Friday, August 19, 2011

When Pay Creeps In Into Career Choices

A couple of days ago I had dinner with an old university friend of mine, who is now facing a dilemma: keep her position of a personal assistant and the perks that come with it or take up a transfer to the position of an economist but with a salary cut.
My mind went working in two directions at the same time:
  1. What sort of company is that where a secretary gains more than an economist, and
  2. How does pay influence our career choices and how should we go about it?
Answering the first question: any company experiencing pay compression, skewed salary scales, unmatched jobs or severe nepotism/favoritism. Since I know my friend very well, the latter hypothesis is eliminated, but all the former ones are extremely likely to take place. Whether you are using a point based system in job evaluation or whole job matching approach, you will need to do a lot of convincing to make me believe that any sort of a personal assistant is "heavier" than an economist. Following the Hay method, we are operating with three dimensions: Accountability, Know-How and Problem Solving. While we can have arguments around Accountability in this case, I will die fighting trying to prove that Know-How and Problem Solving dimensions of an economist position should be higher. Another likely explanation of this situation is pay compression, "defined as pay differentials that are too small to be considered equitable", e.g. when supervisors get less than their subordinates, new hires receive loftier salaries than the current incumbents or there are so many salary grades that the wage differences between them are negligible. My friend is in a similar situation: she will lose her 20% supervisory allowance and a few other perks if she agrees to take up the economist's job, which will drag her total cash down.
The key term in the last sentence is "total cash", which does not equal "total compensation", and many people do not differentiate between the two, as a consequence making grave mistakes in making their career decisions. Total Cash is a part of Total Compensation, but there are other elements such as Work-Life, Career Development Opportunities, Benefits, Performance & Recognition, if we are using the World at Work terminology. Focusing on pay only may lead to suboptimal choices, and here I would refer you to an HBR article Six Dangerous Myths About Pay. Hence, we need to look beyond the dollar.
Frederick Herzberg back in the 20th century, inspired by Maslow's ideas,  came up with a Two-Factor Theory, a research on motivation and job satisfaction. He discovered that there were two types of factors that affected employees' motivation and productivity:
  • Motivators (e.g., challenging work, recognition, responsibility) that give positive satisfaction, arising from intrinsic conditions of the job itself, such as recognition, achievement, or personal growth, and
  • Hygiene factors (e.g. status, job securitysalaryfringe benefits, work conditions) that do not give positive satisfaction, though dissatisfaction results from their absence. These are extrinsic to the work itself, and include aspects such as company policies, supervisory practices, or wages/salary.
As you see, pay is listed under the hygiene factors, i.e. the factors that primarily satisfy the survival needs in the Maslow's hierarchy. Therefore, if you are hardly making your ends meet, dying under the mortgage burden or have nothing left after having paid your alimony, your choice to go after the money in the short-term might be justified. However, should you be primarily concerned about your own development, learning new things, gaining more responsibility (and, as a result, getting prettier paychecks in the long run), you should definitely opt for career opportunities that will get you closer to the personal goal of self-actualization.
In not so sophisticated terms I gave her this advice, "Do not fear gaining less right now - by taking on a greater challenge, you will be much more equipped to compete on the labor market later, and never be motivated by money… it will come by itself should you invest enough time and effort into yourself".
P.S. There was some doubt whether the Russian Labor Legislation allows pay cuts. It does:


  1. Sergey, amazing piece of analysis. Very insightful and well written. I am only concerned with the fact that this trade off (money vs growth) is often presented by HR people to you, most of the time to negotiate down your salary. As a result, I am always skeptical of "development" positions. If they are so good and let you develop, they expose you to important stuff. And, as such, they should pay more. Therefore salary SHOULD reflect the worthiness of the position and not be an either/or

  2. Thanks, Fede!

    I completely agree with you that salary should be commensurate with the job complexity (coming back to the job evaluation practices). I wrote this post as a piece of advice to those who are in a career dead-end (e.g. after being a PA for five years) and at this stage in their careers need to decide whether to stay where you are or to move somewhere with better prospects but with less money.

    The desire to have bigger money in "development" positions in understandable, but remember that by bringing in someone at a lower position in the salary range means lower compa-ratio, which predicates higher salary increases. Though, I am talking shop now :)

    Salary is an indication of how much a person skilled to do a job would get on that particular market. "Development" positions are designed to upskill new entrants, hence it is expected that the future incumbents are not-so-well-qualified and it would be possible to snap someone from the open market without the need to invest corporate time/money/skills into getting them up to speed. The preference is given to the young and bold merely as a tool used to strengthen the talent pipeline.

    We should continue this discussion once I get back to Madrid!

  3. If I had a company, I would definitely want you as my HR manager. You or we do without HR :)

  4. So, I wish you have a company very very soon :)



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