, , ,



When Satya Nadella’s comments discouraging women from asking for raises in lieu of “trusting the system” went public last week much was written about them. A lot of it was insightful, and I encourage you to read a few of the above pieces if you have a chance. For those that missed his comments, however, see below:

It’s not about asking for the raise, but knowing and having faith that the system will actually give you the right raises as you go along… And that, I think might be one of the additional superpowers that quite frankly women who don’t ask for a raise have. Because that’s good karma. It’ll come back because somebody’s going to know ‘that’s the kind of person that I want to trust. That’s the kind of person I want to really give more responsibility to.’ And in the long term efficiency, things catch up. And I wonder… And I’m not saying that’s the only approach.

…So if I were to distill why people were outraged by these comments, I would submit that it’s because they belie unawareness of a reality that countless working men and women the world over are all too aware of:

“The system” doesn’t always give you raises that reflect something approaching your value as you go along. Or, put another way; compensation is not always commiserate with performance.

…That isn’t to say that good work doesn’t get noticed – it often does, eventually. But good work being noticed doesn’t always translate into markedly more pay, and even when it does that doesn’t necessarily mean that it translates into “fair” pay. This is because determining “fair” compensation is tough. Doing so requires very accurate performance management systems, which are easier talked about in the abstract than blueprinted… and harder still to implement even when/if a great system is designed within one’s organization. As a practical matter, many employees chafe at the prospect of performance reviews, and their organizations are subsequently shying away from publicizing the criteria used to rate employees.

…Again, this is because at present performance measurement is at least a little subjective even in organizations going to great pains to quantify it. In many cases performance reviews are left almost exclusively to management discretion, which is frequently bound by few if any hard metrics. This means that the process of determining employee value is often an exercise mired in subjectivity.

To be fair, there is a certain degree of scientific rigor to developing a compensation structure. But it must also be said that pay ranges can be very wide, and that being paid a competitive wage that’s in line with the market is *not* the same as maximizing one’s earnings. Early in one’s career, if one is a high performer it’s actually much more financially lucrative to switch jobs often than it is to stay in one place. This is because an employee always has the most leverage when they’re mulling an offer – and certainly much more so than they do once they’ve accepted a job. Once you’ve accepted an offer a company knows how much you’ll work for… which makes it much easier to provide marginal year over year increases.

…And that’s the thing about meritocracies. The point of a compensation plan is to attract, retain, incentivize, and reward talent. Comp structures don’t exist to promote internal equity and parity so much as they exist to keep high performers producing high-quality work. Ideally, everyone is paid relative to their output – the highest performers make the most money, the lowest performers make the least, and everyone else falls in between. In practice? It doesn’t always work that way, and when it is working that way in an organization, said firm may or may not know it because – again – quantifying the performance of individual contributors is often as much art as science.

I suppose, then, that I would submit to you that being paid what you’d like to be paid is not so much a matter of asking for a raise as it is understanding leverage. Companies pay top talent what they have to in order to keep them happy and performing. And as a superstar will always generate many times his salary in value to the business he or she is employed by, this can often times be a very high number. The best way, then, to maximize earnings is to develop a skill set that can solve many employer’s business pain and then being unafraid to leverage that skill set in the market (and this often times means being highly mobile – as the best opportunities are not always in close geographic proximity of one another).

By freeing oneself to understand what constitutes compensable value, it’s possible to stop chasing an “equitable” wage (an impossible number because if businesses paid all employees commensurate with their value they wouldn’t turn a profit), and even wage page parity (a poor ideal to strive for because employees in the same jobs often have different but difficult to precisely differentiate impacts).

…This post was a bit tangenty, but for those that read to the end I hope it added some sort of value. This is just a Tuesday morning thought stream, but in the future I may try and better structure my thoughts on quantifying compensable value and how one can leverage their own to maximize earnings. My gut says that asking for a raise is not the way to accomplish the latter, though. It may work for some, but I really think maximizing earnings goes back to understanding one’s value in the market and leveraging it.

Or maybe I have this wrong?

As always, please share your thoughts in the comments section below.