My experience with the Error and Tyranny of Percentages

[lostnfound]

Ever been in a position of determining raises for your staff at a large corporation? Probably you were given a set of guidelines from 'Human Resources' with percentage ranges for each employee based on 'performance' and relative pay. Privately, you might lean to the high side a bit for low paid employees -- but you'd still generally stick to the ranges, because you bought the idea that you want to make all of your staff feel rewarded, including the higher paid ones. Besides, your competitors used similar scales, and you want to keep your talent... Back in the good old days, this meant that a good clerk would surely be pleased with an 8% raise (at $40 a week) because it meant a big improvement in standard of living, while a good engineer also merited an 8% raise (at $140 a week), to feel equally appreciated and motivated. Motivation and retention were the purposes – within an overall budget.

The good old days being gone, the economy is collapsing after a long spiral downward, and nobody has gotten any raises, for a long long time. The dreams of the middle class are being transmogrified into expectations of employment at Walmart in their retirement. One is acutely aware that many of the lower paid working people are becoming nearly impoverished. Finally, this year, after so many years of nothing, just a bit of money is made available for raises, and you are glad, but you struggle with how best to divvy it up. The ranges are wide enough, but the total budget is so small. What to do..?

You look around at your own lifestyle, and it’s true that your 401K needs a miracle, not a little raise; but the other truth is that it is vitally clear that your staff needs it more. You talk to your own boss, and you say: I don’t want a raise this year, I want you to let me use whatever you would have given me to divide it among my staff. And because he is an unusually humane and compassionate man, he finally says ‘yes’. He actually decides to do the same.

You’re elated. You fill out the numbers, it’s still not much but giving up your few percent is going to make a difference for about 10 people, who both deserve it and need it. You are still actually ‘within the ranges’, except for your own, which will show up on a paper somewhere as ‘below range’, but since you volunteered, who will care about that?

You go home satisfied, imagining the good feelings your staff will have (and your mind is happily wandering to your own kid’s Christmas, wondering whether you’ve checked off ALL the items that were in his letter to Santa), until you get "The Call": the call that says, from somewhere up the line, that you can’t do that; it isn’t ALLOWED. Someone who is basically a stranger to your department, who doesn’t know most of your staff by name let alone by their contributions, is using a single number that you were forced to assign to those contributions, to lower percentages downward. And insisting that you MUST accept this certain raise, that these others will be okay: “we will do something for them later”. It’s the infamous “later”, that hasn’t come in so many years, these years in which we had a President who joked about the ‘haves and the have-mores’, the years in which the pyramid schemes around us puffed up and puffed up and then blew the houses down. (Bad analogy, for like the neutron bomb, these pyramid schemes actually left the houses standing but blew the people right out of them.)

You feel angry and frustrated, tired of being forced to mistreat your staff for so long, and you ponder the whole system, that begins in grade school and conditions us to think that certain people are ALWAYS entitled to more and some are ALWAYS entitled to less. You start to consider what a company would look like that divided up its raise money more evenly -- how fast exactly would it start to lose its “talent”, as its professionals fall further behind “the market”? Would high-priced clerks really make a company less competitive? Do executives with tenure contribute so much more than the “fresh blood” of an untested newcomer? It depends.

Early on in your corporate career, someone took the time to patiently explain that salary adjustments based on percentages was the fairest approach. The memes and the anecdotes that support the status quo are numerous: the higher contributions made by leaders compared to followers, the need to motivate at all levels of the staff, the investments they’ve made in education, the market for certain skill sets or “executive talent”. Memes that might push us in the other direction – share and share alike, strengthening the weakest link, the least of your brothers, the lion and the mouse – are derided or seen as soft or relegated to some dustbin after preschool. “Share and share proportionally” doesn’t have the same ring, but it is the favorite tune. You don’t expect to overturn the whole system, but it is hard to fathom why there are never exceptions allowed,
why the system so vehemently defends itself. Why is it such a threat to the system for one individual to voluntarily forego a raise so that subordinates can finally be rewarded?

Let’s instead consider “marginal value” and "marginal cost" – the marginal value of a little extra cash to the person who makes $20,000 per year compared to the same cash for the person who makes $200,000. In difficult times, why is it forbidden to cut the pie a little more equally? Because the little people might get used to it??

Even in these awful times, when some of us worry about falling stocks and some of us worry about the rising price of milk, there are systems in place to prevent us from exercising human judgment, let alone human concern. Take a pool of money available for raises, and the largest chunks will almost always go to the highest paid persons, the smallest slivers to the lowest. Disparity between upper and lower is actively protected and encouraged.

The biggest wealth disparities in our society aren’t driven by this percentage system – they are driven by policies and politics that favor the investor class, and by corruption and self-dealing by the ruling class – but I can’t help but sense that this standard corporate percentage system is a useful part of it. In certain perspectives of social economy, the “purpose” of the middle class is to provide a buffer between the elites and the impoverished masses. For this purpose, it is helpful if the ties that bind and subdue are rationalized and smooth.

[sinkingfeeling]

1. I quit my job as a 1st. line manager in a huge corporation when they decided to change the rules

in mid-stream. We were paid on a 'merit' system, but really it was a range of percentages based on the formal 'evaluation' of the employee's performance. Suddenly, in prep for massive 'employment actions', we were told to not only stop the raises of those '3' performers, but to also put them on 'improvement plans'. Now for 50 years a '3' performer was meeting all requirements of the job. the '4' performers were the first to go. What was the over-all result of this long after I had left the position? Managers tried to move everybody up into the '1' and '2' performance range. So the corporate bean counters set another rule. Each manager could only have certain percentages of each performance rating in their departments! And finally, they took performance evaluation away from the 1st. line managers and let the employees rate each other!

[lostnfound]

2. I've had to deal with those forced percentages, also.

Not this year, luckily. But isn't it similar to grading on a curve? Or in college, my professor had an automatic 50% D&F rule -- the class average would be set at 70, and half of the class was destined to get a D or an F. More than 3 Ds or Fs in your major, you were kicked out. Not sure what the purpose was. It seems an odd way to control the quality of the graduates? :shrug:

[annabanana]

3. Why does the theme from "Brazil" keep running through my head?

Are we there yet?

[lostnfound]

4. I'm one of the few who has never seen that movie.

What's the connection?