Greg de la Cruz works in the tech industry and is the author of two published titles on Amazon.
Yes, it’s safe to talk about pay even when there’s turmoil in the economy.
Getting paid what you’re worth is an evergreen subject because fair compensation is a right. You could argue that in legal terms, minimum wage is the only barometer by which a person has any basis to demand for better pay – but this argument stands no chance against other barometers that exist in the market that you may not be aware of.
Also, the idea that your own work performance has much to do when determining your salary, needs revisiting. Or more like reshaping, because as Washington University-St. psychology professor Jake Rosenfeld puts it in his HBR article You’re Not Paid Based on Your Performance, the individual performance basis “rests on a set of myths about pay that are widespread, often uncontested, and misleading.”
Knowing about the factors that truly help you get paid more will help reframe your mind about the compensation that’s consistent with your worth as a worker. According to Rosenfeld, there are four dynamics that actually determine pay – power, inertia, mimicry, and equity.
Additionally, myths surrounding the concept of performance-based pay need to be challenged and debunked. Rosenfeld tells of at least three myths which are discussed further below.
But before we get to these two lists, it’s highly important for us to answer a very simple question: Is my own contribution a big factor in how much I get paid?
Does individual work performance matter when it comes to pay?
Up to the point when Rosenfeld wrote his article, he had surveyed more than a thousand full-time workers from over 150 companies.
“Combined,” he found, “a full 85% believed their individual performance was an important determinant of the number on their paycheck.”
Rosenfeld didn’t simply stop at interviewing ordinary workers and managers. He also surveyed a variety of individuals in executive positions – people who actually help in deciding a worker’s pay, all of whom were involved in pay-setting at their organizations.
And similar to his survey of workers, the characteristic which ranked highest among factors that the person believed determined wages and salaries, was again individual performance.
As to why this was the case, Rosenfeld believed that it reflected “a deep-seated cultural sentiment of individualism”, and that this sentiment reinforced a tendency among Americans to locate individual economic success within the self, as opposed to broader political and economic structures.
But Rosenfeld argues that the overwhelming conclusion from his surveys with workers, managers, and executives is wrong. And he argues that in reality, these four factors discussed below are the ones that truly shape the number on our paycheck.
Four Dynamics that Actually Determine Pay
- Power: Determining wages and salaries involves the exercise of power, and it represents “the outcome of past and sometimes ongoing power struggles.” Power possesses the force to settle claims made inside organizations on who should get a bigger slice of the pie, and how much.
- Inertia: Because of the power dynamic, and taking into account a history of power struggles, there’s an “organizational inertia” that prevails. These past struggles can legitimize a salary for certain job over a period of time, which restrains any room to negotiate. As an example, Rosenfeld points out that it’s this inertia that makes us think by default, “of course a developer makes more than a designer” or based on my own experience, “of course administration department jobs should pay less, because admin costs should be kept low.”
- Mimicry: This is the tendency of companies to simply match the wages and salaries of their competitors. And at the same time, mimicry simplifies the pay-setting process for companies while “assuaging core equity concerns”. Paying the market rate in a certain labor market helps stave off workers’ claims that the pay being offered is unfair.
- Equity: Employers need to manage concerns about pay equity in the organization. And the most common strategy, a “tried-and-true tactic” according to Rosenfeld, is to prevent employees from finding out how much their co-workers earn. Although the Department of Labor tends to harp about how talking about your compensation with other people, especially with your colleagues, is completely within your rights – Rosenfeld’s research found that half of all employees today are either discouraged or even prohibited from discussing their co-worker’s pay.
Three Myths About Pay Based on Performance, Debunked
Believing these myths have held back progress fighting inequality and all the corrosive effects that flow from it. According to Rosenfeld, these myths are:
Myth No. 1: You can completely separate your performance from the contributions of others.
In a few cases, such as in sales positions where you are singularly accountable for your output on whatever sales target, quota, or goal the company sets, the task of measuring your individual contribution is straightforward.
But for most of us who work jobs in which our contributions are intricately intertwined with the efforts of the people we work with, it’s not that simple. “This difficulty in disentangling one’s contribution,” Rosenfeld writes, “is especially acute in group-centered, white-collar occupations that have grown in size over the past decades.”
Quoting the journalist Derek Thompson: “The whiter the collar, the more invisible the product.”
In other words, making out your own footprint from a muddy field traversed by colleagues who’ve walked that land with you is at times impossible, or impractical altogether.
Myth No. 2: Your job has an objective, agreed-upon definition of performance.
It’s rare to find a job for which everyone agrees on what really is its core mission. “If you can’t identify a clear mission,” Rosenfeld asks, “how can you define what a good performance is?”
Rosenfeld made a very good example in his own field – academia. One university in 2010 ranked professors according to two metrics: (1) the number of students in the professor’s classes, and (2) the amount of grant money the professor generated.
As an outsider, you might feel that these two metrics make total sense from a business standpoint, but what about societal value?
What about publishing path-breaking research, or spending time with a struggling student to ensure she graduates? The university’s analysis decided that these weren’t factors in ranking their professors.
“Even when a definition of performance is clear,” Rosenfeld writes, “it can lead to perverse incentives, and at the extreme, criminal malfeasance.” Remember the issue with Wells Fargo when they pressured their workers to open as many customer accounts as possible? The company tied a portion of a worker’s pay based on the number of accounts a worker persuaded each customer to open. While the scheme worked very well in making money for Wells Fargo, it also encouraged workers to cheat customers, leading to massive fines.
Myth No. 3: When they pay you for your performance, it leads to positive outcomes for the organization.
It’s rare to find a job where we work in total isolation – where the fruits of our labor are sent “up the organizational chain at the end of each working day.” In almost every workplace today, we learn from, cooperate with, and assist those around us. Even the hired freelancers of today are asked to interface with employees of the company that hired them, because finished outputs only result from input and feedback.
When an organization allocates pay solely based on a measure of individual productivity, toxic competitiveness ensues, and Rosenfeld makes the example of the law firm Mayer Brown, which in the 1980s created a system where partners were paid based on the business (clients) they brought in.
While this was logical from a business perspective, Mayer Brown soon found out that this system backfired. Partners stopped cooperating with one another – which also happened to make logical sense. “Asking a colleague for help trying to land a client,” Rosenfeld describes, “meant that you’d be splitting the proceeds, discouraging collaboration that might help the firm overall.” The end result was a nightmare wherein partners were poaching clients from their own colleagues, and Mayer Brown eventually backed away from this system.
Getting Paid What You’re Worth: A Self-Evaluation
Since we’ve already dispelled the false narrative that meritocracy at work determines pay, let’s now perform a self-evaluation that may uncover what you need to do to get paid what you’re worth:
1. Is my current salary enough to cover expenses?
At the very minimum, your job must compensate you enough to cover expenses. You may easily argue that there are costs that you can cut out and you can be more efficient with spending—which is a valid argument—but this often becomes a convenient excuse to not look for more lucrative options.
To hammer down this question and know the harsh, true answer is an extremely important first step before you even begin to ask yourself how much you’re worth. A job that pays “just enough” to cover expenses is not a job that pays well.
The unfortunate reality surrounding most of the workforce is that they’re unable to know their worth because they’re too caught up overcoming a scarcity mindset, a state of poverty. When you’re still in a stage of your life where you worry about whether your next paycheck will be enough to financially support you, the whole situation blinds you from seeing yourself as someone worthy of a better situation.
2. How much do I have to earn today consider myself happy?
This is a tricky and complex question, because assessing your own happiness can get very philosophical. For the purpose of this question, let’s focus on being content – how much money do you have to make for you to be content?
Being discontent with your compensation means that you know that somewhere out there, you can get paid more. And I’m not saying you have to immigrate to a place where market rates are higher – I’m suggesting that there’s a more practical way for you to get paid more without uprooting yourself.
3. Does the career path or field I’ve chosen offer a good outlook on pay increases?
There are career paths, industries, and specializations for which the market has decided that the jobs there should pay more than others. Sometimes, it’s as simple as which industry contributes the most to the overall GDP, or which field has very few people who can do a specific, money-making job, or even which specialization happens to be favored by the government.
This is where a mismatch on education versus career can become obvious – an aerospace engineer gets a job in finance (see the movie Margin Call), a medical doctor finds himself managing a hedge fund (see The Big Short) – mostly because they’re better off financially if they don’t remain faithful to their own educational background.
And I can relate. Even as a mechanical engineering graduate, I’ve veered far away from the mechanical engineering discipline – a curriculum that expected me to either be a power plant engineer or a mechanical designer. But the question for you is, are you willing to get out of your own box? Like it or not, the opportunities that are available to you depend heavily on where the market is going. What they taught you to prepare for in college may no longer be true today. Career adaptation has become the key to economic survival.
4. In what other areas of the organization can I contribute value and improve my reputation as an asset?
Career experts often emphasize this: if you can’t grow your career vertically, try to grow it laterally. If changing jobs, specializations, or industries altogether is too drastic of a move for you, figure out a way to contribute in other areas of the organization.
Unsolicited help in some work cultures can be seen as threatening, but in many collaborative work environments, proactive support is the norm. Your being proactive will help paint this image of you as someone who can do more than what he’s “paid to do”. This will improve your reputation as an asset to the company, and through this, good managers will be able to see that there’s more value to be derived from you – and logically, giving you more money makes more sense.
5. If I quit today and applied at another company under a similar role, how much would I get paid?
Job market research is important, and you shouldn’t stop looking up salaries online even when you’re fully satisfied with what you’re getting. Always be looking up and comparing salaries on sites like PayScale, Glassdoor, Salary.com, and other career sites.
The failure to keep yourself updated on current salary trends will cause you to fall behind among peers and will make you resent your employer. The thought experiment suggested here—which is to imagine quitting and applying at another company—enables you to be continually objective towards how much someone like you would be paid today without being subjective and biased.
I’ve seen former colleagues leave, who were with the company for more than a decade, but were paid just about the amount any entry-level person at their job would. They had more than 10 years of experience but were paid like fresh graduates – this was very disturbing. This is why, even when you love your job, even if you’re employed at a proclaimed (or certified) great place to work, do yourself a favor and perform this thought experiment every so often.
Fighting the Recession Narrative
Workers need to be empowered to know their true worth as a contributor to not only the entities that pay for their services, but to the economy as a whole.
Ask yourself: what’s my place in the millions of transactions that take place every day?
You have to believe that you’re needed. To quote the character Will Emerson in Margin Call:
“Listen, if you really wanna do this with your life you have to believe that you’re necessary and you are. People wanna live like this in their cars and big fuckin’ houses they can’t even pay for, then you’re necessary. The only reason they all get to continue living like kings is cause we got our fingers on the scales in their favor.”
Employers will from time to time use the narrative of an impending recession to stop giving out raises, or stop promoting, hiring, and even laying people off. But the unfortunate truth is, recessions or market downturns have become something to be expected – occurring at almost every decade. As John Tuld of the same movie said about the 2008 financial crisis:
“It’s just money. It’s made up. Pieces of paper with pictures on it so we don’t have to kill each other just to get something to eat. It’s not wrong. And it’s certainly no different today than it’s ever been – 1637, 1797, 1819, 37, 57, 84, 1901, 07, 29, 1937, 1974, 1984 (Jesus, didn’t that fuck me up good), 92, 97, 2000, and whatever you want to call this. It’s all just the same thing over and over; we can’t help ourselves. And you and I can’t control it, or stop it, or even slow it. Or even ever-so-slightly alter it. We just react.”
Recession or not, know your worth. Be confident that there’s someone out there who acknowledges your value and pays you for it.
© 2022 Greg de la Cruz