In my book Puttin’ Cologne on the Rickshaw, and in a previous blog post, I lampooned the obsession that many management teams have with chasing the all elusive ‘best-of-the-best’ employee. Many organizations are on a constant quest to “upgrade” their organization in this manner. They think that if they could only hire the crème de la crème all their visions and values and financial goals would miraculously become reality.
The problem is that most organizations aren’t prepared to pay the kind of salaries that the true “best of the best” would demand. That’s evidenced in the way that most organizations present themselves. I’ve worked in many organizations in which HR flaunted that they offered “competitive wages and benefits” and a “professional environment.” It sounds like a great place to work, right? However, in his book The Gifted Boss: How to Find, Create and Keep Great Employees, Dale Dauten dispels this as nothing more than self-defeating. “When you say ‘competitive wages’ what you’re saying is ‘ordinary, average, about like everyone else’s.’ And when you say a ‘professional environment,’ you are saying the same thing. ‘Professional’ means that it’s typical of the profession, which is another way of saying that it’s what’s common or standard. So you have, in effect, told me that your policy is to offer average rewards in an average environment. In other words, you are trumpeting your mediocrity.”
The fact is that salaries for a particular job, no matter where you go or what organization you work for, are all set to be “competitive” just as Dauten tells us. That said; let’s take a look at how these “competitive’ salaries are set in most all organizations.
First, every job has a salary range that a company is willing to pay for a particular job. It’s set by doing a comparison of what other employers in the locale and industry are paying for the same job function or position. In other words, every company sets wages that are “usual and customary” for the job and locale. Employees holding that particular job are paid somewhere within that spread–mostly hovering around the median of the range.
Second, most companies try to hold an individual’s compensation to no higher than the nth (typically the 75th) percentile of their salary range. That nth percentile, of course, can vary from company to company, but typically not by much. So once an employee reaches, through yearly raises, that threshold, a company will do anything and everything it can to limit further pay raises, regardless of the employee’s level of performance. This is a pretty universal salary, and raise, setting practice. In this way companies in an industry or locale virtually conspire to keep salaries as low as the market will bear.
This is the same process used to determine starting salary offers for new hires.
Most organizations try to entice new employees by offering a wage that’s between the median and the 75th percentile. If this range is higher than the salary the employee is making at his/her current job then an offer will be tendered with a commensurate salary. However it will be typically set so as to offer no more than a 10% raise. You don’t want to overly motivate a new employee do you?
That’s how most people get hired. However remember there’s a limit to this–if the employee is currently making “a lot less,” then the job candidate will be passed over–the thinking being that if the previous employer wasn’t paying a higher salary then the there’s something wrong with the candidate–no matter how well he/she interviewed.
Conversely, if the candidate makes more than the targeted range would justify, then the employee is also passed over–the thought being that the candidate is too expensive and to pay him/her a high salary will result in them not being motivated to excel, i.e., they’ve already received their reward and thus have nothing more to strive for.
The first problem with this whole wage/raise/hiring process is that it dramatically proves that pay-for-performance is truly but a myth. However the big question becomes how most organizations reconcile this wage setting process with their goal of only hiring the “best of the best.” As you can probably see the two are diametrically opposed. You can’t hire the “best of the best” by paying average salaries.
Once, at a large multi-national company (which will go un-named to save them the embarrassment), management held a meeting to explain the above compensation setting scheme to the masses. The executive explaining it was then asked, point-blank, how the above described salary-setting methods reconciled with management’s stated goal of only hiring the “best of the best.”
For any normal person, caught trying to explain this dichotomy, this would be a “stump the dummy” moment–having to justify the unjustifiable and do it without that deer-in-the-headlights look. However the executive, in a rather deadpan manner, proceeded to explain that if the company were to offer higher than “competitive” salaries to new hires it would be akin to placing a “Golden Chain” around their neck forever committing them to work at that company. They would then be out of the competition for jobs anywhere else because they “made too much money.” Thus, in fact, employees were being done a “favor” so as to not place them out of the job pool and out of reach of other companies.
Sadly, this is a true story but we can learn a lot from it. There are a couple things, fundamentally wrong with management thinking, that are exemplified in the above anecdote. The first is that this salary setting practice does in fact nullify the “best of the best” mantra making it little more than laughable for management to continue with this charade. And, as I note above, it makes pay-for-performance but a myth. But more fundamentally, there’s a much more subtle mechanism at work that gives us a glimpse into how sociopathic management thinks.
The very fact that an executive would think that he could bullshit a group of highly intelligent people (in this case engineers) into believing his bunk is both disturbing, yet indicative of the typical sociopathic command and control management thinking. This is a result of the narcissistic “holier than thou” personality trait, found in many management teams today, who consider their employees as unintelligent “tools” who only exist for the purpose of performing needed labor. Most management teams fundamentally believe that everyone in the organization is naïve and that any technical sounding answer will be greeted with rapt acceptance.
So next time you’re in the job hunting mode and a company offers you a new position at little more than what you’re currently making (or they turn you down) don’t be offended–it’s not you who’s not worthy of a big raise–you’ve just fallen victim to “The Golden Chain Syndrome.”
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