Comments on: The Worth of a Job http://6ampacific.com/2006/06/17/the-worth-of-a-job/ Basab Pradhan's weblog about business and life in a 'flat world'. 6 AM Pacific is the best time for a global conference call. Thu, 20 Nov 2008 19:37:15 +0000 http://wordpress.org/?v=2.6.3 By: Diogenes http://6ampacific.com/2006/06/17/the-worth-of-a-job/#comment-101 Diogenes Sun, 13 Aug 2006 00:42:51 +0000 http://sixampacific.com/?p=22#comment-101 This anamoly can be explained by a few factors : (1)Supply and demand - We are in 1995,Internet suddenly explodes and everyone wants a web strategy or a webstrategist. If you can say HTML, you can make lots of money as an employee (2)Oligopolies - Investment banks are oligopolies.Otherwise, there is no reason why they should get 7% for peddling IPOs. (3)Being at the right time at the right place : Being an arms dealer during times of war pays a lot of money. Stock broking during bull runs are the same.Volumes go up dramatically and every broker makes money.Sometimes,people wrongly attribute their pay checks to ability or skill.But the truth remains.They were at the right time at the right place. (4)Perception play : In many jobs, evaluating ppl objectively is difficult. How do u evaluate a HR guy? Can be done , but difficult. So the ppl who play the perception play well rise in ranks till they reah their level of incompetence. Wallstreet obsession notwithstanding, most professional CEOs add little value. BUt teh game goes on. This anamoly can be explained by a few factors :
(1)Supply and demand - We are in 1995,Internet suddenly explodes and everyone wants a web strategy or a webstrategist. If you can say HTML, you can make lots of money as an employee
(2)Oligopolies - Investment banks are oligopolies.Otherwise, there is no reason why they should get 7% for peddling IPOs.
(3)Being at the right time at the right place : Being an arms dealer during times of war pays a lot of money. Stock broking during bull runs are the same.Volumes go up dramatically and every broker makes money.Sometimes,people wrongly attribute their pay checks to ability or skill.But the truth remains.They were at the right time at the right place.
(4)Perception play : In many jobs, evaluating ppl objectively is difficult. How do u evaluate a HR guy? Can be done , but difficult. So the ppl who play the perception play well rise in ranks till they reah their level of incompetence. Wallstreet obsession notwithstanding, most professional CEOs add little value. BUt teh game goes on.

]]> By: Paddy http://6ampacific.com/2006/06/17/the-worth-of-a-job/#comment-100 Paddy Thu, 13 Jul 2006 17:11:10 +0000 http://sixampacific.com/?p=22#comment-100 My hypothesis is that it depends on two factors: 1. How much people are willing to pay for the product/service to consume 2. The scarcity of people to do the same job in that industry In Basab's example, if the portfolio manager can be easily replaced by another, soon the price ( or compensation in this case)comes down. For people to be paid enormous amounts of money, both conditions have to be satisfied. The product/service has to be valuable- That is why a cricketer gets paid many times more than, say a hockey player. And second, it should be hard to replace. Example- Pilots are paid much more than ground staff because pilots are harder to be replaced though both are within the same industry. Coming back to Basab's example, why teachers are paid less than portfolio managers- I think both factors at work. People value portfolio management more than teaching and portfolio managers are harder to be replaced than teachers. Thanks for the interesting post! Paddy My hypothesis is that it depends on two factors:

1. How much people are willing to pay for the product/service to consume

2. The scarcity of people to do the same job in that industry

In Basab’s example, if the portfolio manager can be easily replaced by another, soon the price ( or compensation in this case)comes down.

For people to be paid enormous amounts of money, both conditions have to be satisfied. The product/service has to be valuable- That is why a cricketer gets paid many times more than, say a hockey player. And second, it should be hard to replace. Example- Pilots are paid much more than ground staff because pilots are harder to be replaced though both are within the same industry.

Coming back to Basab’s example, why teachers are paid less than portfolio managers- I think both factors at work. People value portfolio management more than teaching and portfolio managers are harder to be replaced than teachers.

Thanks for the interesting post!

Paddy

]]> By: dipayan http://6ampacific.com/2006/06/17/the-worth-of-a-job/#comment-99 dipayan Sun, 02 Jul 2006 16:47:39 +0000 http://sixampacific.com/?p=22#comment-99 Here's an interesting perspective on this from Forbes. The tournament theory explains why people up the ladder get paid more... <a href="http://www.forbes.com/2006/05/20/executive-compensation-tournament_cx_th_06work_0523pay.html" rel="nofollow">http://www.forbes.com/2006/05/20/executive-compensation-tournament_cx_th_06work_0523pay.html</a> Here’s an interesting perspective on this from Forbes. The tournament theory explains why people up the ladder get paid more…

http://www.forbes.com/2006/05/20/executive-compensation-tournament_cx_th_06work_0523pay.html

]]> By: Mogolov http://6ampacific.com/2006/06/17/the-worth-of-a-job/#comment-98 Mogolov Mon, 19 Jun 2006 21:40:18 +0000 http://sixampacific.com/?p=22#comment-98 Lets go back to the fundamentals. The sole objective of any business is to make money. And you can broadly classify all jobs in that company as "Core" or "Context" ("Crossing the Chasm": Geoffrey Moore). And typically an employee who is working in the areas classified as "Core" will obviously get paid more than someone who is working in the areas that are "Context" to that company. Core and Context, as you can imagine, change with every company. Cisco's context is Infosys' core...so on and so forth. So in essence if you want to get paid more, you need to be working in a company where your core competency matches the company's core competency. For example, If you are a SW engineer, you can work at a SW company (paid more) or work in a hospital (paid less) and that makes a huge difference in salary. Now, coming to your second part about teachers - the fundamental statement (The sole purpose of a company is to make money...) is not true in the US. It is a service provided by the govt. Hence the low salary. And hence the big delta in pay between private (IIT coaching classes) and public educators... I know I am oversimplifying..but just another point of view! Lets go back to the fundamentals. The sole objective of any business is to make money. And you can broadly classify all jobs in that company as “Core” or “Context” (”Crossing the Chasm”: Geoffrey Moore). And typically an employee who is working in the areas classified as “Core” will obviously get paid more than someone who is working in the areas that are “Context” to that company. Core and Context, as you can imagine, change with every company. Cisco’s context is Infosys’ core…so on and so forth.

So in essence if you want to get paid more, you need to be working in a company where your core competency matches the company’s core competency. For example, If you are a SW engineer, you can work at a SW company (paid more) or work in a hospital (paid less) and that makes a huge difference in salary.

Now, coming to your second part about teachers - the fundamental statement (The sole purpose of a company is to make money…) is not true in the US. It is a service provided by the govt. Hence the low salary. And hence the big delta in pay between private (IIT coaching classes) and public educators…

I know I am oversimplifying..but just another point of view!

]]> By: abhi http://6ampacific.com/2006/06/17/the-worth-of-a-job/#comment-97 abhi Mon, 19 Jun 2006 17:15:23 +0000 http://sixampacific.com/?p=22#comment-97 Basab, the school teacher example is a good one. Another example is journalism in particular news media. The guy who sells ads gets paid more plus, of course a cut of sales. The best journalists though don't get paid that well because as most ppl know (though journos are still in denial) Dalal Street cares more about profits than path-breaking journalism. The few journos who can rake in the moolah are those whose brand value is big enough to pull readers/viewers which indirectly translates into profits. Tom Friedman (though I detest his overtly simplistic views) or Rajdeep Sardesai can command that I guess! Basab, the school teacher example is a good one. Another example is journalism in particular news media.
The guy who sells ads gets paid more plus, of course a cut of sales. The best journalists though don’t get paid that well because as most ppl know (though journos are still in denial) Dalal Street cares more about profits than path-breaking journalism.
The few journos who can rake in the moolah are those whose brand value is big enough to pull readers/viewers which indirectly translates into profits.
Tom Friedman (though I detest his overtly simplistic views) or Rajdeep Sardesai can command that I guess!

]]> By: My $ 0.02 http://6ampacific.com/2006/06/17/the-worth-of-a-job/#comment-96 My $ 0.02 Mon, 19 Jun 2006 15:57:03 +0000 http://sixampacific.com/?p=22#comment-96 The hypothesis seems to be correct and logical but not exhaustive. It is quite clear that in meritocratic organization, salary is a function of value created. If the value is significant salary also becomes significant. Now, my point is what happens when the value is significant but not measurable? Measurability tends to decrease over a period of time. As time goes by, many initiatives and variables affect the outcome. So, if the value is not measurable (due to the outcome after a medium to long lag) will the initiative owner's salary be low? I do not think so. Typically roles whose impact will not be significant but with a lag (and hence not clearly measurable) are strategic in nature. Lets consider the roles of head of strategy & planning, head of research, head of product development and head of marketing (not sales). Strategy formulation, cutting edge research, product incubation and brand building can not be directly related to topline / bottomline figures. However, these roles are core of the organization and ensure long term success. Hence the compensation of people in these roles are also quite high (sometimes higher than the ones whose contribution can be clearly measured). So measurable contribution is good-to-have and not must-to-have criterion for high compensation. Whereas significant contribution is a must-to-have criterion. Successful organizations have a tendency to understand the value of a role irrespective of the contributions being measurable. Hence these organizations compensate competitively the resources creating value in the long term compared to the ones creating measurable value in the short term. The hypothesis seems to be correct and logical but not exhaustive. It is quite clear that in meritocratic organization, salary is a function of value created. If the value is significant salary also becomes significant.

Now, my point is what happens when the value is significant but not measurable?

Measurability tends to decrease over a period of time. As time goes by, many initiatives and variables affect the outcome. So, if the value is not measurable (due to the outcome after a medium to long lag) will the initiative owner’s salary be low? I do not think so.

Typically roles whose impact will not be significant but with a lag (and hence not clearly measurable) are strategic in nature. Lets consider the roles of head of strategy & planning, head of research, head of product development and head of marketing (not sales). Strategy formulation, cutting edge research, product incubation and brand building can not be directly related to topline / bottomline figures. However, these roles are core of the organization and ensure long term success. Hence the compensation of people in these roles are also quite high (sometimes higher than the ones whose contribution can be clearly measured).

So measurable contribution is good-to-have and not must-to-have criterion for high compensation. Whereas significant contribution is a must-to-have criterion. Successful organizations have a tendency to understand the value of a role irrespective of the contributions being measurable. Hence these organizations compensate competitively the resources creating value in the long term compared to the ones creating measurable value in the short term.

]]> By: hari nair http://6ampacific.com/2006/06/17/the-worth-of-a-job/#comment-95 hari nair Mon, 19 Jun 2006 11:05:36 +0000 http://sixampacific.com/?p=22#comment-95 Good one. Agree with you on the economics. Good one. Agree with you on the economics.

]]> By: Satish http://6ampacific.com/2006/06/17/the-worth-of-a-job/#comment-94 Satish Mon, 19 Jun 2006 07:37:44 +0000 http://sixampacific.com/?p=22#comment-94 "If the person in a job can directly impact the company’s profit in a significant, measurable way that job will get paid more than someone in a job that doesn’t." -- I must say, I have been waiting for your next post and it makes a very interesting read.. In growing organizations, the impact that job roles(people) can make is tough to measure.. How do one handle it..? Does the industry has a measurement mechanism in place to realize the value articulation that a person can bring in..? I am not sure if this happens everywhere but in the era of global organizations where employee strength keeps an upward count daily, it is indeed a challenging task.. ---- As far as comparing roles across industries, more or less we as human beings have pre concieved set of notions which drive us.. A car mechanic is as important as a doctor, its all about life.. Isn't it..? But for us doctor is god but a mechanic isn't “If the person in a job can directly impact the company’s profit in a significant, measurable way that job will get paid more than someone in a job that doesn’t.”
–
I must say, I have been waiting for your next post and it makes a very interesting read..

In growing organizations, the impact that job roles(people) can make is tough to measure.. How do one handle it..?

Does the industry has a measurement mechanism in place to realize the value articulation that a person can bring in..?

I am not sure if this happens everywhere but in the era of global organizations where employee strength keeps an upward count daily, it is indeed a challenging task..

—-

As far as comparing roles across industries, more or less we as human beings have pre concieved set of notions which drive us..

A car mechanic is as important as a doctor, its all about life.. Isn’t it..?

But for us doctor is god but a mechanic isn’t

]]> By: Shashikant http://6ampacific.com/2006/06/17/the-worth-of-a-job/#comment-93 Shashikant Mon, 19 Jun 2006 03:37:50 +0000 http://sixampacific.com/?p=22#comment-93 Some more parameters I can think of are closeness to the customer and criticality of the function to the entire organization. First closeness. A sales person in, say a bank, closes a deal and the operations department executes it. A sales person, obviously gets paid more, in spite of the fact that execution is equally important. Then, criticality. Consider a sys admin working for a large bank and the same job in a software company which develops enterprise software. Both involve managing a server farm. But, the function in the bank is more critical as it means the bank conducts its business or shuts down for the day. For the same job in software company, it means delay of a day or two in the deadline. Some more parameters I can think of are closeness to the customer and criticality of the function to the entire organization.

First closeness. A sales person in, say a bank, closes a deal and the operations department executes it. A sales person, obviously gets paid more, in spite of the fact that execution is equally important.

Then, criticality. Consider a sys admin working for a large bank and the same job in a software company which develops enterprise software. Both involve managing a server farm. But, the function in the bank is more critical as it means the bank conducts its business or shuts down for the day. For the same job in software company, it means delay of a day or two in the deadline.

]]> By: neha http://6ampacific.com/2006/06/17/the-worth-of-a-job/#comment-92 neha Sun, 18 Jun 2006 17:42:46 +0000 http://sixampacific.com/?p=22#comment-92 Maybe something that could be evaluated on the lines of risk? Maybe like the likelihood of you getting fired/ shot down the ladder if your performance is under par. Or the extent to which your performance can be compared to your peer's. Ability to quantify/ monetize outcomes and results. Linked to incentives? Linked to future opportunity? Therefore, if monetary value is lower than usual - you risk losing an incentive. Maybe the link between the role and company profits AND rewards for risk? Maybe something that could be evaluated on the lines of risk?

Maybe like the likelihood of you getting fired/ shot down the ladder if your performance is under par. Or the extent to which your performance can be compared to your peer’s.

Ability to quantify/ monetize outcomes and results. Linked to incentives? Linked to future opportunity? Therefore, if monetary value is lower than usual - you risk losing an incentive.

Maybe the link between the role and company profits AND rewards for risk?

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