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Is it rational for a a company to risk losing $1mm+ while training his replacement rather than pay him more? Assuming he would have stayed if they offered him more money. And if the same situation repeats itself with his replacements, maybe it's a matter of $1mm every (say) 6 years, which would justify paying $166k more per year (surely enough to keep him on indefinitely).

This comment isn't against you, because you are right that a lot of companies calculate this way. It is also undeniably short sighted. Because value in this case is literally in the eye of the beholder. If they were worth at least million and mission critical, market rate was 100k-200k. Pay 400k-500k. Guarantee employee knows they are valued and no other company would match because the person isn't worth as much to the competitor.

There was an article a few years ago about a Google employee. Competitor interviewed, offered what they thought was a great package around 500k, found out candidate was making 3mil at Google. Failure on the recruiter part not getting that info beforehand, but can understand more senior folks not discussing till the end.

Presumably the article in question: http://www.businessinsider.com/a-google-programmer-blew-off-...

yes, exactly the one. personal note, it's bad form to have published the candidate's salary. at the 3 mil level, not even Google has many employees making that. probably narrowed it down to a dozen or so people since they even mentioned that it was a "programmer" (which I interpret as high IC level).

What does ic mean?

Individual contributor (basically non-manager)

Individual contributor as opposed to people manager

Individual Contributor

Individual Contributor.

Integrated circuit

actually it's the sound a manager makes when they have to talk to their staff: "another round of one-on-ones, ic!"

You know what's even worse at trying to surface? When you saved your company millions of dollars! I'm not talking theoretical dollars here, I'm talking about last year X cost $Million, and this year due to my finding out some egregious mistakes and fixing them, that cost was measurably less by seven figures, and no one bothers to tell that story to the higher ups! I just wonder what these people do all day? Darn few managers I have ever worked with seemed able to even tie their shoes properly.

Meanwhile, I had to sit through an all hands meeting where some dingy broad got a 5 figure award for cooking up an Access database that some asshat manager used for like a week!

Franz Kafka could not dream this up!

Because of stories like this I am generally against publicly praising individual employees. Whenever you do that there is gonna be somebody who did something great you don't know about and aren't praising. There might even be people who think that what the person you are praising did something bad. I remember a all-hands meeting where somebody got praised for working all weekend. Later in private several people were disgruntled and claimed the person only had to do so because they had messed it up before despite being told to use a different approach repeatedly.

Just praise people in private, actually trust them and listen to them and reward them accordingly comes compensation time.

> Later in private several people were disgruntled and claimed the person only had to do so because they had messed it up before despite being told to use a different approach repeatedly.

This sounds like every tech company ever. I used to excitedly watch youtube videos about the extreme measures startups took to scale to "massive" amounts of traffic while undergoing huge growth spurts.

Now I just kind of roll my eyes and think "Yeah, obviously a message bus in a relational databse using rails wasn't the optimal solution for scaling that app".

In the real world emergencies happen. The unexpected happens. But the truth is that if you actually prepare and have been around the block once or twice, they don't happen all that often. And when they do, there's usually a handy little knob to ameliorate the issue.

Well, "they just didn't know," is different than, "they were directly warned and didn't listen because they though they knew better." In the latter case, working all weekend to fix the mistake isn't necessarily praise-worthy.

I don't think I agree; I think that your examples show that it's important to know your employees' accomplishments, and to praise people accurately. Public praise matters; I like it when my managers and coworkers acknowledge good work I do, and it's nice hearing that my coworkers are doing good work, too. Why should we all labor in the shadow? Why should we be afraid of praise?

I don't think that this means that we have to labor in the shadows. Typically people notice pretty well who is competent, who puts in effort and who actually gets work done. In a healthy organization that also will get acknowledged organically in all kinds of ways. High performers will be asked for help by others, people insist that they will be invited to meetings or that their opinion will be asked on certain matters. We shouldn't be afraid of praise but of awkwardly praising a subset of people in a all hands meeting where we might miss people who did good work and now will feel that their work isn't acknowledged. This also easily gets political. You have one manager who judges their employees wrong and their reports who did questionable work get praised at the all hands. Maybe they were recommended for praise although there manager knew they didn't really deserve it but needed done if their reports to also be mentioned. It frequently also leads to a hero coder culture. Someone who stays up all night and implements a feature that management wants really badly in a hard to maintain and buggy fashion will get praised at all hands. People who end up fixing the mess won't. Very frustrating for people who fixed it. Obviously this will kick off a feedback cycle leading to more and more all nighters producing crappy code.

Public praise and recognition, yes.

Public announcements of awards and raises, hell no.

Sounds like your manager didn't do his or her job. As a manager of people, you have to own these kinds of metrics and be prepared to wield them whenever the "value of an employee" question comes up.

There are multiple ways for firms and employees to value contributions. The 'how much can the employee command on the market' method that you outline is a commodity model of valuation, and it seems to have been a poor fit for this situation on the part of the firm, since the employee held enormous non-commodity value to the firm.

Employees aren't worth the market value of their job title on the open market. They are worth the cost of replacing their contributions to the company's bottom line plus any gap in contribution that the market is unable to replace. Often early employees (regardless of objective skill level) hold tremendous non-commodity value to fast growing companies. It is ultimately very costly behavior to think of these employees as commodities.

[late note: the bottom line oriented valuation method that I outline, can of course be negative. If we take the gp's assertions as given, then the employee in question is clearly worth more to the firm than his/her 'commodity' price on the market. But it is possible for the commodity value to be higher than the value of a given employee, even once the transactional turnover costs are taken into account. In such cases, it may be preferable to allow the employee to seek his/her fortunes elsewhere. I note this to make it clear that this sort of valuation model doesn't unduly bias the firm toward retaining low or negative producing employees. By the same token, it frees the firm to recognize value in excess of 'replacement value', as any reasonable worker productivity model should]

I think the point is that line of reasoning is pretty self-defeating, because the guy left. But if they had paid him in line with what value he was bringing to the company, he might not have.

Interesting. Often I hear that you are only worth what value you can provide in any one role. Like for me working in bioinformatics, I am paid much less than if I took my skills to pure tech. There is only so much value my skills can provide in this industry, but if I went to tech my skills could provide 3-4x the value.

Despite being able to show I could get paid much more at a tech-company, my company will not pay me more. However, you are claiming that the opposite is also true. You are not paid based on the value you can provide to an organization, but based on how much you COULD provide to other organizations.

So I think you are wrong. These are all just attempts to justify why companies are averse to highly paid employees, but will happily spend 10x a key employee's salary on a new machine or on a month worth of consultants.