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> Performance management, as practiced in many large corporations in 2024, is an outdated technology that is in need of an update Author made a couple of funda

> Performance management, as practiced in many large corporations in 2024, is an outdated technology that is in need of an update Author made a couple of fundamental mistakes: the first is they assume employees are (or should be) paid according to how much they "individually" earned the company. Employers strive to pay employees the minimum they can bear, on employer's terms. Those terms are information asymmetry and a Gaussian distribution. Fairness is the last thing one should expect from employers, but being honest about this is not good for morale, so instead, they rely on keeping employees uninformed, while the employers collude to gather everyone's remuneration history via the Work Number. The second mistake they made is assume that companies would prioritize being lean and trimming the mediocre & bottom 5%. There are other considerations, combined productivity is more important than having individual superstars working on the shiniest features. How much revenue do you think a janitor or café staffer generates? Close to zero. The same goes for engineering. Someone has to do the unglamorous staff, or you end up with a dysfunctional company, with amazing talent (on paper). Edit: there's an infamous graph that shows when aggregate worker productivity and average income. The two tracked closely, rising in tandem until the 1970s, where they got decoupled. With income becoming much flatter, and productivity continuing to rise. That's how the world has been for the past 50 years on the macro and the micro

hnuser123456 2y ago
I believe the graph you're referring to is here: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/
- jez 2y ago
  Also: the specific choice of the year 1971 (as opposed to say "the 70s" or "the late 60s") is usually meant to call attention to the fact that in 1971 the US abandoned the gold standard for the US dollar. https://en.wikipedia.org/wiki/Nixon_shock https://en.wikipedia.org/wiki/Nixon_shock
thrwaway1985882 2y ago
> The second mistake they made is assume that companies would prioritize being lean and trimming the mediocre & bottom 5%. There are other considerations, combined productivity is more important than having individual superstars working on the shiniest features. I'll add a perverse incentive too that I've talked about elsewhere – hiring is a goddamn mess right now. If I trim the bottom 5% of my org (in my case, 2-3 engineers), I may not get a backfill for them. Or I'll have to drop their level from L5->L4 to make finance happy, or hire overseas or convert a FTE to a contractor. I also have to be ready for the potential of RIFs happening, which means having an instantly identifiable bottom 5% puts me at the advantage of being ready when my boss says "give me your names". So the time value of a staffed engineer is way higher right now than it might be in a few months. It'll never be zero, because proactively managing people out makes all of our managers happy. But for now, I definitely need my low performers.
- nilkn 2y ago
  I think the value of low performers becomes much more obvious when you separate out the concept of a toxic employee. Toxic employees hurt the team or organization whether low performing or high performing, and with rare exceptions it’s almost always worth getting rid of them. Toxic employees are the people getting into arguments and conflicts all the time, dragging others down constantly. Or they’re the managers who cause attrition or can’t retain their team or lie to their peers and own leadership until it catches up to them, often dramatically. However, low performers are not always toxic. Often, low performers are just kind of lazy, or they take longer than they should to finish their work, or they take too long to reply to emails or messages, or their work needs extra review and checks and balances, or they are only capable of delivering on a relatively small set of fairly simple tasks, or they just want to work on the same part of the same product forever and can’t emotionally handle change, or … Non-toxic low performers can be great because they’ll often do the unglamorous work for you for relatively low pay, and all you have to do is not bother them too much. The worst thing you can do with non-toxic low performers is try to force them into high performers. It won’t work, because they’re either not capable or they just don’t care. For some people, their work just isn’t that important to them, and there’s nothing you can do to change their perception of the relative importance of their job to the other aspects of their life. What might look like low performance in a corporate environment can just be someone setting boundaries and refusing to let work infringe too much on their personal life.
abeppu 2y ago
It's also just embarrassing that this is supposed to be a data science blog about employee performance and the only non-simulated data directly presented or discussed is the US wage distribution, where the author has just cavalierly marked the x-axis as "Performance". There's all this spew, and the author makes claims about what good data scientists do ... and there's no data in this discussion that's directly relevant to their rambling claims.
- wombatpm 2y ago
  That’s on par with most data science projects I’ve seen in my corporate job.
- doctorpangloss 2y ago
  This topic is written about better elsewhere. Here's an opinion piece in the Harvard Business Review in 2022: https://hbr.org/2022/01/we-need-to-let-go-of-the-bell-curve https://hbr.org/2022/01/we-need-to-let-go-of-the-bell-curve Here's another article on the same topic from 2014: https://www.forbes.com/sites/joshbersin/2014/02/19/the-myth-of-the-bell-curve-look-for-the-hyper-performers/ https://www.forbes.com/sites/joshbersin/2014/02/19/the-myth-... Here's more press on the same topic from 2012: https://www.npr.org/2012/05/03/151860154/put-away-the-bell-curve-most-of-us-arent-average https://www.npr.org/2012/05/03/151860154/put-away-the-bell-c... From a data science point of view, if you want to compare the fitness of different distributions to data, go ahead and do some fitness tests, like AIC or BIC, to compare distributions. Ordinary Gaussian outperforms skew-normal and log-normal in many settings where the physics of the measurements would suggest otherwise. However, it matters what you are measuring. Here's a summary quote that explains what this Pareto versus Gaussian stuff is talking about: > "We found that a small minority of superstar performers contribute a disproportionate amount of the output." That is very different than saying that employee performance is Pareto instead of Gaussian distributed. "Output" and "employee performance" measures two different things. If there is any big picture flaw to all of this: it is quintessentially Individual Contributor to conflate output with employee performance. Another POV is that people who get fired from IC jobs understandably lament a lot of the details of their circumstances. One detail that comes up is that other people take credit for their work, which should illuminate how output and employee performance measure different things in a way that interacts in the opposite of what the article is advocating for.
efitz 2y ago
I have a crazy idea. If a corporation lays off any people in a particular job category/title, that corporation should not be allocated ANY H1B visas for that job category/title for the next year. If a corporation institutes any policy that requires decimation (or any other statistic-based termination program) of employees with a particular job category or title, or if IN EFFECT they perform this (because they will just hide it otherwise), then they will not be allocated any H1B visas for that job category or title, for the next year following any such act. In essence, the point here is that if a corporation decides it can live without X% of their workforce, then they don't get to go bring in foreign workers. The H1B program is to help find workers for positions that can't be filled; if you're laying off or mass firing people then obviously you CAN find people to fill those jobs.
- polishdude20 2y ago
  The play devil's advocate, presumably they're fired because they didn't meet standards (in whatever vague way they can justify) and they want foreign workers because local workers didn't meet those standards.
  - wetpaws 2y ago
    [dead]
  - jdbernard 2y ago
    Parent's point was about lay-offs, not firings. I'm very comfortable with their suggestion. Make the company be explicit. If it's a firing ("they are underperforming") then sure, that doesn't affect H1B eligibility, but you have to actually fire them. If it is a layoff ("we don't need those jobs") then why are you turning around and hiring for them immediately afterwards?
    - polishdude20 2y ago
      Oh yes I agree!
  - fullwaza 2y ago
nox101 2y ago
There is arguably no way to judge "fairness". Employee A gets assigned to work on LLMs. Employee B gets assigned to work on Android 9/Mac OS 12 security patches. Another example includes unforeseen difficulties. I have a friend that signed up to implement a feature. That feature would have taken 1-2 weeks in any standalone app, but, he happened to be on web browser team and the number of edge cases that came up and the amount of back and forth between standards committees meant it ended up taking 2 years. He was judged poorly even though all of it was out of his control because everyone though it should have taking 1-2 weeks. I feel like I'd prefer some balance. There are superstars. We know them. We can easily point them out in peer reviews. But, we're also a team, there's lots to do, not everyone gets to work on the high profile easy to identify "impact" parts.
wcfrobert 2y ago
Completely agree. Yes, great engineers tend to be compensated well, but only slightly more than the median performer. In other words, a 10x engineer isn't getting paid 10x more. It's probably more like 1.5x to 2x. If we somehow invent a magical way to track productivity numbers exactly, I suspect we'd see something closer to Price's Law [1] (Pareto distribution) which is essentially what this post is about, where something like 20% of workers contribute to 80% of the results. However, that doesn't means the other 80% is expendable which relates to your second point. Paying what employees "earn" for the company is incompatible with our economic system where companies want to be profitable. Paying employees what they "deserve" based on contribution is probably also undesirable. I think you'd get the same income inequality dynamics but within companies. There is an averaging effect when you work at large corporations. That's either a good thing or a bad thing depending on the person. Individual contributions are averaged out, but so are responsibilities. I think Paul Graham articulated this wonderfully in his essay on what a job is and why some prefer to work for startups [2]. [1] https://www.kienbaum.com/blog/prices-law-and-the-trouble-of-operationalizing-performance/ https://www.kienbaum.com/blog/prices-law-and-the-trouble-of-... [2] https://paulgraham.com/wealth.html https://paulgraham.com/wealth.html.
robertlagrant 2y ago
> Employers strive to pay employees the minimum they can bear, on employer's terms I don't think it's worth thinking like this. An employee's salary is floored by their value to any company, and ceilinged by their value to the company currently employing them.
- sangnoir 2y ago
  The absolute numbers are hard to accurately calculate for every employee, and change all the time, so at best, the limits are fuzzy. That said, do you care to guess where in this floor-to-ceiling range the employers' ideal would fall? Does that answer conflict with my thesis?
  - robertlagrant 2y ago
    Would you care to guess where in the range the employee's ideal would fall? The answer is missing from your thesis.
Aurornis 2y ago
> Employers strive to pay employees the minimum they can bear, on employer's terms. This is one of the things I try to drive home when I mentor young people. Employment is a market and it responds to the forces of supply and demand. Never think that your relationship with a company is anything other than a business transaction. It's a hard lesson for young people to accept these days, but everything becomes much more clear once you stop fighting the idea.
torginus 2y ago
The thing is, even if performance was Gaussian, even if we run with the following 2 statements: - IQ is gaussian - IQ correllates well with performance hiring practices would probably produce an employee population that went through some right-curve cutoff test, meaning most people would be much closer to the hiring threshold, with a few positive outliers. For a given arbitrarily chosen values, you could massage the distribution and make it look Pareto, but I'd be hard pressed to come up with a reason why it makes rational sense.
- pfooti 2y ago
  Those two assumptions are not particularly well-supported by data or modern thought on capabilities. Even the construct of "IQ" is probably a post-hoc explanation of data rather than a predictive thing. If you want an hours-long discussion of that in the context of the book, The Bell Curve, have a look at: https://www.youtube.com/watch?v=UBc7qBS1Ujo https://www.youtube.com/watch?v=UBc7qBS1Ujo
robocat 2y ago
> mistakes: the first is they assume employees are (or should be) paid according to how much they "individually" earned the company From the article: Economists will teach you something called the Marginal Productivity Theory of Wages, the idea being that the amount of money that a company is willing to spend on an employee is essentially the value that the company expects to get out of their work. This strikes me as mostly true, most of the time From internet: The marginal productivity theory of wages states that under perfect competition, workers of the same skill and efficiency will earn a wage equal to the value of their marginal product. The marginal product is the additional output from employing one more worker while keeping other factors constant. However, the theory has limitations as it assumes perfect competition, homogeneous labor, and other unrealistic conditions. In reality, competition is imperfect, labor is not perfectly mobile, and other factors like capital and management efficiency affect productivity. The marginal argument is confusing to me.
- setopt 2y ago
  > The marginal argument is confusing to me. When economists say “marginal” they usually mean what an engineer would call “derivative”. So “marginal cost”, for example, is usually “d(cost)/d(production)” or “d(cost)/d(sales)”. Similarly, marginal productivity means “d(productivity)/d(workers)”. Usually this pops up in ideal economics because under ideal circumstances, maximizing revenue and productivity and so on means “set the derivative of something to zero” to find the optimum point. (Disclaimer: I’m a physicist not an economist, but I’ve taken an intro economics course. The above was my main takeaway from that…)
  - robocat 2y ago
    That's very insightful. Thank you.
renewiltord 2y ago
If you look at those graphs you’ll see a more telling tale. US productivity has skyrocketed but Europeans are not that productive in comparison and are stagnant. Might help with understanding what’s going on.
johnnyanmac 2y ago
>. How much revenue do you think a janitor or café staffer generates? Close to zero. The same goes for engineering. Someone has to do the unglamorous staff, or you end up with a dysfunctional company, with amazing talent (on paper). There's two ways to make a profit. Gain more revenue, and not lose more revenue. Those kinds of staff are the latter, in addition to other aspects like HR (preventing lawsuits/settlements which are expensive). But yes, there's so many hidden factors on measuring "productivity". That's why stack ranking is a bit stupid in the long run. Some people aren't just producing value but bringing out productivity in others. But that's an opportunity cost for a stacked system. Such individuals should be considered for management, not kicked out. >The two tracked closely, rising in tandem until the 1970s, where they got decoupled. With income becoming much flatter, and productivity continuing to rise. That's how the world has been for the past 50 years on the macro and the micro Yup, very well known that we really should be close to that ideal John Maynard Keynes predicted all the way in 1930 of 15 hour workweeks by 2030. Instead, I believe the average work week in the US is 50 hours and it's still a very controversial battle to get to a 4 day work week.
konschubert 2y ago
> How much revenue do you think a janitor or café staffer generates? Close to zero. This completely depends on how you do your internal revenue accounting.
throwaway2037 2y ago
About your last "edit" paragraph: You can read more about it here: https://www.epi.org/productivity-pay-gap/ https://www.epi.org/productivity-pay-gap/ TL;DR: Productivity–Pay Tracker: Change 1979q4–2024q1; Productivity +80.9%; Hourly pay: +29.4%; Productivity has grown 2.7x as much as pay Also, if people are unfamiliar with economics term "productivity", it roughly corresponds to profit per employee, or better, return on equity (ROE).
SideQuark 2y ago
That “infamous graph” is mostly pop nonsense. Simply google productivity graph versus income debunk economists. The problem is bad Econ like that latch onto certain untrained brains like quack cures to an antivaxxer, because they reinforce unfounded beliefs (beliefs formed by eating too much of stuff like this). The actual items under consideration are far less spectacular or supporting the dearth of conspiracies, so the truth doesn’t spread as fast. It’s not so shiny or conspiracy reinforcing.
- disgruntledphd2 2y ago
  That's really interesting, can you provide some links to the sources you reference?
diggan 2y ago
> the first is they assume employees are (or should be) paid according to how much they earned the company From the perspective of a employee and/or human, that does seem like the most fair way of distributing what the company earns, sans the money that gets reinvested straight back into the business itself. But I'd guess that'd be more of a co-operative, and less like the typical for-profit company most companies are today.
- nuancebydefault 2y ago
  If an employee wants to get paid according marginal company earnings, they should not be an employee. They should be self employed.
- s1artibartfast 2y ago
  Would you pay a farmer or doctor how much value they give to you? You die without their service. The problem with calculating based on value provided not market rate is value provided easily sums to more than one unless you consider replacement cost.
- dingnuts 2y ago
  Did you even finish reading the comment you're replying to? It explicitly explains why employees who do not generate revenue are still valuable. What you're describing, that money would go to whoever brings in revenue directly, is the myopic viewpoint of Sales with an emphasis on closing deals with nothing else. If it wasn't for the rest of the work, there'd be nothing to sell!
- stoperaticless 2y ago
  There is no way to unambiguosly decide who is responsible for which earnings. Hipothetical two people cooperative that produces simple hammers. One specializes on wooden part, the other on metal part. How much each of them earned to the company? (Or producing and selling; or one spending his lifesavings to buy pricey hammer-making-equipment while other presses buttons on said equipment)
  - arctek 2y ago
deepnet 2y ago
My takeaway ( and an indication of who actually needs a performance review [ e.g. the manager ]) “ It’s my opinion that the biggest factor in an employee's performance – perhaps bigger than the employee’s abilities and level of effort – is whether their manager set them up for success “
- groby_b 2y ago
  It's not so much that managers need a performance review per se, but they need training and useful feedback. If you've ever worked in tech management, your experience likely was "IDK, you're senior, you vaguely have an idea what we should do, here, go manage a few folks". No training, or minimal training. Often with an expectation that of course you can still be a strong technical contributor, because how much time could managing folks possibly take. And then mostly being evaluated based on how your reports delivered. As long as we follow that approach, we'll struggle with managers doing the right thing, because they neither have learned it, nor have they seen it modelled. Sure, that expresses in bad manager performance, but often nobody can really see it or tell people what they should do better. Performance review is too late to fix that. (This is, btw, mostly true for employees as well - if you only talk about performance 1-4 times a year, people are being set up to fail)
  - anktor 2y ago
    As someone doing this transition, I would love some references that help me... Train myself I guess? Other than by doing and analyzing myself, which is my current situation I have realized I can give so many tips and reference so many great content online to learn math, programming, engineering... But find myself missing anything about managing
    - groby_b 2y ago
      There are a number of decent books. "Become an Effective Software Engineering Manager", "The Manager's Path", "Becoming a Technical Leader", "An Elegant Puzzle", "Resilient Management". But your best bet is either finding an experienced manager who's willing to coach you, or working with a management coach. (There's a number of folks blogging as well. Gergely Orosz, Laura Hogan, Camille Fournier,...)
ec109685 2y ago
Employers want to pay the minimum, clearly, but until a person’s salary exceeds the value they bring to a firm, there will be other firms willing to pay more and attract that talent. So provides some upward pressure on wages, which the author addresses: > Economists will teach you something called the Marginal Productivity Theory of Wages, the idea being that the amount of money that a company is willing to spend on an employee is essentially the value that the company expects to get out of their work. This strikes me as mostly true, most of the time, and likely to be the case in the corporate world that we’re considering here.
- bluGill 2y ago
  > but until a person’s salary exceeds the value they bring to a firm, there will be other firms willing to pay more and attract that talent This is false. Supply and demand is a factor. I could clean the toilets at the office, if janitors were in short supply my boss might setup a rotation schedule - nobody wants to but it must be done and so he would pay me. However because janitors are cheaper than me he doesn't. This isn't just theoretical - McDonald's mostly has the crew clean the floors - janitors make more money than McDonalds crew.
  - johnnyanmac 2y ago
    I don't see the contradiction. Janitorial duties are at the very worst easy to train any person off the street for. As long as people need any sort of minimum wage to survive you can find a janitor. But that also means that, because minimum wage, your salary will almost never exceed the value brought to that business. Outside of some super crazy regulations of cleanliness.
    - Spooky23 2y ago
      Not necessarily true. You either pay the margin for a contractor, or pay the janitor more in-house.
    - bluGill 2y ago
      Janitor is a messy and low prestige job. As such some will choose a lower paying job if they get the option and the pay isn't too much worse
hemloc_io 2y ago
When I first heard of the Work Number, I thought there's no way they stay in business given the Real Page suit.
- HWR_14 2y ago
  What is the RealPage suit?
  - hemloc_io 2y ago
    Lawsuit for price fixing for landlords using RealPage. https://www.justice.gov/opa/pr/justice-department-sues-realpage-algorithmic-pricing-scheme-harms-millions-american-renters https://www.justice.gov/opa/pr/justice-department-sues-realp...
    - HWR_14 2y ago
      Thanks.
- sgerenser 2y ago
  Note that with the Work Number, you can at least freeze your file, much like a credit report. Employers will still submit information, but potential employers (or lenders, or anyone else) will not be able to access the report.

hnuser123456 2y ago

I believe the graph you're referring to is here: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/

jez 2y ago
Also: the specific choice of the year 1971 (as opposed to say "the 70s" or "the late 60s") is usually meant to call attention to the fact that in 1971 the US abandoned the gold standard for the US dollar. https://en.wikipedia.org/wiki/Nixon_shock https://en.wikipedia.org/wiki/Nixon_shock

thrwaway1985882 2y ago

> The second mistake they made is assume that companies would prioritize being lean and trimming the mediocre & bottom 5%. There are other considerations, combined productivity is more important than having individual superstars working on the shiniest features. I'll add a perverse incentive too that I've talked about elsewhere – hiring is a goddamn mess right now. If I trim the bottom 5% of my org (in my case, 2-3 engineers), I may not get a backfill for them. Or I'll have to drop their level from L5->L4 to make finance happy, or hire overseas or convert a FTE to a contractor. I also have to be ready for the potential of RIFs happening, which means having an instantly identifiable bottom 5% puts me at the advantage of being ready when my boss says "give me your names". So the time value of a staffed engineer is way higher right now than it might be in a few months. It'll never be zero, because proactively managing people out makes all of our managers happy. But for now, I definitely need my low performers.

nilkn 2y ago
I think the value of low performers becomes much more obvious when you separate out the concept of a toxic employee. Toxic employees hurt the team or organization whether low performing or high performing, and with rare exceptions it’s almost always worth getting rid of them. Toxic employees are the people getting into arguments and conflicts all the time, dragging others down constantly. Or they’re the managers who cause attrition or can’t retain their team or lie to their peers and own leadership until it catches up to them, often dramatically. However, low performers are not always toxic. Often, low performers are just kind of lazy, or they take longer than they should to finish their work, or they take too long to reply to emails or messages, or their work needs extra review and checks and balances, or they are only capable of delivering on a relatively small set of fairly simple tasks, or they just want to work on the same part of the same product forever and can’t emotionally handle change, or … Non-toxic low performers can be great because they’ll often do the unglamorous work for you for relatively low pay, and all you have to do is not bother them too much. The worst thing you can do with non-toxic low performers is try to force them into high performers. It won’t work, because they’re either not capable or they just don’t care. For some people, their work just isn’t that important to them, and there’s nothing you can do to change their perception of the relative importance of their job to the other aspects of their life. What might look like low performance in a corporate environment can just be someone setting boundaries and refusing to let work infringe too much on their personal life.

abeppu 2y ago

It's also just embarrassing that this is supposed to be a data science blog about employee performance and the only non-simulated data directly presented or discussed is the US wage distribution, where the author has just cavalierly marked the x-axis as "Performance". There's all this spew, and the author makes claims about what good data scientists do ... and there's no data in this discussion that's directly relevant to their rambling claims.

wombatpm 2y ago
That’s on par with most data science projects I’ve seen in my corporate job.
doctorpangloss 2y ago
This topic is written about better elsewhere. Here's an opinion piece in the Harvard Business Review in 2022: https://hbr.org/2022/01/we-need-to-let-go-of-the-bell-curve https://hbr.org/2022/01/we-need-to-let-go-of-the-bell-curve Here's another article on the same topic from 2014: https://www.forbes.com/sites/joshbersin/2014/02/19/the-myth-of-the-bell-curve-look-for-the-hyper-performers/ https://www.forbes.com/sites/joshbersin/2014/02/19/the-myth-... Here's more press on the same topic from 2012: https://www.npr.org/2012/05/03/151860154/put-away-the-bell-curve-most-of-us-arent-average https://www.npr.org/2012/05/03/151860154/put-away-the-bell-c... From a data science point of view, if you want to compare the fitness of different distributions to data, go ahead and do some fitness tests, like AIC or BIC, to compare distributions. Ordinary Gaussian outperforms skew-normal and log-normal in many settings where the physics of the measurements would suggest otherwise. However, it matters what you are measuring. Here's a summary quote that explains what this Pareto versus Gaussian stuff is talking about: > "We found that a small minority of superstar performers contribute a disproportionate amount of the output." That is very different than saying that employee performance is Pareto instead of Gaussian distributed. "Output" and "employee performance" measures two different things. If there is any big picture flaw to all of this: it is quintessentially Individual Contributor to conflate output with employee performance. Another POV is that people who get fired from IC jobs understandably lament a lot of the details of their circumstances. One detail that comes up is that other people take credit for their work, which should illuminate how output and employee performance measure different things in a way that interacts in the opposite of what the article is advocating for.

efitz 2y ago

I have a crazy idea. If a corporation lays off any people in a particular job category/title, that corporation should not be allocated ANY H1B visas for that job category/title for the next year. If a corporation institutes any policy that requires decimation (or any other statistic-based termination program) of employees with a particular job category or title, or if IN EFFECT they perform this (because they will just hide it otherwise), then they will not be allocated any H1B visas for that job category or title, for the next year following any such act. In essence, the point here is that if a corporation decides it can live without X% of their workforce, then they don't get to go bring in foreign workers. The H1B program is to help find workers for positions that can't be filled; if you're laying off or mass firing people then obviously you CAN find people to fill those jobs.

polishdude20 2y ago
The play devil's advocate, presumably they're fired because they didn't meet standards (in whatever vague way they can justify) and they want foreign workers because local workers didn't meet those standards.
- wetpaws 2y ago
  [dead]
- jdbernard 2y ago
  Parent's point was about lay-offs, not firings. I'm very comfortable with their suggestion. Make the company be explicit. If it's a firing ("they are underperforming") then sure, that doesn't affect H1B eligibility, but you have to actually fire them. If it is a layoff ("we don't need those jobs") then why are you turning around and hiring for them immediately afterwards?
  - polishdude20 2y ago
    Oh yes I agree!
- fullwaza 2y ago

nox101 2y ago

There is arguably no way to judge "fairness". Employee A gets assigned to work on LLMs. Employee B gets assigned to work on Android 9/Mac OS 12 security patches. Another example includes unforeseen difficulties. I have a friend that signed up to implement a feature. That feature would have taken 1-2 weeks in any standalone app, but, he happened to be on web browser team and the number of edge cases that came up and the amount of back and forth between standards committees meant it ended up taking 2 years. He was judged poorly even though all of it was out of his control because everyone though it should have taking 1-2 weeks. I feel like I'd prefer some balance. There are superstars. We know them. We can easily point them out in peer reviews. But, we're also a team, there's lots to do, not everyone gets to work on the high profile easy to identify "impact" parts.

wcfrobert 2y ago

Completely agree. Yes, great engineers tend to be compensated well, but only slightly more than the median performer. In other words, a 10x engineer isn't getting paid 10x more. It's probably more like 1.5x to 2x. If we somehow invent a magical way to track productivity numbers exactly, I suspect we'd see something closer to Price's Law [1] (Pareto distribution) which is essentially what this post is about, where something like 20% of workers contribute to 80% of the results. However, that doesn't means the other 80% is expendable which relates to your second point. Paying what employees "earn" for the company is incompatible with our economic system where companies want to be profitable. Paying employees what they "deserve" based on contribution is probably also undesirable. I think you'd get the same income inequality dynamics but within companies. There is an averaging effect when you work at large corporations. That's either a good thing or a bad thing depending on the person. Individual contributions are averaged out, but so are responsibilities. I think Paul Graham articulated this wonderfully in his essay on what a job is and why some prefer to work for startups [2]. [1] https://www.kienbaum.com/blog/prices-law-and-the-trouble-of-operationalizing-performance/ https://www.kienbaum.com/blog/prices-law-and-the-trouble-of-... [2] https://paulgraham.com/wealth.html https://paulgraham.com/wealth.html.

robertlagrant 2y ago

> Employers strive to pay employees the minimum they can bear, on employer's terms I don't think it's worth thinking like this. An employee's salary is floored by their value to any company, and ceilinged by their value to the company currently employing them.

sangnoir 2y ago
The absolute numbers are hard to accurately calculate for every employee, and change all the time, so at best, the limits are fuzzy. That said, do you care to guess where in this floor-to-ceiling range the employers' ideal would fall? Does that answer conflict with my thesis?
- robertlagrant 2y ago
  Would you care to guess where in the range the employee's ideal would fall? The answer is missing from your thesis.

Aurornis 2y ago

> Employers strive to pay employees the minimum they can bear, on employer's terms. This is one of the things I try to drive home when I mentor young people. Employment is a market and it responds to the forces of supply and demand. Never think that your relationship with a company is anything other than a business transaction. It's a hard lesson for young people to accept these days, but everything becomes much more clear once you stop fighting the idea.

torginus 2y ago

The thing is, even if performance was Gaussian, even if we run with the following 2 statements: - IQ is gaussian - IQ correllates well with performance hiring practices would probably produce an employee population that went through some right-curve cutoff test, meaning most people would be much closer to the hiring threshold, with a few positive outliers. For a given arbitrarily chosen values, you could massage the distribution and make it look Pareto, but I'd be hard pressed to come up with a reason why it makes rational sense.

pfooti 2y ago
Those two assumptions are not particularly well-supported by data or modern thought on capabilities. Even the construct of "IQ" is probably a post-hoc explanation of data rather than a predictive thing. If you want an hours-long discussion of that in the context of the book, The Bell Curve, have a look at: https://www.youtube.com/watch?v=UBc7qBS1Ujo https://www.youtube.com/watch?v=UBc7qBS1Ujo

robocat 2y ago

> mistakes: the first is they assume employees are (or should be) paid according to how much they "individually" earned the company From the article: Economists will teach you something called the Marginal Productivity Theory of Wages, the idea being that the amount of money that a company is willing to spend on an employee is essentially the value that the company expects to get out of their work. This strikes me as mostly true, most of the time From internet: The marginal productivity theory of wages states that under perfect competition, workers of the same skill and efficiency will earn a wage equal to the value of their marginal product. The marginal product is the additional output from employing one more worker while keeping other factors constant. However, the theory has limitations as it assumes perfect competition, homogeneous labor, and other unrealistic conditions. In reality, competition is imperfect, labor is not perfectly mobile, and other factors like capital and management efficiency affect productivity. The marginal argument is confusing to me.

setopt 2y ago
> The marginal argument is confusing to me. When economists say “marginal” they usually mean what an engineer would call “derivative”. So “marginal cost”, for example, is usually “d(cost)/d(production)” or “d(cost)/d(sales)”. Similarly, marginal productivity means “d(productivity)/d(workers)”. Usually this pops up in ideal economics because under ideal circumstances, maximizing revenue and productivity and so on means “set the derivative of something to zero” to find the optimum point. (Disclaimer: I’m a physicist not an economist, but I’ve taken an intro economics course. The above was my main takeaway from that…)
- robocat 2y ago
  That's very insightful. Thank you.

renewiltord 2y ago

If you look at those graphs you’ll see a more telling tale. US productivity has skyrocketed but Europeans are not that productive in comparison and are stagnant. Might help with understanding what’s going on.

johnnyanmac 2y ago

>. How much revenue do you think a janitor or café staffer generates? Close to zero. The same goes for engineering. Someone has to do the unglamorous staff, or you end up with a dysfunctional company, with amazing talent (on paper). There's two ways to make a profit. Gain more revenue, and not lose more revenue. Those kinds of staff are the latter, in addition to other aspects like HR (preventing lawsuits/settlements which are expensive). But yes, there's so many hidden factors on measuring "productivity". That's why stack ranking is a bit stupid in the long run. Some people aren't just producing value but bringing out productivity in others. But that's an opportunity cost for a stacked system. Such individuals should be considered for management, not kicked out. >The two tracked closely, rising in tandem until the 1970s, where they got decoupled. With income becoming much flatter, and productivity continuing to rise. That's how the world has been for the past 50 years on the macro and the micro Yup, very well known that we really should be close to that ideal John Maynard Keynes predicted all the way in 1930 of 15 hour workweeks by 2030. Instead, I believe the average work week in the US is 50 hours and it's still a very controversial battle to get to a 4 day work week.

konschubert 2y ago

> How much revenue do you think a janitor or café staffer generates? Close to zero. This completely depends on how you do your internal revenue accounting.

throwaway2037 2y ago

About your last "edit" paragraph: You can read more about it here: https://www.epi.org/productivity-pay-gap/ https://www.epi.org/productivity-pay-gap/ TL;DR: Productivity–Pay Tracker: Change 1979q4–2024q1; Productivity +80.9%; Hourly pay: +29.4%; Productivity has grown 2.7x as much as pay Also, if people are unfamiliar with economics term "productivity", it roughly corresponds to profit per employee, or better, return on equity (ROE).

SideQuark 2y ago

That “infamous graph” is mostly pop nonsense. Simply google productivity graph versus income debunk economists. The problem is bad Econ like that latch onto certain untrained brains like quack cures to an antivaxxer, because they reinforce unfounded beliefs (beliefs formed by eating too much of stuff like this). The actual items under consideration are far less spectacular or supporting the dearth of conspiracies, so the truth doesn’t spread as fast. It’s not so shiny or conspiracy reinforcing.

disgruntledphd2 2y ago
That's really interesting, can you provide some links to the sources you reference?

diggan 2y ago

> the first is they assume employees are (or should be) paid according to how much they earned the company From the perspective of a employee and/or human, that does seem like the most fair way of distributing what the company earns, sans the money that gets reinvested straight back into the business itself. But I'd guess that'd be more of a co-operative, and less like the typical for-profit company most companies are today.

nuancebydefault 2y ago
If an employee wants to get paid according marginal company earnings, they should not be an employee. They should be self employed.
s1artibartfast 2y ago
Would you pay a farmer or doctor how much value they give to you? You die without their service. The problem with calculating based on value provided not market rate is value provided easily sums to more than one unless you consider replacement cost.
dingnuts 2y ago
Did you even finish reading the comment you're replying to? It explicitly explains why employees who do not generate revenue are still valuable. What you're describing, that money would go to whoever brings in revenue directly, is the myopic viewpoint of Sales with an emphasis on closing deals with nothing else. If it wasn't for the rest of the work, there'd be nothing to sell!
stoperaticless 2y ago
There is no way to unambiguosly decide who is responsible for which earnings. Hipothetical two people cooperative that produces simple hammers. One specializes on wooden part, the other on metal part. How much each of them earned to the company? (Or producing and selling; or one spending his lifesavings to buy pricey hammer-making-equipment while other presses buttons on said equipment)
- arctek 2y ago

deepnet 2y ago

My takeaway ( and an indication of who actually needs a performance review [ e.g. the manager ]) “ It’s my opinion that the biggest factor in an employee's performance – perhaps bigger than the employee’s abilities and level of effort – is whether their manager set them up for success “

groby_b 2y ago
It's not so much that managers need a performance review per se, but they need training and useful feedback. If you've ever worked in tech management, your experience likely was "IDK, you're senior, you vaguely have an idea what we should do, here, go manage a few folks". No training, or minimal training. Often with an expectation that of course you can still be a strong technical contributor, because how much time could managing folks possibly take. And then mostly being evaluated based on how your reports delivered. As long as we follow that approach, we'll struggle with managers doing the right thing, because they neither have learned it, nor have they seen it modelled. Sure, that expresses in bad manager performance, but often nobody can really see it or tell people what they should do better. Performance review is too late to fix that. (This is, btw, mostly true for employees as well - if you only talk about performance 1-4 times a year, people are being set up to fail)
- anktor 2y ago
  As someone doing this transition, I would love some references that help me... Train myself I guess? Other than by doing and analyzing myself, which is my current situation I have realized I can give so many tips and reference so many great content online to learn math, programming, engineering... But find myself missing anything about managing
  - groby_b 2y ago
    There are a number of decent books. "Become an Effective Software Engineering Manager", "The Manager's Path", "Becoming a Technical Leader", "An Elegant Puzzle", "Resilient Management". But your best bet is either finding an experienced manager who's willing to coach you, or working with a management coach. (There's a number of folks blogging as well. Gergely Orosz, Laura Hogan, Camille Fournier,...)

ec109685 2y ago

Employers want to pay the minimum, clearly, but until a person’s salary exceeds the value they bring to a firm, there will be other firms willing to pay more and attract that talent. So provides some upward pressure on wages, which the author addresses: > Economists will teach you something called the Marginal Productivity Theory of Wages, the idea being that the amount of money that a company is willing to spend on an employee is essentially the value that the company expects to get out of their work. This strikes me as mostly true, most of the time, and likely to be the case in the corporate world that we’re considering here.

bluGill 2y ago
> but until a person’s salary exceeds the value they bring to a firm, there will be other firms willing to pay more and attract that talent This is false. Supply and demand is a factor. I could clean the toilets at the office, if janitors were in short supply my boss might setup a rotation schedule - nobody wants to but it must be done and so he would pay me. However because janitors are cheaper than me he doesn't. This isn't just theoretical - McDonald's mostly has the crew clean the floors - janitors make more money than McDonalds crew.
- johnnyanmac 2y ago
  I don't see the contradiction. Janitorial duties are at the very worst easy to train any person off the street for. As long as people need any sort of minimum wage to survive you can find a janitor. But that also means that, because minimum wage, your salary will almost never exceed the value brought to that business. Outside of some super crazy regulations of cleanliness.
  - Spooky23 2y ago
    Not necessarily true. You either pay the margin for a contractor, or pay the janitor more in-house.
  - bluGill 2y ago
    Janitor is a messy and low prestige job. As such some will choose a lower paying job if they get the option and the pay isn't too much worse

hemloc_io 2y ago

When I first heard of the Work Number, I thought there's no way they stay in business given the Real Page suit.

HWR_14 2y ago
What is the RealPage suit?
- hemloc_io 2y ago
  Lawsuit for price fixing for landlords using RealPage. https://www.justice.gov/opa/pr/justice-department-sues-realpage-algorithmic-pricing-scheme-harms-millions-american-renters https://www.justice.gov/opa/pr/justice-department-sues-realp...
  - HWR_14 2y ago
    Thanks.
sgerenser 2y ago
Note that with the Work Number, you can at least freeze your file, much like a credit report. Employers will still submit information, but potential employers (or lenders, or anyone else) will not be able to access the report.