Salary Commensurate with Effectiveness

I was just read this phrase “salary commensurate with experience” in a email list I’m on, and thought perhaps it should be “salary commensurate with effectiveness” or “salary commensurate with excellence” instead. A lot is gained through experience, but experience teaches some and not others. Effectiveness and excellence, whether or not they were attained by simply having the knack or through the school of hard knocks, is really what you want to reward.

16 thoughts on “Salary Commensurate with Effectiveness

  1. True story! With all the tools available these days to measure effectiveness, it’s getting harder and harder to skate by on having ridden a desk for a certain number of years. If you’re interviewing someone and the concept of “you keep what you kill” doesn’t make them excited, it should be a giant red flag. Unless you don’t care about effective employees that can produce acceptable, billable work, or deliver complete products, etc., and just hope for someone with a pulse. Oh, wait, that was the 90s!

  2. I like the concept of rewarding effectiveness over mere longevity, but I’d sound a strong note of caution as well. One of the chief things W Edwards Deming pointed out, quite rightly, in my opinion, is that individual “effectiveness” is often heavily determined by variables outside of the individual’s direct control; for example, it may be due to organizational issues (their effectiveness might be driven down by inefficiencies in the way the org as a whole operates), due to decisions made by other departments, or due to random statistical noise. For example, he pointed out that sales will vary randomly due to ordinary statistical noise, so rewarding employees based on short-term measures of sales, for example, can create a frustrating situation where a worker’s pay can vary widely on a month-to-month basis due to variables outside of the worker’s control, which is actually a very strong demotivator, as a number of studies have shown.

    A great example of holistic effects: A textile company asked Deming to come in to consult about a recent drop in productivity by the seamstresses. The managers explained to Deming that they had put up signs exhorting the seamstresses to “work harder” but it had not had any effect. Deming asked the managers if they had actually spoken with the seamstresses to find out why their productivity had dropped; the manager said they hadn’t (all they had done was exhort them, apparently). So Deming went to the factory floor and asked them if anything had changed a few months ago, when productivity had first dropped. Yes, they said: a few months ago they said they started to spend a lot more time rethreading their machines because the thread started to break a lot more often. So, Deming went to purchasing and asked them if anything had happened with the thread a few months earlier. Yes, they said: management had come in with a directive to cut costs, so they’d switched from the 20-cent thread to the 19-cent thread.

    This simple story illustrates a lot of different things at once: individual effectiveness often depends more on the whole context rather than just the performance of one individual. It also demonstrates the ineffectiveness of mere exhortations and slogans, as opposed to actually finding out what is going on. It shows that in this case, the party at fault was neither purchasing nor the seamstresses, but rather management.

    My personal view on compensation is you decide who you want to hire, and you pay them what they are willing to accept (up to a limit of what you’re willing to pay). In fact this can lead to some people who are less effective getting paid more than people who are more effective; salaries aren’t always totally fair. But ultimately I try to entice employees with the product, the team, the working environment more than mere salary, and I think keeping the focus on the effectiveness of the whole team creates a stronger basis for motivation than varying salary based on individual measures of “effectiveness”. If the whole company does better, give everyone a raise.

  3. Salary commensurate with effectiveness – Ok,I would just like to get a perspective of a benchmark standard interpretation of effectiveness.The absence of this,the correlation between salary and effectiveness can distort the parameters of the relationship between enhanced injections and objectives attainment.Does effectiveness imply “Results”irrespective of actions??

  4. Love the Deming story. Shows the importance of examining the system including impediments to success. I often think about high-achieving Japanese women with whom I worked in Tokyo @GS. Top-ranked in Tokyo U yet when they joined a Japanese bank, they were asked to make tea. When we recruited them to Goldman Sachs, they were given client-facing roles and were measured (and compensated) for their top-line (read: revenue) contributions. Put a high potential person in the right environment and watch him or her flourish. Experience looks good on paper, but what were the results? Did they increase or decrease RISK to the company? Wall Streeters not yet measured on that latter factor (sadly). I cringe when I think about Countrywide. Crooks.

  5. Though the Deming story if illustrative, our misses one piece. If you could find the one person that increased productivity in the new environment, you might learn something. It is too easy to use the system as a crutch. Those that succeed in spite of it are rare. But I do understand that past ineffetiveness or effectivenessdoes not always translate.

    I can’t help but think of the teachers union as an example for all of this; paid for experience, not effectiveness; a broken system; and one where the unique successes are ignored or stopped.

  6. It’s too hard to accurately measure excellence or effectiveness. Experience is easy to measure as a timeframe – although not accurate in terms of “exposure”.

    “salary commensurate with experience” normally translates to “below market rates”, often also referred to as “being scrappy”.

  7. where i come from experience does not count.but i believe the in the saying,
    though some people gain experience after working for some time to balance the equation of their salary .

  8. When hiring new/external resources, experience is clearly more measurable than effectiveness, even if it’s less predictive. However, it’s important not to overemphasize the latter. There are countless examples where previous “failures” are not indicative of future performance.

    Look to sports for example – my beloved Boston Celtics are an interesting case study. All 3 of the Celtics “Big 3″ came from teams where they were the only star. As a result, all 3 had never won a championship. If the Celtics GM, Danny Ainge, upon reviewing their CVs had said to himself “These guys have experience, but not success – I think I’ll pass” then the Celtics would not have put together a championship caliber team for 3 years straight. Instead Ainge factored in their experience, personality and drive and recognized that all 3 could be successful in his system.

    At any given point in time, the percentage of people in a given population who have already accomplished X, Y or Z is always lower than it would be if you re-evaluated the group 1 year later. The point – hiring a proven winner is easy, but being able to read the tea leaves, and pick up the top talent before everyone else can tell they are top talent – well, that’s the key to victory.

  9. You are all right, in some ways, for the next 10 days… only.
    The end of work (http://en.wikipedia.org/wiki/The_End_of_Work) is upcoming. It has to come soon! Our growth won’t succeed to create enough employement for everyone. Our production effectiveness is exponential, our consumption (and our needs) are linear (at least). Inevitably, we are moving from a world of goods to a world of links, from industrial age to cultural age.
    Thus, we should need salaries without any link to our work… but maybe, linked to our creations.
    Have a look on flattr.com
    More disruptive : check http://fr.wikipedia.org/wiki/Allocation_universelle
    (translation into english :

    http://translate.google.com/translate?js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&sl=fr&tl=en&u=http%3A%2F%2Ffr.wikipedia.org%2Fwiki%2FAllocation_universelle)

    Olivier (Caterina, i’m the french guy you met yesterday @ TED, during TEDFellows session :)

  10. “I never hire people who’ve already done what I want them to do. Rather, I want people who are doing it for the first time. You always do your best work when you do it for the first time.” – Paul English (CTO of Kayak)

  11. So true. I’d like to add that we should think of how much salary we can command in the terms you’ve suggested, instead of just using that as a parameter for people we are considering hiring. Thanks!

  12. As a public school employee, I savor this argument. While it’s begging for a definition of terms in the school arena…”effectiveness”, “excellence”…the time is ripe to step out of the safety of the “measurable” experience.

  13. So true. I was just reading about projectionists complaining digital projection would make them redundant… yes time to upgrade your skills: experience is not enough but it should be a platform for upgrading your skils

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