“At Google, we … have situations where two people doing the same work can have a hundred times difference in their impact, and in their rewards.
For example, there have been situations where one person received a stock award of US$10,000, and another working in the same area received US$1,000,000. This isn’t the norm, but the range of rewards at almost any level can easily vary by 300 per cent to 500 per cent, and even then there is plenty of room for outliers.
In fact, we have many cases where people at more “junior” levels make far more than average performers at more “senior” levels. It’s a natural result of having greater impact, and a compensation system that recognises that impact.”
This is how it should be. Pay based on performance and value – not on duties and titles and role in the hierarchy.
Bock admits that a policy to “pay unfairly” is provocative, and that it might be better characterised as “pay unequally.” In his view, it is actually more fair to pay a top performer significantly more than an employee with the same job title that produces less value.
Of course it goes against all the left calling for more income equality.
“Ten per cent of productivity comes from the top percentile, and 26 per cent of output derives from the top 5 per cent of workers,” O’Boyle and Aguinis write.
A good test for big companies:
Bock says managers at any company should ask, “How many people would you trade for your very best performer? If the number is more than five, you’re probably underpaying your best person. And if it’s more than ten, you’re almost certainly underpaying.”