Salaries and Promotions

I just read this interesting article and it voiced out certain things that I have also been thinking about and certain ideas that I have been toying with. I think that I’ll write down my ideas here and see if anyone will give me any feedback. My personal HR policy is simple – the cost of losing an employee is more than the incremental cost it takes to implement a fair system.

The trouble with most companies is that salaries are kept secret – that is just a recipe for trouble if people find out that they are earning less than their underlings or if newbies are getting paid higher than senior people because they came in during a market boom. Also, promotions are another sensitive issue as superiors decide who to push up the ladder – another recipe for disaster as it encourages unethical behaviour due to imbalances in power.

The article said that salaries should be objective and transparent and be pegged at a single value – I fully agree. I will go even one step further. There should only be four salary grades at maximum – Experts, Masters, Adepts and Noobs.

There is no need for intermediate salary grades as it just does not make any sense. Like I always say about grades – they are good as a relative indicator, not an absolute measure. It is easy to differentiate a noob from an expert but it is difficult to differentiate between different experts. Once a year, adjust everyone’s salaries accordingly to cater to market rates and inflation but everyone in the same grade gets the same pay.

My main argument for this is because salaries are used for bread-and-butter things. We use them to pay for our mortgages and bills. So, what is most important about salary is not their absolute values but rather that they come in at a fixed value regularly, which helps people plan their lives.

Now, if we want to reward performance, that can be done through other means like bonuses, dividends and royalties – depending on the nature of the job. These things are usually quite measurable. If a product sells well, people should get a share of the profits. There is little to hide here as well since these things are obvious.

I would like to talk about something that the article did not address – that of promotions. Instead of having promotions from up the hierarchy – I feel that promotions should be from down the hierarchy. Placing promotions in the hands of the superiors is just a lawsuit waiting to happen. There are just too many ways to abuse this.

For starters, promotions should be peer-evaluated. In order to decide who gets promoted, everyone at the same grade sits down and votes on it. Peers are usually more honest with each other because they need to work with each other and they will know whether or not the others actually did anything worthwhile. Furthermore, they will be really stupid to promote someone useless to be their boss. This is self-regulating.

In addition, this should be extended to those working under the person. If someone were to be promoted, they would inherit more responsibility and probably run a bigger team. So, we need to be sure that they will make a good boss. The best people to decide whether or not they are good bosses would be their existing staff. Easy.

Just my 2 sen.

Published by

Shawn Tan

Chip Doctor, Chartered/Professional Engineer, Entrepreneur, Law Graduate.

2 thoughts on “Salaries and Promotions”

  1. Hmm… I think I have read a management article on something similar to your concept. The argument is pretty much about introducing democracy into the hierarchy of a business entity. I am no management expert so I wouldn’t know the merit of such a management system.

    But one thing is certain to me. The current management practice of all business entity is of oligarchy nature, where the power to run the company rested on the shoulder of a few, or (in most cases) a family. Hence promotions and salaries raise are from top to down.

    But big companies have too much baggage and hurdles to beat before they could change their human resource management style. If you formed your company following your management style and if it works, don’t be surprised that your HR model would be studied by the Havard Business school.

    1. HBS?! o_O

      All I care about is that employees are not abused and misused. As long as everyone is happy, productivity will be high. That’s my simple theory.

      But then again, I am just starting out. So, still ‘budak baru belajar’.

      Step by step.

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