's a form of price discrimination. Folks fall on a spectrum from willing to go to more trouble to get more money to not willing to go to any trouble at all. It's in the best interest of a company to pay a higher rate to the former than the latter, but you can hardly go around polling people and then adjusting their salary accordingly. So you favor policies that implicitly offer the higher salary to those who signal they demand it without having to offer a higher salary to all. It doesn't have to be that they perceive the former to be worth more. Even if both perform exactly the same it's still worth it to pursue a policy which allows you to price discriminate effectively.