Can the Young Star Ever Earn Less Than the Employees They Manage?

Capitalist Note - Got an email about this from a young gunner over the weekend, and sent her this post.  Felt like I should share again.  Cliff notes - you play to win the game, not win today.

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In a word, yes.  It's rare, but it happens.

Here’s my take - most star managers on the upswing of their careers have usually faced the prospect of either managing someone who has either:

a) earned more than they have, or

b) earned close to what they have. 

It happens more often with rising stars who are relatively young in an organization, because they tend to aggregate additional responsibilities beyond their years.  You’re aggressive with the star within the definition of “aggressive” within your company, then the department of the star has to grow, you move people around internally to work for them and BAM!  You also experience the reality that in order to hire people with the skills to work for the young star in the growing department, those new hires need to come in at or around the salary you have the star at…

Is that a problem?  Many would say yes.  To anyone (this message is for you, young star) who finds themselves in that situation, I would say "have patience, young grasshopper".  If you are that star who finds themselves managing people who earn more or close to what you earn, you're right, there should be more of a divide.  However, note this - you got to where you are because you are viewed as a high, high potential asset to your company.  There's probably only one way you can mess that up if you continue to perform - by not handling the situation with class.

If you make it about the money, some people will chalk that up to maturity, and you might see theMo money upward arc of your career slow down a bit.  If you find a classy way to bring it to someone's attention without demanding any immediate action, I can guarantee you one thing: You're going to make a LOT more money than the people you're currently managing over the course of your career.
 
To the stars of the world who find themselves in this situation, I say: "Be the ball, Danny".  Don't let pride or some shortsighted advice from your Uncle Tommy drive your reaction to this situation.  You've managed to be different than everyone else to this point.  Keep being different. 

Play to win the game, not this possession.


Subscription-Based Org Charts Are an Interesting Recruiting Tool...

If you're a consumer of news, one of the things you've seen in the past is that there's a trend towards the best news outlets creating paywalls and trying to get you to pay for a digital subscription.  The game plan at the Washington Post, New York Times and other outlets is to give you something like 10 free articles a month on your phone, then stop access and make you pay.

Have you paid the fee?  Me either, but I'm always doing the math in my head if I should.  If the content is good enough (and maybe more importantly if the SEO moves the source to the Information top repeatedly), I'm always inclined to consider paying.  Another trend in digital journalism is to create a deep, deep coverage level of a small niche and then ask the readers with hyper interest in that niche to pay for the coverage.  That's the plan at a source called "The Information".  Here's a description of that news outlet:

Jessica Lessin, a 33-year-old former Wall Street Journal reporter, has created a tech news site, The Information, which could become a new digital model at a time when ad-supported Web news is in need of an economic lifeline. 

The Information has gained notice for its contrarian, old-school approach to digital news, which includes a no-joke $399 paywall, relatively scant attention to social media (at least when compared to other digital-first news sites), and a newsroom ethos that encourages reporters to write fewer, deeper stories, as opposed to a constant drip of quick, often thinly reported hits. The Information’s sweet spot is the serious pursuit of business news: Snap Inc.’s IPO plans, the boardroom travails at Uber, an investigation into the founder of Nest Lab.

I'm interested in The Information because there's a lot of interesting HR and recruiting stories in the valley.  In addition, one of the recurring features they have is basically underground reporting of the top 2-3 levels in any company, which is a bit of a an org chart on HGH - below is a picture of how they teased the org chart of the people who matter the most at self-driving car company, Waymo (click through if you don't see the image below):

TheInformationOrgChartDive

If you're a recruiter in a niche industry, my sense is that you would pay $399 a year for the an org chart like this every two weeks alone - to say nothing of the other features and deep reporting on an industry you're trying to rip talent from.

The question is whether sources like The Information can survive in a world of free.  See the box top left - $400 per month across 10,000 subscribers = 4M in revenue.


The Elon Musk Test For Whether You Deserve a Raise....

You're going to love this one...

In his 2015 book, "Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future," Ashlee Vance shares the story of how Musk stopped working with his longtime executive assistant in early 2014. Elon musk

According to Vance, the assistant, Mary Beth Brown, asked Musk for a significant raise after she'd been working with him for 12 years. In response, Musk told Brown to take two weeks off, during which he would assume her responsibilities and see whether she was critical to his success.

When Brown returned, Musk told her he didn't need her anymore.  

Whoops.  

OK, couple of things.  While Musk generally is on the record as saying this book is accurate he strongly denies the reporting of this encounter.  Brown also denies the reporting that she lost her job through the rigid efficiency study conducted by Musk.  Also, after Brown was no longer in the role, Musk says he needed the position, as evidenced by the fact he hired 2-3 specialists (PR, etc.) rather than a generalist executive assistant.

Still, where there's smoke, there's fire.  My take is that Musk probably did consider whether the position still worked for him based on the way his business has changed.

Add this to the list of things to be careful asking for.  The most common error employees make is taking an offer to their boss expecting a counteroffer.  The boss, rather than countering, wishes the employee luck in the new position.

Want a raise?  Interesting.  How about you take a couple of days off while I determine how vital you are to the organization?

Elon Musk.  The most interesting man in the world.


UW Study On $15 Minimum Wage Bad News For Liberals...

Minimum wage

If there's anything that will get a healthy dinner conversation going (or get people fighting), it's the idea of the $15 minimum wage.  A better wage for core entry-level workers is hard to argue against as a reasonable person.  I want it to be true as a moderate, but my business focus always makes me wonder - is it actually a good idea?

This is the problem being a moderate.  I'll get 5-7 emails from each side on this post just crushing me for even daring to be in the middle.  Only the polar extremes get the oxygen and attention these days.

Fortunately, there's some research pouring in on the minimum wage that seems to be based on reality, not theory.  

More from the Washington Post

There’s bad news from Seattle for advocates of a $15-an-hour minimum wage law. Turns out the measure’s costs to the city’s low-wage workers have outweighed benefits by 3 to 1, according to a new city-commissioned study by University of Washington researchers. The average low-wage worker has lost $125 a month because of the higher-wage decree, the study found — even before it is fully phased in.

David Autor, a leading labor economist at MIT, told The Post the study seemed “very credible” and suggested that it might have enough “statistical power” to “change minds” in the perennial argument over the minimum wage.

Autor was wrong — not about the study’s credibility, but about its potential for moving people off their “priors.” The Seattle study met a furious counterattack from proponents of a $15 minimum. Defenders of the law came armed with a much rosier assessment of its impact by economists at a pro-labor University of California at Berkeley think tank, produced a few days before the more skeptical one came out.

It seems that Seattle’s mayor, a big advocate of the $15 minimum, had gotten a heads-up on the impending negative study and asked the Berkeley group to weigh in. Seattle Weekly called it “an object lesson in how quickly data can get weaponized in political debates like Seattle’s minimum wage fight.”

Woof.  Go dig in if you dare, but the UW study found that businesses react to the $15 wage by contracting total work hours, which results in low-wage workers in the area losing $125 per month due to the law.  That's interesting.  But if you go look at the Berkley study, you'll see the opposite.

If you really want to geek out, see this article at 538.  It talks about limitations of both studies.

My gut tells me this.  Businesses probably will restrict total hours to low-wage workers when minimum wage hikes hit because the margins for success are so thin.  The left and anyone else can shake their fist and wax poetic about evil owners trying to stay cost-neutral on labor expense.

But the critics don't risk their capital or their livelihood.  Add more labor costs to any business with limited margins and one of two things is going to happen - prices are getting raised or labor cost is getting scrutiny.  Prices are hard to raise from a competitive perspective.

I believe the UW study.  Sucks to be an owner when laws get passed by people who don't have to live with the consequences.  


Best Predictors of Higher Income Attainment in 12 Year Old Kids? Rule Breaking/Defiance of Parental Authority Of Course...

Ready for some science today?  Of course you are.  You want to be taken back to the college days where you'd figure out how to game the Dewey Decimal System to find the right cites for that lame research paper you had to write.

Actually, this cite is kind of cool - it comes from the Journal of Developmental Psychology Defiant kidand breaks down Best Predictor of Higher Income Attainment in 12 Year Old Kids... That's right, they measured a bunch of kids 30-40 years ago and tracked them.

Turns out, the rule breakers and the kids who are hard on their parents win.  Check out the full abstract below for some details...

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Student characteristics and behaviors at age 12 predict occupational success 40 years later over and above childhood IQ and parental socioeconomic status.

Spengler M, et al. Dev Psychol. 2015.
 
Authors
Spengler M1Brunner M2Damian RI3Lüdtke O4Martin R1Roberts BW3.

Author information

  • 1University of Luxembourg.
  • 2Free University.
  • 3University of Illinois at Urbana-Champaign.
  • 4Leibniz Institute for Science and Mathematics Education.

Drawing on a 2-wave longitudinal sample spanning 40 years from childhood (age 12) to middle adulthood (age 52), the present study was designed to examine how student characteristics and behaviors in late childhood (assessed in Wave 1 in 1968) predict career success in adulthood (assessed in Wave 2 in 2008). We examined the influence of parental socioeconomic status (SES), childhood intelligence, and student characteristics and behaviors (inattentiveness, school entitlement, responsible student, sense of inferiority, impatience, pessimism, rule breaking and defiance of parental authority, and teacher-rated studiousness) on 2 important real-life outcomes (i.e., occupational success and income). The longitudinal sample consisted of N = 745 persons who participated in 1968 (M = 11.9 years, SD = 0.6; 49.9% female) and 2008 (M = 51.8 years, SD = 0.6; 53.3% female). Regression analyses and path analyses were conducted to evaluate the direct and indirect effects (via education) of the predictors on career success. The results revealed direct and indirect influences of student characteristics (responsible student, rule breaking and defiance of parental authority, and teacher-rated studiousness) across the life span on career success after adjusting for differences in parental SES and IQ at age 12.

One surprising finding was that rule breaking and defiance of parental authority was the best noncognitive predictor of higher income after accounting for the influence of IQ, parental SES, and educational attainment. Given the nature of our archival data, the possible explanations are rather ad hoc and our exploratory results need to be replicated.

For instance, individuals who scored low on Agreeableness were also shown to earn more money (Judge, Livingston, & Hurst, 2012). One explanation Judge and colleagues (2012) gave for this finding was that it might be because of the fact that such individuals value competition more than interpersonal relations and therefore want to advance their interests relative to others. Another explanation might be that individuals with higher levels of rule breaking and defiance of parental authority also have higher levels of willingness to stand up for their own interests and aims, a characteristic that leads to more favorable individual outcomes (Barry & Friedman, 1998)—in our case, income. This may be one of the reasons why defiance of parental authority plays a role in determining income—students who show higher levels of rule breaking and defiance are more likely to engage in negotiations about earning and payment (see Judge at al., 2012) and fight more strongly to achieve personal benefits. We also cannot rule out that individuals who are likely or willing to break rules get higher pay for unethical reasons. For instance, research in the field of organizational psychology showed that employees invest in unethical or deviant workplace behavior when they are not satisfied with their income and when they have a high level of love of money (Tang & Chiu, 2003). Thus, this kind of behavior might in turn lead to higher income. Nevertheless, further research is needed to better understand the construct and its mechanisms.

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KD NOTES - My favorite parts of that abstract are as follows...

--individuals who scored low on Agreeableness were also shown to earn more money

--students who show higher levels of rule breaking and defiance are more likely to engage in negotiations about earning and payment

--We also cannot rule out that individuals who are likely or willing to break rules get higher pay for unethical reasons (whoops!)

The kids are alright.  It's just that some of them are going to get paid based on how they are wired, and some of them aren't.  Embrace the difficult child in your household, people. 


The Perils of Your Company Culture Becoming Sales-Focused (Above All Else)...

Nothing happens without sales.  Treat your salespeople right, because unless they kill something, nobody eats.

For the reasons stated above, it's not wrong for the leaders of your company to want to transform your culture into a sales machine.  The problem happens when people who weren't hired to sell suddenly find themselves with quotas but no idea of what to do next.

I was reminded of the perils of leaders trying to transform a decent culture into one that is purely revenue-focused by two things over the holiday weekend.  First, this from Fast Company on the Tesla acquisition of one-time solar energy darling SolarCity:

If there was one sign that the company was flying too close to the sun, it was, many felt, an extravagant sales-team huddle in Las Vegas around March 2015. In a scene straight out of HBO’s Silicon SolarCity.IPO_1Valley, Barnard, then SolarCity’s chief revenue officer, burst onto the stage in front of Lyndon, Peter, and 1,300 employees (Musk would arrive later) at Hakkasan nightclub, rapping over Nicki Minaj and Drake’s hit “Truffle Butter” while surrounded by provocatively dressed dancers. At another point, he appeared dressed as Helios, the Greek sun god, wearing a green suit of armor designed by the same people who created the Iron Man costume for that movie. “The party was cool,” recalls hip-hop artist Chingy, who also performed. “Lots of energy, a beautiful crowd. We shined like the sun.” There was, after all, much for them to celebrate. SolarCity was by then the clear industry leader, owning a third of the residential market and handling more installations than its next 50 competitors combined. (Barnard explains that he was only trying to rally his troops, and strongly denies that the culture became bro-y. “I don’t tolerate that bullshit,” he says.)

OK - that's fun, but what follows shows how the grind to create revenue and keep growth rolling quarter/quarter and year/year can result in less than stellar sales practices:

The company’s growth rate—it was hiring 100 sales reps a week to help hit aggressive targets—led to some dubious tactics when it came to marketing SolarCity’s zero-money-down concept. Many sources felt that the drive to hook customers often eclipsed any concerns about whether they would follow through with the lease purchase. “You had all these poorly trained reps basically going, ‘Just sign here! Don’t worry, you can cancel any time!’ ” says a former sales director. “People were treating it like signing off on iTunes’ terms and conditions.

The company’s average cancellation rate increased to 45% or higher; its door-to-door sales team saw rates of 70%, multiple sources say. (The SEC is reportedly probing the lack of public disclosures around cancellation rates in the solar industry. A spokesperson for SolarCity says that rates have improved, and that the company reports on “installed assets,” rather than “preinstallation cancellation rates.”) With competition in the solar space increasing, SolarCity engaged in a pricing war with many of its rivals, a race to the bottom that hurt deal profitability.

If there's one thing that seemingly happens a lot when companies/employees are under incredible pressure to sell, it's the emergence of low quality/borderline fraudulent sales that might not ever generate revenue as outlined above at SolarCity.

I wrapped up the holiday week by listening to some former Wells Fargo employees talk about the account fraud that happened at the company, with over 2.1 million fake accounts created by associates at the giant retail bank.  To hear my dinner companions tell it, everyone in the company knew it was going on. Find a good rundown of what happened at Wells Fargo here - and here's a great snapshot of what can go wrong when you say EVERYONE NEEDS TO BE IN SALES at your company:

“Cross-selling,” it’s called, and virtually all banks want to do more of it. Once a customer opens a checking or savings account, maybe he or she would also like an auto loan or overdraft protection or a credit card. The more products a customer has with a bank, the more money the bank makes and the less likely the customer is to leave. That’s why all banks cross-sell. But arguably no bank has ever done it with the fevered intensity of Wells Fargo.

Training in “questionable sales practices was required or you were to be fired,” a former employee tells Fortune. “We were constantly told we would end up working for McDonald’s” for not meeting quotas, a former branch manager told the Los Angeles Times in 2013; another former branch manager said employees “talked a homeless woman into opening six checking and savings accounts with fees totaling $39 a month.” 

The message was clear to everyone in the retail bank: “The route to success was selling more than your peers,” the board’s investigation found—not profitability or customer satisfaction, but simply selling more products to each customer. Everyone knew the goals were sheer fantasy for many branches and employees. At some branches not enough customers walked in the door, or area residents were too poor to need more than a few banking products. Bank leaders called overall quotas “50/50 plans” because they figured only half the regions could meet them. Yet no excuses were tolerated. You met the quotas or paid a price.  The predictable result: fake accounts.

Ugh. Companies can't succeed without sales.  But leaders who are trying to transform from product/service cultures to become sales machines at all costs generally fail.  More often than not with jail time being possible/likely for someone involved.


If I Were Starting A Union, Here's What I'd Do...

I'm spent a lot of time over the last week thinking about the challenges of the budgeted merit increases - you know the drill - 4% across the board, and you need to get "pay for performance" out of that.  Which got me thinking about this ...

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If I Were Starting A Union, Here's What I'd Do...I'd rip a page from the player's unions in the major sports leagues and focus my bargaining on the establishment of a salary cap.

Once the cap was established as a percentage of company revenue, the deal would be pretty simple from an economic perspective - members of the union would get more cash as revenue grew, and they'd be at risk if revenue didn't grow or decreased (I'd have to figure out how new headcount impacts that - there would have to be some way to protect a certain % of growth for the incumbents).

Of course, membership drives for my union would be challenged - mainly because the majority of workers in America have no interest in that kind of risk, or at least see little value in the upside. They'd rather take their 3% annually.

Which means I'd have to attempt to unionize high performers and Linchpins only.  Of course, that's problematic since this group really doesn't need representation and can increase their compensation on their own, both within the same company and via the free market.

Crap.  Back to the drawing board...


Alleged Pay Discrimination at Google Makes Marc Benioff and Salesforce Look Amazing...

Back in late 2015, I reported on proactive moves by Salesforce to do pay equity increases across its workforce to eliminate any and all gender pay issues, job by job. Here's a rundown from the post:

"In a panel at a conference organized by Fortune last week, Marc Benioff, the CEO of the cloud-based software company Salesforce, said that he recently ordered a review of all 17,000employees’ salaries to see if female employees’ pay was in line with those of male employees doing similar jobs. According to Fortune, Benioff said that the company is spending about $3 million extra this year on its payroll to make these adjustments. “We can say we pay women the same that we pay men,” he said the conference. “We looked at every single salary.”

Salesforce has declined to clarify the $3 million figure or provide further details—the size of the average adjustment, how many employees saw their salaries changed, and how they reacted—but is going to put out a report with more information next year."

At the time, I thought the move was brilliant, as it changed the conversation about workforce diversity to one of workforce equality - an equal goal that once achieved, was bound to change the narrative related to how much slack the world was going to give Salesforce for having some work to do on the diversity front.

Well, here's another reason to go for pay equity if you're a company like Salesforce - to keep the DOL from knocking on your door and playing hardball, like they just did at Google.  

"In their efforts to bring wage equality to Silicon Valley, government officials have accused one of the tech industry's anchor firms of large-scale gender discrimination.

According to the U.S. Department of Labor (DOL), available data suggests that women who work at Google suffer from "systemic compensation disparities" compared to their male peers. As part of an ongoing lawsuit, the DOL alleged that the company, a frequent recipient of federal contracts, has violated federal law by discriminating against female employees in the salary department.

In recent years, Google has reportedly been well averse to sharing such data with the DOL, which seeks to compel the company to disclose wage and other information under federal employment laws. Testifying in San Francisco on Friday, DOL regional director Janette Wipper told the court that the government had uncovered "systemic compensation disparities against women pretty much across the entire workforce" in its investigation of available company data from 2015, The Guardian reported."

The fact that Google's taken this DOL charge show's how brilliant the 2015 move by Salesforce and Benioff was.  Not only did they change the narrative related to diversity (important, but so it equality, people!), they didn't get sued.

Did Google have the money to do something similar to the Salesforce move on pay? Of course they did. But leading means you're proactive, even when you don't have to be.

Well played, Salesforce.  Good luck, Google.  You'll likely end up making the same equity increases Salesforce did, but it will look forced and you won't get credit for leading.


VP of Equality Is The Rationalized Replacement for VP of Diversity at Salesforce...

Capitalist Note - I originally posted this a couple of weeks back over at Fistful of Talent. While some of you read both FOT and the Capitalist, not all of you do - so I'm reposting here. Take a look, interesting stuff from Salesforce as they seek to change the narrative from Diversity to Equality.  Some will be frustrated, some will think it's brilliant. Here's what I know - Salesforce is playing OFFENSE, not defense, on this issue.

If you don’t like the answer, you can always change the question. Especially if you have money. Lots of money.

There’s a lot of companies across America that struggle with Diversity hiring.  They’re under-utilized in multiple job families, and even as they try to attract diverse talent, it hasn’t gone great.  After all, not everyone wants to work for your company.  Throw in the fact that you can’t pay new hires anything they want without messing up your comp equity, and most companies don’t make the progress they’d like to.

So Salesforce did what any company with loads of cash would do.  They changed the answer, and thus the question.  Turns out the answer isn’t more DIVERSITY, it’s more EQUALITY.

Confused?  You’ll get it soon. More from TechCrunch:

“It’s important for tech companies to have at least one voice at the senior leadership table that advocates for issues around equality, diversity and inclusion. Unfortunately, that’s just not the case for many companies in the tech industry. Salesforce, a company that said a year ago that a major focus for it was “the women’s issue,” recently became an exception to the rule with the hiring of Tony Prophet, its first-ever chief equality officer. Two weeks into his role, Prophet sat down with me to chat about Salesforce’s evolution from a focus on diversity and inclusion to an overall focus on equality. 

“The notion of being chief equality officer — now that was very thoughtful and deliberate on Salesforce’s part and on Marc’s [Benioff] part versus being chief of diversity or chief of inclusion because you can have a diverse workplace or a diverse culture in many parts of America that are very diverse but are hardly inclusive and there’s hardly equality,” Prophet told me. “We want to go beyond diversity and beyond inclusion to really achieve equality.”

Translation?  Tech companies have huge issues finding enough females and minority to work at their company, especially in the bay area.  If you can’t figure out diversity but can afford to achieve equality when it comes to pay, odds are people are going to be less critical of you.

Earlier this year,Salesforce chairman and CEO Marc Benioff revealed that his company spent about $3 million in 2015 to equalize compensation across the company, closing the tech giant’s gender pay gap.

Here’s a chart showing Salesforce’s workforce diversity (email subscribers click through for graph):

Salesforce diversity

Translation – The company still has a lot of work to do, but by changing the conversation to equality, not diversity, they’ve effectively changed how they’re measured by the outside world.

I’m not saying diversity hiring in tech isn’t important. I am saying that Salesforce is working towards a related, equally important goal and now will be considered in a different light than other major tech companies, whom I would expect will follow suit soon enough.

If you can’t find enough diverse hires, it makes sense to ensure the ones you have (including women) are paid on equal footing to everyone else.

Then you obviously want to get your message out.

At Salesforce, that message includes the fact they’re changing the conversation from diversity to equality, with an emphasis on pay equity.

Again, I’m not saying either approach is right – but Salesforce has created a master stroke to relieve some of the diversity hiring pressure and is going all in, with first mover advantage and everything that comes with it.

I’m a cynic on most things.  Even the cynic in me has to respect how Salesforce is controlling the narrative here.