On my way to the tail of the dragon this weekend I started reading The Big Short: Inside the Doomsday Machine by Michael Lewis. It tells the story of the 2007/2008 financial crisis through the eyes of obscure hedge fund managers that bet against the sub-prime mortgage market. All in all a fascinating read that I ended up finishing that weekend.
Reading this book I came across a money quote on salary:
“Senior management’s job is to pay people…they have four categories: happy, satisfied, dissatisfied, and disgusted. If they hit happy, they’ve screwed up: They never want you happy. On the other hand, they don’t want you so disgusted you quit. The sweet spot is somewhere between dissatisfied and disgusted.”
Here’s how this breaks down in our everyday world (the world where people don’t make $9 billion bets on the stock market that is):
Happy –no one is ever “happy” with their pay (OK Mother Theresa probably was but that is a completely different apple). Someone who is happy isn’t hungry, they aren’t coming up with new ideas, they aren’t improving their skill sets, and they aren’t motivated. Think about that last one…do you want someone who isn’t motivated on your team?
Satisfied –This is someone who knows what people with a similar skill set are paid and they think you are fair. Could they be paid more? Sure. But they are cool with their current situation. Maybe they have a good manager and/or great work but don’t think this person isn’t out there updating their resume.
Dissatisfied – This isn’t a bad place to be. Dissatisfaction can be great motivator. If you don’t like your pay try to change it: brush up on your skills, find a new job, whatever it takes.
Disgusted – You don’t want a good employee in your organization to be disgusted with their pay. Disgust is like contempt…it festers and boils to the point where someone leaves your company and tells all their friends and family about what a crappy place they used to work at. And that’s if you’re lucky.
So there you have it…brilliant in its simplicity and you didn’t even need to hire a fancy-schmancy compensation consultant! Thanks Wall Street for keeping it simple!