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Ducks in a Row: Value-Based Compensation

Tuesday, April 18th, 2017

https://www.flickr.com/photos/gardener41/1452771619/

Yesterday we considered the error companies make by basing offers on salary history, instead of future performance.

That may be about to end, at least in the outliers of Philadelphia and New York City.

In short, the law prevents employers from asking candidates about their current/previous compensation.

Candidates can volunteer the information, but can’t be asked for it by the company or any recruiting process, including third parties.

Doing so opens them up for lawsuits.

Ignoring implementation and legal hurdles, what does it really mean and why do I see it as such a positive?

Primarily because I don’t believe that either performance history or salary history has a damn thing to do with the value candidates bring to their next job.

Companies need to have a hiring range for each opportunity based on the impact that specific position should have on the company’s success.

The low end is based on average performance, while the high end is the result of an over achiever in the position.

The offer should be the highest number within the range based on the hiring manager’s evaluation of the candidate in light of two strong constants.

  1. 98% of star performers become stars as a function of their management and the ecosystem in which they perform.
  2. People who join for money will leave for more money.

Merit raises are then given based on that individual’s actual contribution to the company’s success, as opposed to some number from HR.

This puts most of the responsibility on the hiring manager — exactly where it belongs.

Image credit: gardener41

Golden Oldies: Pay For Performance

Monday, April 17th, 2017

It’s amazing to me, but looking back over more than a decade of writing I find posts that still impress, with information that is as useful now as when it was written.

Golden Oldies are a collection of what I consider some of the best posts during that time.

Money. Everyone’s favorite subject that no one wants to talk about. Especially when it comes to work, as in, “what were you making previously” and “what are you looking for now?”  

Tomorrow’s post focuses on a new law enacted in Philadelphia and New York City that has the potential to change that entire, unwanted conversation, forcing managers/companies to focus on the future, as opposed to history.

Read other Golden Oldies here.

starIn a post last week I asked for opinions on the ideas presented in a series of articles in Business Week on managing smarter but especially one that claims that “treating top performers the same as weaker ones is ‘strategic suicide’” and said I would add my thoughts in a future post.

Bob Foster left two interesting comments (well worth your time to click over and read). Regarding pay for performance he tells the story of a company where everybody from the CEO down all quit.

“Taking on the task to salvage the company, I hired new people that met unusual qualifications: they had to be qualified for the job they were applying for; they had to be unemployed and available immediately; they had to work at sub-standard wages; they had to work while knowing the company could close at any minute; and they had to work without supervision. The team that came together produced a highly successful company, and it was not because of high pay, or performance bonuses (there were none). The team stayed together, and performed, because of mutual respect, trust, appreciation, and consideration—people were ‘valued.’ To me, this is the truest form of ‘pay for performance.’”

I agree that trust was one of the key ingredients in what Bob accomplished, but it wasn’t the only one—or maybe I should say that it needs to be based on fairness and honesty.

Bob says the pay was ‘sub-standard’, but I assume that it was universally sub-standard relative to position and experience. If he had chosen to pay part of the team, say 10% more than their peers, the team wouldn’t have coalesced.

And that is exactly why I disagree with the idea of paying top performers, AKA stars, big sign-on bonuses or higher salaries than their peers.

  • Based on my own experience, 98% of star performers become stars as a function of their management and the ecosystem in which they perform. Change the management, culture or any other parts that comprise that ecosystem and the star may not survive.
  • Just as a chain is as strong as its weakest link there is no star in any sport, business, media, etc., who can win with a team that is subject to constant turnover and low morale.

Consider this common example.

Two people are hired at the same time with the same background, same GP0 and similar work experience, but with the one exception. One graduated from a ‘name’ school and the other from a community college. Starting salary is $50K, but the manager adds a 20% premium to the first candidate’s offer on the basis that she must be better to have gone to that school.

Neither candidate lived up to their potential because the manager made poor choices. In doing so he set both up to fail but for different reasons; one thought she had it made and the other that he was low value.

Merit bonuses fairly given for effort above and beyond acceptable performance levels make sense as long as they don’t come at the cost of developing new talent.

But one problem with ‘pay for performance’ is the pay often comes before the performance, but there are others and I’ll discuss them more Thursday. In the meantime, here are links to five posts from 2006 that give more detail on the trouble with stars.

Stars—they’re in your MAP

More about stars and MAP

Rejects or stars?

Star compensation

Retaining Stars

Image credit: sxc.hu

There were several interesting comments on the original post; check them out.

Psychological Manipulation: The Popular New Management Tool

Tuesday, April 4th, 2017

https://www.flickr.com/photos/26173922@N06/12105796185/It’s likely you are too young to have heard of a book called The Hidden Persuaders.

Originally published in 1957 and now back in print to celebrate its fiftieth anniversary, The Hidden Persuaders is Vance Packard’s pioneering and prescient work revealing how advertisers use psychological methods to tap into our unconscious desires in order to “persuade” us to buy the products they are selling.

A classic examination of how our thoughts and feelings are manipulated by business, media and politicians, The Hidden Persuaders was the first book to expose the hidden world of “motivation research,” the psychological technique that advertisers use to probe our minds in order to control our actions as consumers. Through analysis of products, political campaigns and television programs of the 1950s, Packard shows how the insidious manipulation practices that have come to dominate today’s corporate-driven world began.

It was considered highly unethical and, although there was no social media to spread the word, people were vocally upset enough that many companies stopped doing it.

Gone but not forgotten.

The behavioral social science behind Hidden Persuaders continued to grow and became a driving force underlying the deliberate addictiveness of video games.

60 years, continued research and a name change to “gamificaton” and it has become the basis of today’s management approach for gig economy companies like Uber.

Uber helps solve this fundamental problem by using psychological inducements and other techniques unearthed by social science to influence when, where and how long drivers work. It’s a quest for a perfectly efficient system: a balance between rider demand and driver supply at the lowest cost to passengers and the company.

Employing hundreds of social scientists and data scientists, Uber has experimented with video game techniques, graphics and noncash rewards of little value that can prod drivers into working longer and harder — and sometimes at hours and locations that are less lucrative for them.

Is it ethical to manipulate a workforce to produce more work at less cost to their non-employer?

Of course, Uber and “ethical action” seems an oxymoron, but psychological manipulation does appear to be on the uptick in many companies.

This article should be required reading for anyone who works in the “gig economy” or is thinking about doing so.

Hat tip to KG for pointing it out.

Image credit: Geoff Simon

Misogyny — Follow The Money

Wednesday, March 29th, 2017

Perhaps Susan Fowler’s post about the harassment she endured and Uber’s culture in general is more empowering than some thought it would be.

Especially regarding Silicon Valley’s “untouchables.”

I say that, because another woman, AJ Vandermeyden, just went public, although the lawsuit was filed last fall.

Only this time it’s Tesla and she still works there; not only works, but loves her company.

“Until somebody stands up, nothing is going to change,” she said in a recent interview, her first comments about a discrimination lawsuit she filed last year. “I’m an advocate of Tesla. I really do believe they are doing great things. That said, I can’t turn a blind eye if there’s something fundamentally wrong going on.”

Tesla’s response was hilarious, in as much as it parroted almost word-for-word the Valley mantra.

“As with any company with more than 30,000 employees, it is inevitable that there will be a small number of individuals who make claims against the company, but that does not mean those claims have merit”

Whoo hoo. Doesn’t that just give you a warm, fuzzy, confident feeling of trust?

Things were better for women 30-40 years ago. What happened?

For one thing, at least for tech, video games happened.

But that’s just one reinforcing piece.

The Atlantic took a more comprehensive look at the misogyny so prevalent in tech culture.

Investigators often say that the best way to trace anything is to “follow the money.”

Turns out that applies here, too.

When Silicon Valley was emerging, after World War II, software programming was considered rote and unglamorous, somewhat secretarial—and therefore suitable for women. The glittering future, it was thought, lay in hardware. But once software revealed its potential—and profitability—the guys flooded in and coding became a male realm.

Now look a bit further and think about the industries notorious for their bad treatment of women.

Wall Street/financial services. Law. Doctors. University-level teaching. Architecture. Chefs. Construction and journeyman crafts. I can keep going.

What do they have in common?

Follow the money.

White and blue collar = high pay.

Pink collar = low pay.

Money means freedom. Freedom to choose. Freedom to walk — from a job or from a relationship.

Put another way, money means control.

The more money you have the more control you have over your world — whether for good or for evil.

So maybe control is the real root cause.

Men (some, not all) need to control women, AKA, mom…

Poor, insecure, little guys.

Trying to change their past by taking revenge on the present and, in doing so, damaging the future.

Video credit: Business Insider

If The Shoe Fits: Hypocrisy And Greed In Startup Land

Friday, January 27th, 2017

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.

5726760809_bf0bf0f558_mTuesday I cited a post by Scott Belsky on Medium talking about how employees are often conned (my word) by founders, especially unicorns, when it comes to the wealth that is supposed to flow from their ISO.

As pithy as the post was, some of the comments were even pithier. I especially like this one from  colorfulfool (21st comment)

If profitability were proportional to hypocrisy, there would be no failed startups in the Valley.

Not just true, but succinctly and elegantly stated.

Founders love to talk about the importance of transparency, trust and authenticity.

However, their stock plans and pitfalls thereof exhibit such a high degree of opaqueness and caveat emptor that they kick a hole the size of Texas in the fabric of the founders’ authenticity.

Another prevalent piece of hypocrisy is “change the world.”

Do you really believe that another dating app or being able to evaluate a new restaurant or a better way to buy your groceries will change the world?

While they may impact one’s personal world, they certainly don’t have the impact of something like Mine Kafon.

What is proportional to the Valley’s hypocrisy is its sheer greed.

Actually, when I stop to think about it, the greed probably exceeds even the hypocrisy.

Image credit: HikingArtist

Ducks in a Row: Walmart — King of Spin

Tuesday, October 25th, 2016

https://www.flickr.com/photos/64738468@N00/2212721973/

More proof that what What Walmart really excels at is PR and spin.

After years of angry customer complaints about dirty stores, unstocked shelves, uncaring employees and an exodus of customers to the competition Walmart had an epiphany.

Maybe, just maybe, they had cut worker pay too far.

What if paying workers more, training them better and offering better opportunities for advancement can actually make a company more profitable, rather than less? “Efficiency wages” is the term that economists — who excel at giving complex names to obvious ideas — use for the notion that employers who pay workers more than the going rate will get more loyal, harder-working, more productive employees in return.

Of course, Henry Ford figured that out in 1914 and companies such as Costco have followed suit.

Ford astonished the world in 1914 by offering a $5 per day wage ($110 today), which more than doubled the rate of most of his workers. (…) The move proved extremely profitable; instead of constant turnover of employees, the best mechanics in Detroit flocked to Ford, bringing their human capital and expertise, raising productivity, and lowering training costs.

However, these days, money isn’t everything. People want more challenges, more ways to grow and better career opportunities.

“We realized quickly that wages are only one part of it, that what also matters are the schedules we give people, the hours that they work, the training we give them, the opportunities you provide them,” said Judith McKenna, who became chief operating officer in late 2014, in a recent interview. “What you’ve got to do is not just fix one part, but get all of these things moving together.”

“Quickly?” Considering the years of complaints, falling sales and stock price I’m not sure “quickly” is particularly accurate.

Just think. People who earn more money have more discretionary money to spend.

Rocket science? No, just logic.

But making your company look like a hero for paying people $18K a year definitely is rocket science.

Flickr image credit: mario

If the Shoe Fits: the Wrongest Way to Close a Company

Friday, September 2nd, 2016

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mIn June we learned the right way to close a company and last month we got a lesson in the wrong way to do it.

Right, wrong; what’s left?

(Allegedly) crooked.

How crooked?

Penny Kim is a marketing professional who relocated from Dallas in July to work for WrkRiot (formerly known as 1for.one and apparently also known as JobSonic) for $135,000 a year plus equity and a $10,000 signing bonus for relocation expenses,

It ended with her dismissal in August after she filed a complaint with the Division of Labor Standards Enforcement over failure to properly pay her

If you wonder whether she’s just another disgruntled employee, she’s not.

Not when the CEO gives everyone faked documentation of wage payment.

“Thursday, August 4th was D-Day … That afternoon in the office, Michael emailed each employee a personalized PDF receipt of a Wells Fargo wire transfer with the message: ‘Here is the receipt. It has been calculated for the taxes on your semi-monthly salary and signing bonus. The money is arriving either today or tomorrow. I am sorry about the delay.'”

But the receipts were fake.

Al Brown, former CTO and one of the founders, confirmed much of her account, even the most outrageous accusation: The CEO she dubbed “Michael,” whose LinkedIn profile identifies him as Isaac Choi, gave employees fake receipts for money wire transfers to convince them the company had paid their back wages when in fact it hadn’t.

Not even a good fake, since the photoshopped receipts said 2014.

Even after that two employees lent the company an additional $65K.

All told, Choi burned through $695,000 (his own initial $400,000, Brown’s $230,000 and the borrowed $65,000) in less than a year.

A comment on Hacker News should serve as a bona fide caveat emptor for everyone in the global startup world, not just in Silicon Valley.

“Welcome to the club. It’s pretty much a rite of passage here to spend some time with a psychopath VC, a completely self absorbed CTO with a rich investor dad that fuels his fantasies, or an idiotic CEO with an ego problem, and to pay the price for it (just time if you’re lucky, time+money if you’re not).”

This isn’t a warning not to join, just a note to do so with your eyes open.

There’s a reason it’s called “due diligence” and it’s as much for employees as it is for founders and investors.

Image credit: HikingArtist

If the Shoe Fits: Shock and Fear in Coder Heaven

Friday, June 17th, 2016

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.

5726760809_bf0bf0f558_mProgrammers in Silicon Valley are reeling.

What are they going to do?

No more clandestine recruiter calls from unicorn startups offering million dollar salaries, six figure sign-on bonuses, thousands of stock options and country club style perks.

And those graduating with CS degrees may find fewer startups bidding against each other for their services.

Not to mention layoffs. Layoff a programmer? Are you nuts?

Nope, that’s exactly what’s happening.

And, as an ex recruiter, all I can say is it’s about time.

Perhaps now candidate focus will return to the mission and the tech, instead of the dollars and bragging rights.

Because, in spite of the all the media coverage, there is a large number of programmers who don’t believe it will affect them — others, sure, but not them.

Of course, it’s hard when you’ve been the golden (mostly) boys and reality rears its ugly head.

But ask anyone in tech who has been around for awhile and they’ll tell you that change is constant and what goes up comes down — and eventually goes back up again.

Programmer jobs not excepted.

Image credit: HikingArtist

Entrepreneurs: HireAthena — On Demand, But Not 1099

Thursday, April 28th, 2016

HireAthena

Do you use or are you familiar with HireAthena? It provides professional services, such as HR, benefits, payroll, FSA and 401k management, accounting, bookkeeping, monthly financials, and taxes, using a subscription model priced according to size and needs, dominantly for startups, non-profits and other small biz.

However, unlike most on-demand providers HireAthena is not using 1099 contract professionals.

In a unique twist in the on-demand labor market, HireAthena offers its professional workforce the best of both worlds: they receive a competitive salary, 401(k), and medical/dental/vision insurance, but they can also work from home. (…) “We’re committed to the idea that employees are loyal if we’re loyal to employees, even if you’re part-time,” said Kristen Koh Goldstein, founder and CEO of HireAthena.

What’s more, HireAthena is specifically targeting professional stay-at-home moms and dads, which gives them a significantly under-utilized source of candidates.

And in case you think that HireAthena’s model only applies to higher-end professional, you have a short memory.

Last year on-demand cleaning service Managed by Q did the same with their staff.

Managed by Q hires its “operators,” as it calls them, as employees, offering full-time and part-time employment with benefits and stock options. The work is flexible, and Managed by Q works with operators’ schedules.

While HireAthena is a spinoff of Backops and Scalus, which have raised $12 million, it hasn’t taken any funding directly and expects to be profitable later this year.

“Our mission wouldn’t be taken seriously unless we were profitable. This is not a charitable organization. We’re employing moms and dads in order to provide a very affordable service to small businesses.”

No funding. Profitable. Employees, with benefits.

How old fashioned.

Image credit: HireAthena

Ducks in a Row: Do People Count?

Tuesday, March 15th, 2016

800px-The_protectors_of_our_industries

I’ve written a lot about the 1099 economy and its poster boy Uber; none of it particularly flattering.

Why?

Because the way the drivers are treated they are not “independent contractors” as described by the Feds.

They are revolting in the best way — by becoming the competition.

That was back at the end of February and in tech three weeks can be a lifetime.

The new news is that Talmon Marco founder of Viber six years ago and sold for $900 million two years later, is the guy behind Juno, Uber’s newest competitor — but a competitor that values it’s people.

“What Uber left out in the process of building their company is that they completely and totally forgot about the people who do the work, the drivers. Imagine a company where all the employees hate management; that is not a good place to be.”

And there lies the problem for most of the 1099 crowd.

Unlike most other 1099 businesses, full-time Juno drivers will be employees, not contractors, receive stock quarterly and have the potential to build  “as much equity as the founders.” according to Marco.

Remember the robber barons of the late 19th-arly 20th Century?

A robber baron is a wealthy, powerful businessman who employs practices including exerting control over natural resources, influencing high levels of government, paying subsistence wages, squashing competition by acquiring competitors, creating monopolies and raising prices  [emphasis mine], and schemes to sell stock at inflated prices to unsuspecting investors.

Even the inflated stock seems familiar when you consider that Uber’s unicorn valuation is based on funds raised, not revenue, and it’s losing hundreds of millions each year.

Robber barons indeed.

Image credit: Wikipedia

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