Loyalty discount

The Human Resources military-industrial complex Go Premium The instrument (the “telescreen”, it was called) could be dimmed, but there was no way of shutting it off completely. Index: Click ᐅ to expand: HR Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

“Our people are our most valuable asset.”

— Every human resources department ever, stating a truth it does not believe, through gritted teeth.

Loyalty discount
ˈlɔɪəlti ˈdɪskaʊnt (n.)
The great falsification of the human resources dogma.

For the miscellany of the HR military-industrial complex — salary bands, forced ranking, gerrymandered performance appraisal system — all militate against the idea that current staff are valuable.

All the great apocrypha of the HR canon 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,” as if you are supposed to be grateful.

Of course they won’t tell you that. They will delegate that magnificent news to your line manager, with the instruction: “do not blame HR for this bad news: you must own the compensation decision.”

Whither performance appraisal?

Never mind the weeks you must spend each autumn mired in performance appraisals, when it comes to the annual pay review, talk of your performance is, mysteriously, absent.

Suddenly, what you personally did to contribute to the bottom line seems not to matter: it’s all about the big numbers, lumbering titans clashing way above your head. You are but a cork, bobbing upon an angry sea.

The net upshot, per worker, is usually stagnation; in real, inflation-adjusted terms they may wind up going backwards, over long periods.

But over those periods, good employees get better. They learn things, they gain experience. They build networks. They bat themselves in. They may see less able, less loyal coworkers forge ahead with lateral moves.

Tiny violins?

Now, none of this is to defend, much less justify, city pay levels which, however you look at them, are absurd.

So should we shed tears about relative disfavour among a group as systematically overcompensated as city drones? We should not. And we do not. But we should understand the systemantic forces at play.

Fundamentally, the deployment of capital to investment — this is the sun total of what the financial services machine, at its most basic level, does — is a very risky, important and therefore valuable thing. Historically, markets that have most effectively allocated capital have done best. It is painful to concede but hard to deny: for at least a century, our American friends have been the 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 — and the remoras, nits and flukeworms who accompany them as they go — do not do nearly as good a job of it as they should. Our roll of honour refers.

If the system were configured systema(n)tically to reward 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. This 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. 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

• Ergodicity
• Lateral hire
• Lateral quitter
• Mediocrity drift