Monday, 30 January 2012

The Reason for Pay Rises?

I'm loathed to simply accept that things have changed for no reason, or because people are somehow different to how they once were.

So, why has the ratio of the highest and lowest paid in a company, or even highest and average pay in a company risen over the past 30 years. The wrong answer is that management were more noble then. They weren't.

But I suspect the answer lies in something that Chris Dillow has said about complexity:-
And a similar thing might be true for management jobs. The assertion that bosses must be paid a fortune because their jobs are so difficult begs the question in the true sense of the phrase; it assumes that the jobs have to be so complex when this premise should be questioned.
The thing is that the increase in the complexity in management isn't because management want it to be more complex, but because it's more efficient. It's cheaper to have a small number of people doing things very cleverly, even if it makes it more complex, than having huge numbers of people doing things in a less complex manner.

As a for-instance, using IT creates a concentration of risk on a small number of people. Those small number of people can stop your whole business from functioning in a way that a manual business with lots of staff acting intelligently can't. Yet, even with the risk, it's the approach most businesses take, because that small team's work scales like crazy.

I recently did some work for a large UK retailer, and the shop staff, including the managers have very little to do with how the shops are run. They're there to be a human face, and that's it. They don't decide stock, where it goes, how much to charge, what sales to run... nothing. A few decades, I worked retail and store managers did do that. What do you think happens to real wages when people are less skilled that work for you?

Everything is now about marketing departments, HR departments, all those centralised teams, and that includes the management teams. The decisions taken by the board have far more serious effects on businesses than they did 30 years ago. Sainsbury's got their ass handed to them by Tesco because they picked a bad software solution. Would bad software have done that 30 years ago? No. So, having people who can pick the right software matters in a way that it didn't then.

Now, this doesn't mean that those people are necessarily the right people, but the company is putting a very high value on how much the company is about the decisions of those people in a way that they weren't in the past.

No comments:

Post a Comment