Posted on March 23, 2009 by Miller
This is a tremendous post by Seth Godin on firms using salaries as a one axis marketing tool. Here’s an excerpt, but be sure to read the full post, its brilliant.
After a million dollars or so in salary, the absolute amount that a person is paid has no real impact on their life. They can’t eat more meals in a day or wear more shoes. What matters to the manager is the relative amount. How much more would I make over there? Why does that company pay its CEO more than my company pays me?
(Aside: should the guys who drive an armored car that carries millions of dollars in bonds get paid more than the guys that drive an armored car that only carries thousands of dollars in cash? Does the amount of money handled change the difficult of the work?)
Twenty years ago, financial industry salaries were a tiny fraction of what they are today. Did lesser people do the work? Did they try less hard? Think smaller thoughts? Of course not. The reasons salaries are high is that the number is a signaling mechanism, a very expensive marketing campaign.
Full post here.
Posted on February 24, 2009 by Miller
With all the craziness in the economy and (justified) outrage at CEO and financial sector compensation packages, I’ve been thinking about income distribution and the wage gap – and how it relates to younger professionals who are used to working in a faster leaner environment.
Most people look at CEO and higher up executive compensation packages see an amazing gap between what they make and what a lower manager or line worker makes. Even at a salary of say $400,000 (which is under what the government is proposing capping bailed out CEO salaray at) breaks down to a hearty $7,692 per week. Not a bad gig.
Listen, I’m not saying the government has a right to tell people what they have the ability to earn in business. That’s crazy. BUT I think if you’re taking tax payer dollars to bail out a company that YOU helped run into the ground, a wage ceiling is not out of the question. More importantly, do shareholders think about the ‘value’ of their CEO vs. their compensation in their investment decisions?
But let me get back to the big What IF. Do we as a society (not a corporate board) think that upper management and CEOs are worth hundreds (or thousands) of times the wage of a lower level worker? Are they doing that much more difficult work? Do they have hundreds of times more expertise? Certainly, I would hope that its much more, but does the wage gap match the skillset?
The argument is that large paychecks attract the best qualified candidates. I think that may be valid. What I want to know is if you get more bang for your buck by getting a kick ass CEO and upper management block that is super expensive but have to pay your front line workers less than they’re worth – OR if you settled for a middle of the road upper management block and paid lower line workers more? I don’t have the answer to that question but I am curious about it.
I also wonder if a corporation could change its structure to the latter, where transparency reigns, and the income gap between the highest paid employee and lowest is much smaller, what would that do for your business? Would it attract the best lower and middle management talent? How much would your upper management talant pool be affected? Would it attract the best front line talent? Would it give people more of a sense of ‘team’ or ownership? And would it be a great story that you can market? I think that altruism is an incredibly marketable thing, so long as its genuine.
Anyone know of any companies that are currently doing this or that have narrowed this gap? Has it hurt them or helped them? And as workers value things like time and flexibility more than wage, how will this change the talent pool and corporate structure of companies in the future?
