An Excellent Book Written by a Compensation Consultant
As part of my Interim CTO assignments I frequently developed and put in place career ladders for my clients. One book that helped me quite a lot to was Michael O’Malley’s classic “Are You Paid What You’re Worth?” from 1998. O’Malley, a renowned compensation consultant, has made a name for himself by helping employees optimize their earnings and potential in the competitive talent market.
Joel Spolsky, the founder of Fog Creek Software, used this book as a cornerstone when he was crafting his company’s career ladder. He distilled the principles into three key pillars: Work Experience, Skill, and Strategic Level. These pillars have since become a fundamental part of the organization’s structure, guiding employees’ career progression and growth.
Despite being published over two decades ago, O’Malley’s book remains incredibly relevant today. Of course, the salary figures mentioned in the book are outdated, but the concepts it presents are timeless. From determining your pay to understanding the value of bonuses and options - the principles laid out in the book are as applicable today as they were back in the late ’90s.
The book was originally written for employees, providing them with a tool to carefully evaluate their career trajectory, pay level, and job options. However, it has proven to be an invaluable resource for companies as well. It offers a blueprint for creating fair and engaging career ladders, ensuring that employees feel valued and motivated to reach their full potential.
Key Points of the Book
This is not a complete summary. Reading the full book is highly recommended!
- Pay is determined by the job, not your abilities
- Three things determine your pay: work experience, skill, strategic level.
- Your strategic level is especially important (executional, operational, tactical, strategical)
- Determining salaries is hard - there are far too many salary surveys out
- Highly paying companies can build a reputation, but it usually means you have to do wy more than usually (work on weekends etc).
- Larger companies pay more than smaller companies
- Salary bands are important. Salary band => 50 down - 50% up, median salary in middle… eg 32k, 40k, 48lk
- Compa-ratio - determined for all employees and usually slightly below median. Eg median is 50k, your pay is 45k compa-ratio is 45/50 * 100 => 90%. Most companies pay up to 105%, but not higher…
- Geography matters
- Job description is important (1-3 year plans etc pp). For hiring and your own career development. Matching salaries to job descriptions is hard.
- How close you are to the power determines your salary (close to CEO, flying a plane etc)
The book introduces many formulas you can use to determine your pay level. It also talks about many other topics like bonus payments, negotiations and much much more. It concludes with a chapter why pay is not everything and why you might trade pay against a better workspace that’s more fulfilling.
Conclusion
O’Malley’s book is a fair and instructive guide that sheds light on what you as an employee can do to increase your pay. It doesn’t suggest any underhanded tactics or propose exploiting loopholes in the system. Instead, it focuses on explaining how companies determine pay and what you can do to maximize your earnings.
The basic principle is simple: you have to provide something of value to the company. If you don’t, your pay won’t be high. However, this straightforward concept is filled with many nuances. These subtle distinctions and complexities are what the book excels in explaining. It delves deep into these subtleties, providing a comprehensive understanding of how to navigate and optimize your earning potential.
But the book isn’t just for employees. It’s also a valuable resource for anyone working in Human Resources or dealing with compensation, career progression, and career ladders. All the concepts are clearly defined, making it an excellent tool for establishing a fair level playing field within the workspace.
More
- The book is no longer in print, but you’ll find it used on ebay or Amazon: https://www.amazon.com/Are-Paid-What-Youre-Worth/dp/0767901312
