Some roles make value easy to measure, while others create value that’s harder to quantify. That difference helps explain who gets rewarded and why.
I was recently speaking with someone a few years out of college. She expressed frustration that she works harder than other people at her firm and feels like she’s not rewarded appropriately, so she’s thinking of switching to a sales role. Underpinning this comment is a broader question about how closely compensation aligns with effort. Rewards (compensation) aren’t always as closely tied to effort as most people think. Businesses often can’t reward what they can’t easily measure. This is an issue that is not often discussed, but one that’s important to understand when looking at career options.
There are two dimensions to compensation alignment. The first is the impact of your role. As I noted in The Career Toolkit: Essential Skills for Success That No One Taught You, even the fastest shelf stocker at a supermarket is never going to deliver as much value to the company as the Vice President of Inventory Management, and so will never earn as much as even an average person in that executive role. Some jobs have a bigger impact, typically those higher up the food chain.
Of course, they don’t always get it right. I think HR, when done right, can have some of the biggest impact at knowledge-worker companies (see “What Restaurants Teach Us about Hiring” to understand why), but HR professionals are typically paid less than peers at equivalent levels. Part of this is that while HR can deliver some of the biggest impact, many people in HR aren’t trained in how to do it and consequently don’t, resulting in lower pay for the function overall.
It’s interesting to note that there can be an asymmetric impact. Consider a system administrator, this is the person who makes sure the servers are up and running. If the servers crash every few weeks, work can’t get done, or perhaps customers can’t place orders. That can cost the company millions of dollars. On the other hand, if everything runs smoothly and there are no crashes, well, then there are no crashes. The system administrator can’t generate millions of dollars in revenue no matter how good a job she does. These jobs often protect revenue rather than generate it.
The second dimension is measurability. It is very easy to measure the impact of a salesperson. How much revenue did she bring in through sales? At many companies, sales is a solo activity, so 100% of her revenue can be tied to her. (In some cases, she may have support, such as from a sales engineer or a business development representative, in which case they get some credit, too, but the bulk of the work—and credit—is hers.) This is why salespeople make most of their money through commission. Consequently, the more successful they are, the more they get paid.
Now consider a software engineer. The decision of what to build (e.g., a new button on the website for a new type of report) was made by product. The software engineer implements it. The difference between a good and a bad software engineer is typically how fast it’s done and how reliable the code is, including how well it scales. Speed can be measured. Even then, the speed difference between a slightly better and slightly worse engineer is often lost among other variables that can affect time to delivery. As for reliability and scalability, it’s hard to tease that out. Often, that takes years to understand, and so many other things are changing that it's hard to attribute results clearly, except in cases such as a major design change explicitly discussed during a planning meeting. That’s not to say managers can’t tell who is better or worse, but it’s hard to translate that directly into the impact a software developer had on the company’s revenue.
As a result, it’s much harder to tie a software engineer’s compensation directly to measurable business impact. Marketing measurability can vary. If you’re running ad campaigns to generate sales or sign-ups, we can directly measure the campaigns created and run by two marketers and compare their ROAS (return on ad spend), which is revenue (or an equivalent metric, such as sign-ups), divided by the cost of the campaign. But if the marketing is more branding and PR, it’s not so easy. If it’s enterprise sales and the goal is to generate awareness in the industry that will help improve sales many quarters down the road, it’s very hard to link effort to outcome directly. If it’s a team of one, you can compare quarter over quarter. If it’s a team of fifteen, whose effort and which decision had what impact on a sale twelve months from now is nearly impossible to attribute.
The best you can do is speak with your manager. Ask your manager how your success will be measured and how that will translate into raises and promotions. Sadly, most managers won’t have an answer, and that alone may be a red flag.
Certainly, don’t expect an answer on the spot. If your manager doesn’t know, ask him to think about it and get back to you. You can even share this article to explain why you’re asking and how you’re thinking about it.
If he still can’t provide an answer within a few weeks, then ask yourself whether you still want to work in a place where your ability to get a raise or promotion isn’t clear to your manager. Even if you like your job, consider the obstacles to your next promotion or raise. If you don’t know what actions are rewarded, you won’t know where to focus your efforts. If he doesn’t know what actions to reward, he may not consider you for a raise or promotion even if you do the right things well.
(For those curious, you can see the same issue in hiring; see “The Streetlamp Effect in Hiring.”)
It’s critical to learn about corporate culture before you accept a job offer but it can be awkward to raise such questions. Learn what to ask and how to ask it to avoid landing yourself in a bad situation.
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