November 23, 2011
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| Image: Rex Features |
Reading the very excellent Flip Chart Fairy Tales blog on income inequality and some analysis of the faulty logic behind senior management pay, Guru was struck by a neat corollary between nonsense job titles and the pay debate.
CEO pay is often justified by comparison with the pay of other CEOs, often on other continents, with the argument that the ridiculous salaries are necessary to stop talent going elsewhere. “If other CEOs get paid more, then you need to pay me more”, a CEO might say, creating a rather nice positive feedback mechanism. Now, where the corollary comes in is in the possibility of this comparison. CEOs can reference the pay of other CEOs easily because the top person in most organisations is usually called a CEO (and is easily identified). The same goes for the chief finance director, the chief operating office, and, even, the head of HR.
But the same cannot be said for us lowly workers who have diverse (often, ever-expanding) roles and diverse job titles. Guru tentatively predicts that as we descend the pay ladder we will find decreasing homology between job titles. Obviously, this primarily reflects the pyramidal corporate structure, but perhaps there is more to it. Where a finance director can point to the pay of other finance directors, what leverage does, taking an example from job site Monster, a production and product development coordinator have when negotiating salary? How many other production and product development coordinators are there? Will an aspiring production and product development coordinator even be confident enough of what a production and product development coordinator actually does to negotiate?
This may sound vaguely conspiratorial, but it’s a fairly simple example of information asymmetry that it would be naive to believe companies were adverse to exploiting. If you don’t have comparative data on the job you’re going for and don’t really know exactly what the job is, then you’re in a very weak position in any negotiations. It’s HR’s job to either exploit this for the good of the company, or limit it for the good of its potential “human resources”.
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