Friday, April 16, 2010

Performance and Compensation

All this talk of performance based compensation got me remembering and thinking....

The first story is about a previous co-worker/friend and myself. I'll call him Blake to protect the sometimes innocent. Blake was ~50 yrs old and stable in his job/career. He had just received his yearly raise and was complaining to me that it was too small. He commented that it was just barely above a cost of living increase, and that he deserved more. Since I had little empathy at the time and I saw his logic as flawed, I just couldn't help myself... I asked Blake:
  • What new skill, knowledge, capability, etc had he gained in the last year?
  • How was he able to do his job better, faster, more consistently, etc than a year ago?
  • What additional responsibilities had he taken on at the company within the last year?
  • What additional value, revenues, etc was he providing the company from year ago?
He answered that he had gained a little experience. However it turned out that otherwise, he was pretty much doing the same job in the same way as a year ago. So I asked:
  • How much more would you be willing to pay for the same service by a contractor this year as compared to last year? (ie mowing lawn, house cleaner) Assuming that they are doing the same job in the same way.
He answered that probably very little or somewhere in the area of a cost of living adjustment. So I asked:
  • Then why should our company give you a bigger raise???
He was very quiet, and very frustrated with me...

The upside is that though we now work in different companies... We are still good friends !!!

The moral of the story is that American's are willing to pay more for more value. And we are reluctant to pay more for the same or less value.

Also note that if you are not learning and increasing your value... You are actually providing less value and will likely be demoted, downsized, early retired, etc. (ie others are improving and changing)

With this in mind: keep learning, growing and adapting if you want a bigger paycheck and/or more job security !!! And expecting something for nothing rarely works out !!!

Thoughts?

Ps. If you are a union member, you may be able to ignore this lesson. At least until you help make the company, system, etc so uncompetive that it implodes due to outside constraints that can not be controlled. (ie General Motors, USPS, USA Textile Industry, etc)

8 comments:

R-Five said...

Let's be honest. Unless there are significant potential upsides like raises and promotions, almost everyone hates the performance review process. It amuses me how HR departments are continually surprised that we don't embrace reviews as tools to grow and advance for its own sake.

We dislike it so much that many are willing to sell ourselves short by unions or other means, trading our unknown potential for a known, but limited future.

That's fine for managing your personal life. Maybe you've got great potential as a chef, but you're more than happy actually cooking and interacting with your happy clientele. Yes, you know you could likely learn to do the things your executive chef does, sourcing ingredients, managing people, etc., but it's not worth the hassle. You love what you do.

Similarly, a teacher may love teaching so much that the thought of being a principal has no appeal whatever. But that's you, and you're the one paying whatever price either way.

It's quite another matter when someone else is paying for your services. Review, correction of the bad, enhancement of the good, is essential. That chef is reviewed daily by his customers. No customers, no job. If he just puts his creations in a dumbwaiter and never hears any feedback, that chef will ultimately lose his edge. And he doesn't dare try anything new.

Why should it be any different for teachers? We the customers have every right, dare I say the responsibility given our kids are involved, to insist that teachers be evaluated, reviewed, promoted, or excised as required.

Anonymous said...

Our company made performance reviews useful, even desirable (though somewhate dreaded) by tying them DIRECTLY to raises. Add your score up, put it on the chart, and there's your raise. If you didn't make objectives (since you get to set them yourself) and didn't pick challenging enough objectives for yourself, you had only yourself to blame. And maybe that's OK with you.

I didn't see, though, where you were talking about teachers, when they are the most visible non-participants in the free market for labor that everybody else lives under. They ought to be first in line, since they so much want (and most deserve) to be treated as professionals yet are forced to work like common union drudges, unworthy to be paid on their own merits. It's not only silly, it's just plain wrong.
J. ewing

Anonymous said...

Management of codgers can be tricky. They can be difficult, and committed to the old way of doing things. Since they aren't promotable, but not easy to fire, they have little to gain or lose from the evaluation process. But they also have things to offer, institutional memory, and often a deeper understanding of the nature of their business. I have seen lots of young whipper snappers learn and adapt their companies into bankruptcies. One primary factor in the collapse of the economy in 2008, was that too many learners and adopters, got the upper hand over the stodgy old timers. Yesterday's charges against Goldman Sachs, a company which has always made a point of pushing it's older employees out the door is perhaps another example of that.

Anonymous said...

Management of professional employees particularly teachers, is also challenging. The problem for the manager is very often, that he is in a supervisory position over someone older, more experienced, and who quite possibly, may be more intelligent and capable than the supervisor, and who almost certainly thinks that he is.

John said...

The fascinating thing about compensation is we always seem to think we are worth more!!! Whatever that means...

We start as a young employee who does not know diddly... At which time we start learning rapidly for the first few years. Then the rate of learning decreases. Finally, at some point we have experienced pretty much everything in that job or position. So the learning becomes minimal.

Well, it makes sense that compensation increases should match the learning rate. Therefore the rate should be high at first and approach the cost of living at the end. Now, are experienced employees willing to accept this reality. Or do they keep seeking those big raises.

If a company does a good job of setting target compenstaion by position and they are disciplined in managing employee compensation, they should be able to avoid having older employees that are paid too much and therefore needing to be retired to cut costs. However, this means actually telling experienced employees that they have max'd out in that position. It may be a difficult discussion, but definitely worthwhile.

In the case of teachers, since they seem to be of interest to the readers. What additional value does a 20 yr Teacher offer over a 10 yr Teacher? Probably minimal, therefore the compensation difference should be minimal... This applies to pretty much every profession. Now, are we willing to accept it...

As for inexperienced Principals and experienced Teachers. In a Compensation class, a Professor explained that as a rule of thumb. The Supervisor should make 10% more than their highest paid employee. This is because they are responsible for the performance of those employees and deserve some slight reward for that risk/responsibility.

The other side of this is that you do not need a $100K Principal if the highest paid Teacher is $66K. Or a Supt making $180K when their staff makes $140K. Then you simply have excessive management costs.

The exceptions to the 10% rule are administrators watching over extreme specialties. (ie genius researchers, professional athletes, enlightened stock pickers, etc)

R-Five said...

To keep this within the education model but without loss of generality, a district should first decide who it will build around. For a number of reasons, I think that is clearly the principal.

In a district the size of 281, there should be only one layer of management between those principals and the superintendent. The supt in turn makes clear to the rest of the HQ staff that everything they do is in behalf of the principals, and you will evaluate yourself in that light. "By keeping good books I gave each principal a fair assessment of their school's financial position and identified some areas where they might adjust their budgets..." If you don't think that's how your job works, prepare to be outsourced.

Within the school, the principal is god, and the staff makes sure the students know that, too.

The principal, in turn, is not pigeon-holed in some union or HR style salary chart. It's open-ended to $100 k and/or has additional perks like conferences and sabaticals or leaves to work a year in a "turnaround" district. Community involvement should be obvious on its own merit, but nonetheless further encouraged.

Now, if we could only get the unions, seniority, and licensing out of the way to start thinking this way.

R-Five said...

I forgot to add that given all this, the principals are evaluated from above (HQ), below (teachers), results (tests), and outside (public opinion).

Further, cost of living increases are separate from merit increases. And if it doesn't work out, you're fired, not demoted or re-assigned.

John said...

No reassigning or demotions???

I have seen both used well and things worked out. However, it is tricky for many reasons.
- Employee carries bad feelings
- Supervisor's try to transfer their problems