Category Archives: Business

Are CEOs 275 Times Better Than The Rest Of Us?

“Greed is good.”

These immortal words, uttered by Michael Douglas as Gordon Gekko in Oliver Stone’s 1987 smash hit Wall Street, were iconic of the go-go, Reagan-era 80s. The story of an ambitious young trader who gets caught up in a world of high-stakes trading and questionable ethics, gambles everything and loses it all has become as applicable today as it was 20 years ago.

The New York Times released a graph from an Economic Policy Institute study showing that executive salaries were 275 times the average worker’s salary in 2007, compared to only 28 times the average worker’s salary in 1970. (To see a visual representation of this graph, visit Portfolio.com).

In today’s dollars, if the average worker was pulling in $30,000 annually that would mean the average CEO would be making a whopping $8,250,000 per year.

Can someone really be worth 275 times more than someone else?

I’m sure most of us would agree that a CEO candidate usually brings more education and experience to their job than does the average worker, but do they truly bring 275 times more? Is the work that a CEO does worth 275 times that of the average employee?

A CEO is charged with making decisions both large and small. They lead the company, they have the ultimate say and absorb the responsibility of making the right decisions, all of the time. The fate of the company rests on their shoulders and they should be compensated accordingly. But a company is not a singular entity. One person alone could not run a fortune 500 business. Does not every employee from the executive in the penthouse to the receptionist in the lobby play a vital role in making a business successful?

As our members of congress hammer out one of the most massive government bailouts of private industry in our history, a major stumbling block to the negotiations has been whether or not to put caps on what some perceive as ballooning executive pay. If message boards are any indication, Americans are outraged at what they see as outrageously excessive compensation. Every article I read on the bailout or executive pay is accompanied by hundreds of comments, none of which defend executives. Why is the average American worker so angry?

In most businesses today I think there is a systematic de-valuing of the contributions of the average worker. While a high-priced consulting firm with years of experience and a brilliant portfolio may come up with extensively researched, strategically written customer service scripts to ensure maximum sales for a call center, it is the ‘lowly’ call-center employee who is on the phone with a dissatisfied customer, providing friendly voice, sympathetic ear and exercising their critical thinking skills to create a win-win situation for both the company and the client.

Yet, a call-center worker who spends all day everyday working the phones is treated to less respect, fewer benefits and lower pay than someone who spends their time “being creative” in an office with a view.

The American worker is angry because they are overworked, underpaid and disrespected. After watching corporate executives jump off a sinking ship with golden parachute strapped to their backs while employees and shareholders are left holding the bag (see the failure of my local bank, Washington Mutual), congress is now asking these displaced workers, these shareholders who are looking at their retirement accounts being gutted to pick up the pieces and bailout Wall Street.

I’m resigned to the fact that a bailout is necessary to keep our economy and financial sector from collapsing, but executive pay has skyrocketed beyond reason and it is time for those at the top to remember that no man is an island, and they can’t take singular credit for the efforts of many if they don’t plan to take the blame as well.

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The Six Types of Motivation

Chris Young of The Rainmaker Group left a comment on the syndication of my blog over at Brazen Careerist that offered an interesting perspective on what really motivates people. I wanted to share it with everyone here:

The short answer is not everyone is motivated by the same things. I have found that there are 6 major “types” of motivators. With each type of motivator, I am including an example of an activity or reward that can motivate the person more appropriately.

1. Utilitarian – motivation for money as well as efficiency. People high in this particular value are more “careful” with how they spend their time, energy, and may want to make more money. $1000 in cash may motivate.

2. Knowledge – motivation to learn, to understand the “truth” about something. People with a high knowledge “factor” may want to spend more time learning. The reward may be to actually send them to additional learning opportunities as a reward. Literally a reward for learning and completing a test may be additional learning. A $1000 learning program may motivate.

3. Social – motivation to help others. A proper reward for someone with a high Social motivator may be to give them a day off to give back to the community. A $1000 donated to a desired cause may motivate.

4. Aesthetic – motivation for nice things, surroundings, clothing, life-fulfillment. A reward for someone with a high Aesthetic may be to give them a pass to an art gallery, a gift certificate to a high-end clothing store, a home-decorating gift card, or a pass to bungee jumping. A $1000 membership to several museums may motivate.

5. Power – motivation to control one’s own destiny as well as the destiny of others. A way to motivate someone with a higher power motivation is to let them lead a project, lead others, or perhaps a gift certificate for professional career planning. A $1000 investemnt in leadership development may motivate.

6. Tradition – motivation to live one’s life according to a set standard. Depending upon one’s beliefs, a person may be motivated by their specific belief system and any type of respect of or recognition of this belief system. A $1000 donation to someone’s belief system may motivate.

The assumption that money motivates everyone is not a true assumption. In fact one person’s motivations may offend another person. There are resources one may use to identify what motivates someone. At the very least, the best thing to do is create a short survey specific to each person to identify what best motivates them. In other words – ask – do not assume.

Thank you Chris for your insightful comments.

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When Employees Can’t Be Trusted

There’s been a lot of buzz around results oriented work environments (ROWE) and the freedom and flexibility they allow in terms of employees setting their own hours and taking vacations. BusinessWeek is no exception, recently profiling the liberal vacation policies of the IT consulting firm, Bluewolf:

Michael Kirven, 38, and Eric Berridge, 39, didn’t worry about a vacation policy when they started Bluewolf, their New York IT consulting firm, in 2000. As the startup added employees, the founders let staff take paid time off for holidays, travel, and rest when they wanted, without asking permission—just letting managers know as a courtesy. About 18 months later, with 10 employees, they made their ad hoc policy official. “If you want to take a vacation, take it,” Kirven says. As long as workers met their goals, they could take as much time as they wanted, when they wanted. In other words, no formal vacation policy.

Unlimited paid vacation? Available anytime I want it? Amazing! What employee wouldn’t think this is a great idea?

Indeed, Bluewolf puts such faith in its employees to police themselves that they’ve eliminated the need for an HR department entirely:

Kirven says the company’s turnover is next to nil—so low that three people who left recently decided to return. Bluewolf has no HR staff. Instead, it relies on a quarterly audit from a lawyer to make sure the company complies with labor laws. And Kirven estimates the company saves $250,000 a year by not having bean-counters tracking time.

Most of the media articles on ROWE focus on the benefits of trusting employees and allowing the freedom to surf the net, take the afternoon off, or otherwise do whatever they please—as long as their work is being done.

But what none of these articles, blog posts or podcasts seem to address is how exactly do you create an environment where everyone is productive, trustworthy and responsible?

“Results only” work environments are only successful if each employee is assigned an individual, measurable set of requirements that are assigned a specific due date. It’s been my experience that most companies can barely define each employee’s job (I once worked for a year in position that had no formal job description), nor set reasonable, measurable goals for each of them. The foundation of ROWE is a competent management team that is able to both see the big picture and quantify it into doable steps. How many people can say that their managers successfully accomplish both of those things?

I’ve responded to several bloggers touting the benefits of ROWE and advocating that employees should be trusted to act responsibly. My question to them is always,

“What do you do if you give your employee all this freedom and they don’t perform?”

The unanimous answer is always,

“Fire them.”

Clearly, these bloggers have never had to deal with a poor performing employee, do the dirty work of firing someone, or ever worked in government.

Some people just aren’t self motivated. They need a boss looking over their shoulder (either figuratively or literally) to be productive. Could we argue that the lack of motivation these employees have is because they are in the wrong job? Maybe. But that is a reason for them to quit, not necessarily for a company to fire them. Isn’t it a manager’s job to ensure their employees have an environment which enables them to be most productive? That seems to be the argument for ROWE, but can also be applied to a structured work environment as well. Just look at how many lost, undisciplined souls have been “straightened out” by the military.

While I think ROWE workplaces are awesome places to work if you’re lucky enough and could have been tailor-made for people like me (ambitious type-As), I acknowledge that they might not be right for everyone and shouldn’t be touted as the panacea for unhappy workers that the media makes it out to be.
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Are Ivy-League Schools Just A Funnel For Wall Street?

Last week I wrote about a three-year old New York Times article featuring interviews with Ivy-League academics criticizing their female students’ choice to become stay-at-home mothers instead of members of a “diverse professional elite” upon graduation from their elite institutions.

One critic who was interviewed went so far as to question the value of educating females if their only goal was to become mothers:

“It really does raise this question for all of us and for the country: when we work so hard to open academics and other opportunities for women, what kind of return do we expect to get for that?” said Marlyn McGrath Lewis, director of undergraduate admissions at Harvard, who served as dean for coeducation in the late 1970’s and early 1980’s.

Coincidentally, that same Monday my post appeared, a new article surfaced in the New York Times, again tackling the issue of what is expected of today’s Ivy-League graduates. According to the article:

Professor Howard Gardner hopes…seminars will encourage more students to consider public service and other careers beyond the consulting and financial jobs that he says are almost the automatic next step for so many graduates of top colleges.

“Is this what a Harvard education is for?” asked Professor Gardner, who is teaching the seminars at Harvard, Amherst and Colby with colleagues. “Are Ivy League schools simply becoming selecting mechanisms for Wall Street?”

Interesting that a man is questioning whether students (male or female) belong in the boardroom and that a woman is advocating to put more women in it. Why is success always measured by job title and salary? Why are so many young people being blindsided into a handful of careers, simply because these careers are viewed as successful by a handful of adults?

After years of watching friends and family getting laid-off and overworked, many of today’s college students are questioning the true value of corporate life:

As Adam M. Guren, a new Harvard graduate who will be pursuing his doctorate in economics, put it, “A lot of students have been asking the question: ‘We came to Harvard as freshmen to change the world, and we’re leaving to become investment bankers — why is this?’ ”

The official word on the value and purpose of higher education comes from the President of Amherst (also male):

“We’re in the business of graduating people who will make the world better in some way,” said Anthony Marx, Amherst’s president. “That’s what justifies the expense of the education.”

If the purpose of an education is to help its recipients make the world a better place, does the role of parent not fulfill that purpose? Most universities claim that they are training the leaders of tomorrow, but why does their vision of leader stick so narrowly to the C-suite? Isn’t someone who cares for, educates, motivates and encourages considered a leader? Are mothers and fathers not the leaders of a family?

I think it’s time for the elder academics to stop wasting so much time on what their students are accomplishing after graduation and more time ensuring the quality of their education. Trust that the younger generation can decide their future for themselves and stop hovering over us like helicopter parents.

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When Working From Home is a Sham

What if you could come into the office anytime you felt like it, or even stop coming in altogether? What if you could take a late morning run or volunteer in an after-school program but still get paid a full-time salary? What if you only had to work 4 hours a day?

Sound like your dream job? Sure, as long as you’re not the manager.

There has been much ado about Results Oriented Work Environments (ROWE), the latest in work/life balance programs. Under ROWE, there are no office hours. As long as workers complete their projects and deliver results, they are allowed to work whenever and wherever it suits them. Most notably being implemented by electronics giant, Best Buy, ROWE is promised to be the panacea for worker (dis)engagement.

Trust workers with their freedom and they will reward the company with riches.

If only business were so simple.

I’ve often fantasized about working from home. How great would it be to sleep in on weekdays, grocery shop without the crowds, never worry about missing a meeting because of a doctor’s appointment? As an employee, the freedom to not work would be an awesome benefit.

But as a manager, I realize that working from home takes discipline, a lot of it, and that most people don’t have the focus to work three feet from a bed and HDTV. This spells disaster for me and my bottom line.

In my own experience, most people who “work from home” (WFH) aren’t really working (exempting people with home offices or special set-ups who actually do work from home). How do I know this? They’ve told me. I once worked in an office with a very liberal WFH policy and the employees abused it so much that upper management had to revoke the policy. Now no one there is allowed to work from home without authorization from the president. Sound harsh? It probably was, but considering employees would send emails like the one below, you can see why they would do that.

Actual example (altered to protect privacy) of an email sent to all employees at my company:

Hello,

I will be working from home today. If you need anything my email is xxxx@notworking.com and my cell is (123) 555-1234.

But I will be watching [insert important sport event here] all day so I probably won’t answer or be much use to you.

See you all tomorrow.

So much for all this extra productivity when working from home. You could make the case that this employee watched the game and then did some work. I can tell you that he most likely didn’t.

In a guest post on Penelope Trunk’s blog, Ryan Healy says this in praise of ROWE:

It’s a win-win situation. Half of the American population will no longer hate their jobs, which will inevitably lead to increased production for the corporations. The only sector that could possibly lose out is pharmaceutical, when clinical depression reaches an all-time low. And that’s just fine by me.

Is freedom from office hours enough of a reason for people to stop hating their jobs?

I highly doubt it. If you hated working in sales because you had to make 50 cold calls a day, would you really be that much happier if you got to make 50 cold calls a day in your bathrobe? If you disliked proofreading press releases, would sitting on a park bench make looking for commas that much more enjoyable? Maybe. Maybe not.

Case in point, the above email writer, someone who took an unlimited amount of “WFH” days to watch football, basketball, soccer or whatever sports event he wanted, with little to no financial or professional ramifications, left after 2 years with the company, allegedly because he felt “unappreciated.”

A change of scenery can’t cure everything.

U.S. Senate Says Women Can Only Sue for Pay Discrimination Within 180 Days

Last week I wrote a very popular post about discrimination based on physical appearance and its negative effect on workers’ salaries. Continuing to build on that theme, I’d like to talk today about the Supreme Court’s ruling on Ledbetter v. Goodyear (2007).

Slate Magazine gives a great summary of the circumstances surrounding the Lilly Ledbetter suit against her employer, Goodyear Tire:

“Ledbetter worked for Goodyear Tire in Atlanta for almost 20 years. When she retired, she was, according to Ginsburg, “the only woman working as an area manager and the pay discrepancy between Ledbetter and her 15 male counterparts was stark: Ledbetter was paid $3,727 per month; the lowest paid male area manager received $4,286 per month, the highest paid, $5,236.” So she filed a suit under Title VII, and a jury awarded her more than $3 million in damages. The jury found it “more likely than not that [Goodyear] paid [Ledbetter] a[n] unequal salary because of her sex.” You see, Ledbetter hadn’t just negotiated herself some lame salary. She was expressly barred by her employer from discussing her salary with her co-workers who were racking up raises and bonuses she didn’t even know about. She found out about the disparity between her pay and her male colleagues’ earnings only because someone finally left her an anonymous tip.”

Title VII, one of several legislative measures passed under the landmark Civil Rights Act of 1964, prohibits discrimination based on “race, color, religion, sex or national origin.” Ledbetter had a strong case for pay discrimination. She was underpaid by a significant amount compared to male co-workers at the same level, even though she was one of the more tenured employees. She could prove a pattern of harassment by male supervisors, several of whom testified to such at trial, and had an anonymous note informing her of almost 20 years of blatant discrimination and withholding of pay toward her.

However, the Supreme Court ruled 5-4 that Ledbetter’s jury verdict should be overturned and her $3 million in back pay and damages returned, because she did not file suit within 180 days of the first occurrence of discrimination (i.e. her very first paycheck).

On April 23, 2008, the United States Senate decided to veto a bill that would overturn the ruling and let the 180 day statue of limitations period on filing for discrimination stand. It seems the lawmakers of our country find nothing wrong with pay discrimination based on gender, asserting that women should be able to pick up on it within 6 months of being hired.

Possible reasons for their decision include:

The U.S. Senate blocked a bill that would allow victims of gender discrimination to learn of and prove discrimination in those rare cases in which their employers don’t cheerfully discuss it with them at the office Christmas party. And the reasons for blocking it include the fact that women are not smart enough to file timely lawsuits, not smart enough to avoid being manipulated by vile plaintiffs’ lawyers, not smart enough to know when they are being stiffed, and—per John McCain—not well-trained enough in the first place to merit equal pay.

The real reason this ruling is so ludicrous and essentially a slap in the face to the “equal pay for equal work” movement, is that most workers, not just women, have no idea what their co-workers make. In some offices, like Goodyear, discussing salary is specifically forbidden.

If you don’t know what your peers are making, how are you supposed to know that you are making less?

How do you prove a pattern of discrimination if you’re only allowed to track 5 – 6 months worth of wages?

I have always been a staunch proponent in keeping your salary to yourself. On the occasion that I do find out what some of my co-workers make, I usually only feel resentful and underpaid. But lately, I’ve been wondering if I should change my stance on that.

The advocates for sharing salary are deeply divided. Some people advocate complete secrecy, while others propose something as radical and open as writing down everyone’s salary on a list and posting it up in the office breakroom.

According to our own laws, such as the National Labor Relations Act, employees are guaranteed the right to know what everyone makes:

The NLRA says employers cannot interfere with, restrain or coerce employees in exercising their rights under NLRA, which protects the employees’ right to discuss their “wages, hours, and other terms and conditions of employment” for their “mutual aid or protection.”

Because, really, who benefits from workers not knowing what others in their field make? Their employers.

With mid-year performance reviews rolling around, I think I might start doing some research on payscale.com. Maybe it’s time for me to negotiate a higher salary.

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Harvard Says, “Promote From Within!”

A few weeks ago I wrote not one but two posts about how age and experience factor into career promotions. My argument was that company’s seem to put too much importance on hiring “outside the box”, trying to bring in more experienced, star talent instead of recognizing the contributions and performance of current, but less ‘experienced’ employees.

I recently found an article from the Harvard Business Review (as published in part by Portfolio.com), that reinforces my point about the risk of bringing in outside talent.

“Top performers resemble comets more than stars: once they’re lured to another firm, their performance plummets by as much as 20%—permanently. That’s because just 30% of a star’s performance stems from individual capabilities. 70% derives from resources and qualities specific to the company that developed him—such as reputation, information technologies, leadership, training, and team chemistry.”

“When you hire a star, he leaves all that support behind—so his performance flags. Worse, his group’s performance slips, as resentment over the star’s spectacular hiring package corrodes morale and productivity. Meanwhile, your company’s market valuation erodes, as investors decide you overpaid to bag your star.”

Why hire an outside candidate with greater potential in terms of years of experience, performance at another company or even another industry and risk them falling flat on their face, when you could simply promote someone from within the company that has a proven performance record and the company/industry-specific knowledge and relationships?

By promoting from within, not only does a company save itself costly recruiting, hiring and benefit payments but it also lowers turnover and retains existing talent by giving employees options to advance without having to look elsewhere.
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