Loyalty discount
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The Human Resources military-industrial complex
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Loyalty discount
/ˈlɔɪəlti ˈdɪskaʊnt/ (n.)
“Our people are our most valuable asset.”
— Every human resources department ever.
For the miscellany of the HR military-industrial complex — salary bands, forced ranking, gerrymandered performance appraisal system — all militate against the idea that staff are are a precious resource. These are lined up to ensure that, through time, an employee’s pay will decouple from, and then trail, the value she offers her firm.
That is, loyalty to the firm is progressively penalised. If they get pay rises at all, they are anaemic. Accompanying protests of iniquity are shrugged off with the two-way optionality that HR managers know they are long.
“As part of infrastructure, you don’t share in the upside, but you’re protected in a down year” HR will say, in a good year.
In a bad one, they will tell you, “we’ve managed to minimise the RIF, but we’re still under a 15% cost challenge, so — just to manage your expectations, you’ll do well to be flat”.
Now none of this is to defend, much less justify, city pay levels. Should we shed tears about relative disfavour among a group as systematically overcompensated as city drones? We should not. And we do not. But still, we should understand the systemantic forces at play.
Fundamentally, the allocation of financial capital — which is the sum total of what the financial services machine, at its most basic level, does — is a risky, important and therefore valuable thing. Markets that most effectively allocate capital do best. In any case, those who are good at it stand to make a lot of money. This will not change. Effective capital allocation is worth paying for.
The JC’s operating premise is that those who do get to do it do not do nearly as good a job of it as they should. Our roll of honour refers.
If the system rewarded excellence, not mediocrity, perhaps fewer shitstorms would happen. So — with the caveat that, sure, everyone gets paid too much — we ask here a different question: how do we allocate pay more effectively? Resource allocation is, after all, what the industry is meant to be best at.
Mediocrity drift
The longer good staff stay, the worse, generally, they are treated. Their only means to correct this — to mark yourself to market — is to leave. This seems a bit mad.
To be sure, salaries may drift upwards, decade by decade, courtesy of HR’s finely honed calculus, predicated as it is on abstract, but unshakable logic: a director is worth more than an associate director; a good associate director worth more than a bad one, and so on. All true, and fair, in the abstract, but here is the thing. Employees don’t work in the abstract. Only averages do.
But the modern world loves its archetypes. Just as the common law has its reasonable person, economics its rational one, the boxwallahs of personnel have their average employee.
But there is no average employee. This abstract average is an emergent property of an unstable group.
It includes the young savant, who with rude haste will be catapulted out of the cohort to bigger, brighter things, and the weak gazelle who should, insh’Allah, be torpedoed from it in the next RIF. Neither will be there in a year’s time. Those who mulch around the median have different skills, different attributes, bring different sets of tools to the table.[1] Yet HR insists on drawing an average from these varying trajectories and holding everyone to it. This average is a blended emulsion that reflects nothing about any of them.
To fit individual performance to an average — this is what forced ranking does — rather regarding it as an individual pathway, is a kind of ergodic switch. Each of those individuals has its own life history: a vapour trail, a trajectory, a unique collection of skills, foibles and attributes which the individual sorts, tests, burnishes and rejects. The individual who stays at the organisation adapts to it in a way an abstract average can’t.
See also
References
- ↑ Well, theoretically they should. Whether they do the firm’s recruiting methodology allows this is another question. If you only hire Russell Group grads and laterals with magic circle experience, we are talking about you.