This post originated from an RSS feed registered with .NET Buzz
by Eric Wise.
Original Post: Rethinking Compensation II
Feed Title: Eric Wise
Feed URL: /error.htm?aspxerrorpath=/blogs/eric.wise/rss.aspx
Feed Description: Business & .NET
My previous post got my wheels really turning over how I would design a compensation system if I were in charge of a large corporation. Basically, there are 3 components of a total benefits package which are salary, tangible benefits (medical/health, vaction time, etc), and intangible benefits (environment, tools, coworkers, etc).
First, a brief rant on fiscal responsibility
Some people have skepticism about my post that the wealthy owners of corporations do not care enough to provide a great package to their employees. Whose fault is that however? It's certainly not the employer's fault. It's our fault. That's right, you heard me loud and clear, it is our fault. Why is that? Well it all boils down to our lifestyle choices. America has one of the lowest personal savings rates and highest consumer debt ratios in the world. Our interpretation of the American dream is that because we are Americans we are entitled to a big house, fancy cars, big screen TVs, and other such luxeries. The consequences of this belief is that every time many people receive a pay raise, they increase their lifestyle to eat up that raise. What this does over time is make you even more dependent on your salary then you previously were. If every time you got a raise you immediately earmarked 50% of that raise to go into savings and investements, you certainly wouldn't have much fear of losing your job anymore as your savings would support you. Think of it this way, all you young developers out there, if you enter the market at the standard wage for IT, around $30,000/yr, chances are that if you stay in the field after 5-7 years your salary will be in the $50,000 - $75,000 range... meaning that if you agreed to save 50% of your wage increase and only use 50% to increase your lifestyle you would be banking $10,000 - $22,500 / yr in that 5-7 years experience range. You could pay CASH for a $200,000 house by the time you were 35. However, if instead you decide to spend every nickle you earn, then you'll be in great fear of losing your job and going bankrupt, and you'll find yourself taking jobs and doing work that make you miserable, accepting situations without a choice, and it's your fault. And keep in mind the numbers I just quoted don't take into account interest earnings, you can find perfectly safe interest accounts paying 3%.
Compensation should be like customizing a racecar in a video game
Customizing your race car in a video game was the closest metaphor I could come up with. For those of you that aren't gamers, I'll explain. Many games allow you the option to customize your race car before the start of the game. Customizations generally include upgrades to speed, steering, shocks, and other features important to a race car. You only have a limited amount of "points" that you can spend on your upgrades, which means that if you increase one stat, the max of the others drops, so in essense you could dump everything into speed and have the fastest car on the track, but your steering and shocks would suck. Depending on what type of racer you are, you'll favor some stats over others, and adjust your car accordingly.
Ok smartguy, how does this relate to compensation?
Well, the first thing businesses have to recognize (they are getting better at this, no matter what Jay thinks) is that workers are individuals and should be treated as such. As individuals we have different needs. Those of us who are young and just starting out in the field have needs for money, experience, and power. Those of us who are older with families have different needs like time with our families, personal reflection and growth, and managing our affairs. With this in mind, I've been thinking about structuring employee compensation just like in the video game. Upon hire, you would get a "base" compensation package like such:
Title: Junior Developer
Salary Base: 25,000
Total points: 100
Base benefits:
* 5 paid vacation days
* 50% paid health insurance
* 5 sick days
* Fitness club discount
* $2,500 / yr education benefit
With this as the base package, you'd then offer one to many additional benefits that would cost points, from above:
* Additional $1,000 salary - 10 points
* Additional paid vacation day - 5 points
* 10% more paid health insurance - 3 points
* Shortened work week (less 4 hours) - 20 points
On and on it would go, listing out additional benefits an employee could have. It would be the employees job, on acceptance of the offer, to distribute their points into benefits that are important to them. Only care about money? Then dump all your points into salary and give yourself a $10,000 raise. Want more time off? Buy a day off work and 12 more PTO days. You'd be able to re-evaluate your point distribution annually just like now in companies that let you change health plans at the end of the year.
I think this would be completely fair to workers in all walks of life since they could adjust their compensation to meet their needs. Employees wouldn't be jealous of the "part timers" as Darrell fears, because everyone has the option to get more time off or a shorter work week, if they don't take it or decide money is more important then that's their business. The only place which might be tricky is the shortened work week because it would have to be scheduled around the needs of the customer, because they always must come first.
Anyone want to work for me? *chuckle* Maybe if Easy Assets and my consulting services grow a bit more I'll be hiring with this compensation plan.
Previous Topic
