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Employment derivatives: Difference between revisions
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==== The first ERS ==== | ==== The first ERS ==== | ||
{{Drop|T|he first so-called}} [[employment rate swap]] was thereby conceived | {{Drop|T|he first so-called}} “[[employment rate swap]]” was thereby conceived between sleepy, ops-heavy mid-market broker [[Wickliffe Hampton]], at the time losing hundreds of compliance and onboarding staff each month, and [[lexrifyly]], a [[legaltech]] startup darling with no product, business model, customers or plan but flush with stupid amounts of VC cash, a great [[Microsoft PowerPoint|deck]] and an unshakable conviction in the wisdom of goosing its burn-rate by hiring lots of staff. | ||
It started with a chance encounter at a swanky soiree in West London. As she neared her [[Schwarzschild radius of alcohol consumption|gin horizon]], Wickliffe Hampton’s Chief Operating Officer Anita Dochter bellyached to her former trainee, now lexrifyly’s CEO, [[Cass Mälstrom]]. | |||
“But we actually ''need'' the staff,” she complained. “They actually do productive things for us. But unless we pay ''your'' stupid rates, which we cannot afford to do — | “But we actually ''need'' the staff,” she complained. “They actually do productive things for us. But unless we pay ''your'' stupid rates, which we cannot afford to do —” at this point she fell from her stool briefly — “and give them free fruit, working from home and a soft play area — they won’t stay with us. But, ''you'',” she continued, jabbing [[Cass Mälstrom|Mälstrom]] in the chest, “right now, ''you'' don’t need ''any goddamn'' staff: you just need to show your investors you are clever, imaginative and on point doing fashionably insane things. This does not require actual staff. So stop taking mine.” | ||
As luck would have it, Hunter Barkley was waiting tables that evening and overhead the conversation. He presented them with a pitch book with the check: | As luck would have it, Hunter Barkley was waiting tables that evening and overhead the conversation. He presented them with a pitch book with the check: If you are not actually hiring anyone, you could be hedging your employment rate risk of not doing so. | ||
For an initial period of three years, Wickliffe would pay its wage bill for its entire operations team in London, controlled for performance, to lexrifyly. In return, lexrifyly would pay its | For an initial period of three years, Wickliffe would pay its wage bill for its entire operations team in London, controlled for performance, to lexrifyly. In return, lexrifyly would pay its absurd, grossly inflated wage budget for an equivalent sized-team to Wickliffe Hampton.<ref>This was slightly complicated as it was denominated in [[crypto]] and needed to be converted back to Sterling. </ref> This way Wickliffe Hampton had the cash required to preemptively bid back restless staff, and lexrifyly could guilelessly piss its investors cash up a wall without troubling the operating resiliency of the banking sector, or needing an HR department. | ||
It was easy enough to quantify Wickliffe Hampton’s wage bill: it was more or less static. But what about lexrifyly’s fantastical aspirations? Could not lexrifyly game this very easily, by just pretending its wage bill was lower? | |||
====The “LIEBOR” submission process==== | |||
{{Drop|W|hat was needed}}, Barkley reasoned, was an observable, objective measure of startup insanity, ''π''. Barkley had just the means for achieving it. Under the auspices of the British Human Capital Managers’ Association (BHCMA) a committee of fashionable startups would meet each afternoon in a WeWork in Shoreditch for an kombucha martini and to state publicly, in front of a live panel of venture capitalists, how much they would be prepared to pay an underperforming settlements and reconciliations specialist to join them and drive customer engagement. | |||
Then the BHCMA would trim the top and bottom estimates, average the remainder and compile and publish the trimmed arithmetic mean rate as the [[London Inter-Employer Basic Offered Rate]] ([[LIEBOR]]). LIEBOR quickly become the defactor rate to be factored into the “floating” leg of [[employment rate swap]]<nowiki/>s. | |||
In this way could trad-fi bankers hedge their ''π'' exposure. | |||
==== Retail employment rate swaps ==== | |||
Employees could do the same, hedging against their intrinsic loyalty discount, and restricting employee moves to genuine changes in role, or idiosyncratic hatred of boss, rather than just the need to rebenchmark periodically. | |||
A firm having a bad year while its competitors feasted had no option but to hike pay to stop flush rivals piratically raiding its meagre stocks of [[human capital]]. By the same token, a firm that was knocking the ball out of the park while its competitors floundered, did not need to pay its own staff outsized bonuses. Where were they going to go? | |||
Legend has it, should she ever be asked for a raise, the [[Vampire Squid]]’s fearsome [[GC]] would theatrically throw open a draw stuffed with unsolicited resumes. “I am sure we’ll find someone to do your job if you’re too good for it.” | Legend has it, should she ever be asked for a raise, the [[Vampire Squid]]’s fearsome [[GC]] would theatrically throw open a draw stuffed with unsolicited resumes. “I am sure we’ll find someone to do your job if you’re too good for it.” | ||
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Enter Barkley’s invention: [[employment rate swap|employment rate swaps]] promised to change that by tanking lateral movements — which were necessarily highly entropic in that they cost a lot in transaction friction, institutional leakage and so on and which could be avoided by just paying the employees more. | Enter Barkley’s invention: [[employment rate swap|employment rate swaps]] promised to change that by tanking lateral movements — which were necessarily highly entropic in that they cost a lot in transaction friction, institutional leakage and so on and which could be avoided by just paying the employees more. | ||
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Meantime while periodic RIFs were greatly reduced they were not avoided entirely, and now could be handled quantitatively without reference to performance or value as it was baked into the credibility rating. This led to the curious counterintuitive phenomenon that the staff with the ''highest'' credibility ratings — ergo the most, well, “pound for pound” expensive — were the first to go. This assisted also in the force ranking process. | Meantime while periodic RIFs were greatly reduced they were not avoided entirely, and now could be handled quantitatively without reference to performance or value as it was baked into the credibility rating. This led to the curious counterintuitive phenomenon that the staff with the ''highest'' credibility ratings — ergo the most, well, “pound for pound” expensive — were the first to go. This assisted also in the force ranking process. | ||
{{Sa}} | {{Sa}} | ||