Nope. You're paid for your ability to negotiate. Big difference. It's very obvious in some companies where it's easy to find higher paid people who are mediocre compared to their colleagues. They get paid more not because they bring in more value, but because they negotiated better.
And, seriously: Except for a few cases (2 person business or something) no one has an accurate amount of how much you add to the bottom line. It's a safe bet you don't. So the notion that either party knows your value is just flawed.
+1. This is extra impossible at tech companies that "give away" products. How much do you add to the bottom line for improving google search algo? Its directly 0 because a better algo doesnt mean more money (it would at a hedge fund!) and indirectly it could be billions if it means more people use the product (or it could be zero if one thinks that google's 98% market share means the algo is irrelevant)
How much does an employee on Alexa add to amazon's bottom line? Its a huge project that is important to the company, but it makes almost $0 and is obviously not free to run... so should you lose money to be an alexa employee?
How do you measure this at any real company?
The issue isn't whether you can put a dollar amount, but on the confidence in accuracy. I've seen how this is done in my company: Construct a narrative, assign numbers to that narrative (with some justification that doesn't always involve real world data), and come up with a total. They are incentivized to inflate the numbers as their goal is to increase their budget - not be accurate. If all departments did this, and you add the numbers they come up with, we'd easily end up with a number 10x our annual revenue, which is ridiculous.
Some folks who are not vested in this will aim for accuracy. And even then, they will have a large confidence interval - easily off by 2x.
How are you going to go from there and estimate an employee's value? Even if the project's value was 100% accurate, you still need to break that down to each employee. And since most employees don't work independently, you need to model the interaction effects (my work depends on your work - if you perform poorly, my contribution to the bottom line is reduced).
If the estimate of the value of the project is off by 2x, then you've already got a pathetic lower bound on the interval length of your confidence interval.
Alexa is actually an easier case to model. My job is to improve the internal communications infrastructure so that important messages get delivered (IT announcements, CEO communications, etc). How will you model my contribution to the bottom line?
I can assure everyone: At any decent sized company, no one is trying to come up with your value to the company.
With great effort and generally mediocre results. Figuring out the contribution of an individual project is hard. An individual person even more so. And this isn't because we're not smart enough, it's because the idea of an individual contribution when the whole is greater than the sum of its parts is not coherent.
So how do you split the returns? Well, the entire field of cooperative game theory has something to say about that, and the answer is complicated but the gist is that it depends less on contribution and more on negotiating power.
Are you willing and able to just leave if you don't get what you want? Are you hard to replace? Can you do your stuff with a different company if you leave? All that is much more important than how much your presence benefits the common enterprise compared to the counterfactual where nobody did your job.
From what I've seen, by horse-trading, and fighting highly political, bitter, zero-sum turf wars that depend way too much on how charming department heads/directors are, and how well they relate to the CxO's and/or board. Its not uncommon for the CEO's pet-project to get a budget completely disconnected from the its value (current or future).
Companies - like anything collective that relies on human judgement - are terrible at digging deeper than first-order effects; which is why sales people tend to get paid much more than the engineers who developed the product: "I closed a $X million deal, so I get Y% of it". The engineers get paid a flat rate, because it's impossible to quantify how much value they added, and when. Baseline engineer salaries are broadly determined by how much other companies are paying, and more specifically by how good the individual engineers are able to negotiate.
Companies that make low margin highly competitive products, like paper mills, are the ones with a rigorous understanding of the costs and benefits of every activity.
On top of that, it does also provide a sales channel that nobody else has. Practically nobody else has a voice-activated robot sitting in people's kitchens that buys paper towels and plays Spotify. It's the difference between all your competitors making sales via telegraph, and you introducing a home telephone just to make orders with your company. Funding it is a no-brainer.
BI, in fact, is almost entirely the artform of synthesizing the answer to that very question for the purposes of executive decisionmaking.
I absolutely agree that people doing ostensibly the same role or with the same job title (but not necessarily responsibilities or time investment) can be deserving of a pretty wide gap in pay based on the particulars but that isn’t the purpose or the reality of trying to keep pay a secret.
Also even if you think you deserve whatever you negotiate, having more information instead of less is probably a good idea during your negotiations.
The only motivation for keeping them a secret at that point is so that your coworkers don’t realize you’re being grossly overpaid for what you do compared to the rest of them and honestly I’m okay with that. Additionally once you get high enough in a company the salary isn’t even what matters or where the money is really made.
> I want to be able to negotiate my value to the company
Another way SWE's got into a better position is the environment not their own ability.
One way this could happen: Let's say that a lot of companies want SWEs and there aren't that many SWEs available. So, you go try and hire and any SWE has a bunch of potential offers. They don't negotiate much, but still have to say no to many people. Those people may then say, well, what if we offer you more? SWE says yes. Have that happen all over and constantly and all of a sudden SWEs are by standard paid more rather than purposefully negotiating higher because their negotiation happened for them in the past based on the environment they were in rather than negotiations.
Actually the 60k guy was the most talented on my 15 person team. The reason is simply when the 60k guy came on they asked him how much do you need, and he said 60k. He never asked for a raise, but they actually bumped him up anyway cause they thought he may be a flight risk if he ever checked out the marketplace.
I also found, people are much more likely to underestimate themselves than overestimate.
Only 10% of employees would consistently ask for more money every year. Everyone else almost never asked for a raise.
Now its not solely just negotiation cause if they were a star they probably got it. If they sucked it just made management like them less. When management doesn't like you, and comes time someone needs to be cut. That's who gets cut.
There were extremely wide pay bands there for the same function and it worked fine because the company was perfectly happy to tell people “that other person is paid more because they are worth more to us”. I find that a whole lot more palatable to the nonsense pay bands I see at the regular tech company.
Don’t lie to people about why your pay is secret (it’s always for information asymmetry in negotiations) and be honest to your employees about their value to the company and everything seems to sort itself out.
There are other reasons; depending on how varied the roles and responsibilities are in an organization, and the people working there (partly 'culture'), this kind of information can make some people get embarrassed or envious. This is obviously most true for company with wider ranges of operations (highly paid engineers vs. lower paid manufacturing workers and/or customer service personnel,) in areas where 'value to company' is not a widely-shared outlook.
If you actually are better then you’ll negotiate better pay.
You’re saying the equivalent of “I don’t want a free market. If other people have the same information I do then I won’t be able to benefit off the information disparity and have to compete on merit”
That's absolutely NOT how it works in practice. It is widely studied that there are HUGE differences in programmer productivity. While the theoretical "10x" programmer may not be that common, I see "2x" programmers all the time.
But you hardly ever see 2x differences in salaries, even though this would be the fair thing if you were looking at output. Once pay becomes public, management is basically constrained to keep people in relatively tight bands because it's trivial for anyone on the lower end of a pay scale to complain that Programmer X gets paid more money, even if Programmer X gets shit out the door 2x faster.
But I don't think you are claiming there are not significant differences in productivity? Given that, it's not unreasonable for the more productive people to ask for more compensation, even if it is difficult to identify who they are.
It's definitely a hard problem. There is probably a lot of room for improvement in general for how we approach this.
That said, while it can't be measured, I also don't think anyone would disagree that it does exist, in that I've easily see engineers that can produce reams of quality code in a fraction of the time other engineers can produce buggy code.
But yes, I do think there is an amount of judgment at the end of the day, which is why this is a tricky subject.
If a trivial complaint from a colleague who, in your theoretical here, is less productive than you can make your employer not pay you more then that means you are only trivially more productive or negotiating pay based on something other than productivity.
Labor is told repeatedly that wages are based on market forces and companies have to act at a sociopathic level of responding to economics.
Why does the narrative always flip to employers having to act emotionally whenever labor would get an up like decreasing the information asymmetry between employers and employees?
While I agree that there can be or at least seem to be that overall difference in productivity between people, utilizing a single metric to make that conclusion is simplifying a much more complex issue.
Or a senior dev may wind up only getting a few tickets done, but it's because they're dealing with meetings and planning to determine the correct course of action for a project that may take a month or more. Or they may be a useful 'repository of knowledge' for the rest of the team, and spend a lot of their time enabling multiple other people to be more effective than they would be otherwise.
If you mean that, between people in the same role, there is usually huge differences in productivity, I honestly haven't seen that, except perhaps for brief periods where someone is late to a deserved promotion.
It seems unlikely that it hurts you directly in your own negotiation, and more likely is a benefit. It might hurt you indirectly - in that it helps other employees, who are making less than you, potentially make more, and thereby reduce your own theoretical maximum pay (this doesn't seem very compelling though)... But, it seems naively egocentric to believe that, over the course of one's career, that indirect harm would be greater than the potential direct benefit...
What am I missing here?
Information overload can lead to analysis paralysis, adding complexity to properly weighing information, and ultimately land into poor decision making processes. In the case of salary information, perhaps I perceive that I'm a below average worker. When handed the average, I might be willing to low ball myself because my thought process may think pay is directly correlated to skill or value given to a company and if I perceive my ability to produce as lower than others, I may be willing, during a negotiation process, to accept low balled values.
In the era of the data deluge, we're learning it's not always the case that more information is better. More and even high quality information needs high quality decision making. If you think of human decision making as flawed (hint: we all make flawed decisions so it is), then our processes will not always make good use of new information, even with high quality concise information. It's very possible for more information to result in undesired or negative effects.
We like to pretend we have all sorts of oracle systems out there but we really don't. In the case of knowing salaries I tend to agree with you: knowing what your competition make is better, most of the time.
Regardless, yes, more information yields the possibility of incorrect analysis, but I don't think that it's obvious that the information in this instance, the salaries of one's peers, would be of such complexity that knowing it would result in frequent misinterpretation to the detriment of the worker. In fact, given the stated goals of the worker in your example, even they use such information to their own (personal) moral, if not their financial, benefit.
The possibility that something won't help applies to every possible advantage. So reject all of them?
I'm not saying we shouldn't provide good information, I'm saying we shouldn't assume providing good information is always beneficial (which a lot of people and models do).
Did you ever wonder if maybe your negotiation skills aren't as good as you think? Public pay could be a way of finding out if you are selling yourself short.
This would be easier and more accessible if the data was just available.
It's frequent that the salary of a freelancer working for a company becomes public among its employees. That doesn't mean similar employees will ask the same salary, because they know the freelancer can do something they can't, or they can't do it as well.
Completely untrue. Imagine you spend three years building an app. You'll produce zero revenue during those years, and even after it ships, it'll take years more to pay off the money invested.
In reality, like any other good, your pay is determined by what someone is willing to pay for you.
At a full-time, salaried job, though? Do you get a higher salary because of your demonstrable value, or just because you've become a great salesman? The latter being why tech companies throw up barrier after barrier in their hiring process to try and differentiate between smooth talking and genuine skill (or value).
The point being, would you even work for a company at all knowing where you stand as a freelancer, or a consultant? From where I'm standing, publishing the payroll wouldn't make a jot of a difference.
Public pay does not mean equality. Most public institutions have public pay, but the janitor does not make as much as the CEO.
> I want to be able to negotiate my value to the company whether that is more or less than others.
In which case, public pay is an incredibly important bit of information for you to frame your negotiation around.
Being unhappy with public pay is like going to a car dealership and being unhappy that there are prices written on the windows of the car its selling. You can still negotiate from those prices. In fact, you're expected to.
Not only that, but more information on costs is still better, even if you have the MSRP.
You want to know the invoice, you want to know the holdback if any, you want to know the average selling price in your area, you certainly want to know how much sales tax is, you probably take for granted the gas mileage is disclosed, is there an extra/excessive "documentation" fee...
And as freelance developer, how do you know you're not underpaid? For example, a client offered you $x to build a system, how do you know that's a fair amount without market data?
I don't understand how this affects your ability to "negotiate your value" in the first place. The party you're negotiating with already has this data, regardless of whether you yourself have it as well or not.
My compensation information to me is private. I never felt like sharing it either when I was poor or now when I'm better off.
It's like having an open sex life. It's not for me. I don't want to know how often you get laid, nor do I have the need to share my sex life either.
Neither is "wrong" they're just not things I want to share.
Would you be ok with nobody posting MSRPs anywhere?
So I don’t need to know what Jane, or my boss or whomever paid for their F-150 and none of them need to know what I paid. But I don’t mind knowing the distribution so long as none of the data points can be tied to any particular person.
Does that mean you are against salaries being published beside names, or you feel any possibility of identifying people should prevent a dataset being released?
Also, even in companies that don't post their salaries have pay grades and bands.
However, consider the other group of people this helps. Minorities, H1B holders, other commonly discriminated classes, who discover they are doing the same work as a colleague and being payed 1/3 the rate. Should these folks get screwed over so you can get your negotiated high pay? Has the trade off even been considered?
I'm not saying you're wrong. I just want to make clear what the other side is arguing for - and it's not some evil plot to screw you in particular. It's to help a different group.
It might not be an ‘evil plot’, but corporations routinely support wage suppressing measures.
They’re not getting screwed over. They’re getting paid what they agreed to when they took the job, just like everyone else is.
Leverage comes from alternatives to an agreement.
The asymmetry in negotiations is that in most circumstances, employees or candidates tend to have zero (remaining unemployed) or one (remaining at a job) alternatives.
People think they have more alternatives, but there's a huge difference between an alternative at an exact moment, and alternatives that are theoretical within days, weeks or months.
Employers have alternatives, even if they aren't great, right now. So you're not on an equal footing whether you are interviewing or talking to your current employer.
Not to mention, when you do have leverage, exploiting it to the hilt can poison or destroy a future relationship.
You're commenting as though this person somehow has proof of what they apparently do not want to know.