Are You Paid What You're Worth? - Softcover

Michael O'Malley, a Ph.D.  in psychology, is a practicing management and compensation consultant with over fifteen years of experience.  Currently employed at a major consulting firm, O'Malley has designed compensation programs and benefits plans for more than one hundred major corporations, including PepsiCo, AT&T, Fisher-Price, and Aetna.  He lives with his wife in New Haven, Connecticut.

Comparative Standards: How You Measure Up to Everybody Else

There are two types of comparative standards that involve comparisons between what you get paid and what others get paid.  In one instance, you compare yourself to others around you within the company: to those persons' efforts, abilities, contributions, responsibilities, etc., and to their likely salaries.  It is wholly natural to make these social comparisons to see how you measure up against others.  You make a judgment of fairness based on what you do and offer the company and receive in compensation, and what others do and offer and receive in compensation.  If these comparisons do not match up, if there is a disconnect between what you do and what you get, versus what others do and get, you will perceive the system as unfair.  And you, for one, may feel undercompensated because you believe you offer as much or more to the company than others but get paid less.  You will often hear companies refer to this as an issue of internal equity.

The other comparative standard involves comparing yourself to others who perform similar work outside of your company.  Companies refer to this as external equity.  Having a pay system that is externally equitable means that no matter which company you approach in your geographic area (often within the same industry), that company would pay about what you currently get paid for the performance of similar job duties and responsibilities.  Inequity exists to the extent to which your company pays less, or more, than similar companies.  I assume you won't complain if you are earning "too much." Let's take a closer look at internal and external equity before we move on.

Internal Equity: How You Stack Up with Your Colleagues at Work

This is the most obvious, straightforward way of recognizing fairness: by comparing yourself to others who work near you.  When you look at the sum total of what those around you bring to the table and see what they earn, compared to what you bring to the table and what you earn, does it make sense?

Now you know why companies don't like people talking about what they earn.  In some companies, such discussions are "dismissable offenses." Polite conversation about what everyone earns is often forbidden because it leads to questions of fairness and, potentially, to employee dissatisfaction.  In trying to make life fair, most attempts fall short.  And it isn't because your human resources department doesn't try.  Achieving internal equity is a basic tenet of any self-respecting human resources department.

There are many complicating factors that create internal inequities.  First, you can't earn more than your boss.  Even companies that have "flattened" the organizational hierarchy and claim workforce parity have extreme difficulty in violating this axiom of corporate life.  The problem, of course, is that your boss may not have kept up with the times, particularly in areas that are rapidly changing.  Your boss may not have a clue, but he or she pulls in a higher salary.  I have met heads of information technology departments (of big companies!), for example, who wouldn't know a PC if it fell on them.  Now I can appreciate managerial acumen but shouldn't a person in a supervisory position know something about the area in which he or she supervises? Nevertheless, these people are paid more than their underlings.

There aren't a lot of great options about how to avoid this, but let me alert you to what is futile.  Don't curse and denounce hierarchy.  Every complex social system has a "pecking order." Some ordering of authority will always be found and is quite "natural." Indeed, I believe organizations would be better off if they acknowledged this fact rather than touting concepts that are often meaningless like "flattening the organization" and "empowerment" (and simultaneously acknowledge that the way power is distributed within a company has very little to do with the way work is done).

Also, don't discuss your boss's incompetence with your boss's boss or seek to have him or her removed.  Incompetent people have an uncanny staying power.  And if you thought your life was unbearable before you complained about your boss .  .  .

Fundamentally, the problem with bad bosses is that they never get anywhere.  And whereas they may never have been told they are mediocre performers, their pay is likely to reflect that fact.  Insofar as your boss's pay acts as a ceiling to your own, that's a problem! Conventional wisdom may suggest that having a boss with inferior skills who may someday be replaced (by you, perhaps) is desirable, but the contrary is true.  Find a boss whose talents you respect and who appears to be psychologically balanced.  He or she is more likely:

(1) to get better pay raises
(2) to get promoted
(3) to help you refine your own skills
(4) to help you get promoted

All of this is good news for your earnings.  It is like a bicycle race, a good boss who is on the move can pull you along in his or her draft.

A second complicating factor to maintaining internal equity is inequities created by new hires.  Have you ever noticed that whenever new people are hired, they earn more than you for the same work? It happens.  What also frequently happens over time is that as new people are hired in, the pay between organizational levels begins to blur.  With people coming and going, the nice distinction in pay between levels is often tough to maintain.  Companies refer to this as "pay compression." This is when the compensation paid at one level in the organization abuts the compensation of another level--two different sets of jobs are paid similarly, which threatens to violate the rule that employees higher in the organizational hierarchy should be paid more.  It is hard to control internal equity with people coming and going all of the time.

Of course, you can play the same game and hop to a new job.  That is, you can be the new hire.  Indeed, workers are more mobile than ever before and quite readily exercise the "move" option.  It is estimated that the average employee will make seven to nine job or company changes and will have three different career tracks during his or her work life.

But let's assume that you like where you are.  Having people come in at greater pay can work to your advantage if:

(1) The pay differential is noticeable.
(2) It seems to be a recurring problem; the position appears to be impossible to fill except at greater pay than your own.

Under these conditions, there is likely to be a reassessment of your job and pay that may lead to a pay adjustment.  That is, if the problem of paying new employees more than the old occurs frequently enough, your pay will likely be bumped up as well.  Again, such situations are a source of angst for most human resources departments who strive for fairness.  But they have to notice the problem first and not all of them do.

I know what you're thinking.  How can you bring it to their attention if you don't know for sure what others earn? You don't have to know in order to raise a "concern" with your boss about your salary compared to the "newcomers." One top-performing employee I met raised the subject of undercompensation vis-Ó-vis newly hired employees with his superior by suggesting he be the highest paid employee within his particular work group.  He'll never know for sure if he is, but he received a handsome increase.  His boss obviously realized that his contributions relative to others warranted higher pay.

A third complication arises because of the way pay is set by the company.  Much more will be said about how this is done in the following chapters.  For now, the important point to note is that pay is determined by the job and not by the person.  To some extent, your "excess" skills and abilities are not recognized by your pay.  If they are not required for the performance of your job duties, they are not relevant.

That, however, creates perceived inequities.  Your potential, given your abilities, may be far greater than another's but your pay is comparable.  The trick then, is to find a way of using your full potential so that the compensation system can recognize it.  One strategy is to think of using the skills you have in unusual ways in your current position.  The best employees play to their strengths.  Sally T. relied upon her strong team-building skills to become a cult heroine within a telecommunications company by going to the company's various call centers and improving their performance on the strength of her leadership abilities.  There are three directions that optimizing your skills can lead and they are all positive:

(1) It can lead to a stellar performance review and increased earnings.
(2) It can lead to a redesign of your job and a salary that is adjusted upward.  There are many instances where jobs are created by the jobholder who has special skills and abilities.
(3) It can lead to a promotion with the attendant pay increase.

Another strategy is to look for another job within the company that is a better "fit" with your abilities.  Many companies have programs that internally advertise job openings along with the skills required to competently perform the job (i.e., job postings).  Look for companies that promote internal movement.

My personal the...