The Insider Guide to Careers
Insider information, secrets and tips about getting hired and building careers. For employees and job candidates.
I received a note yesterday from a good friend working in a Senior Director role in a Silicon Valley tech company. Unfortunately, the company decided to lay him off. Even though he was doing the de facto work of a Vice President and getting compensation much below what he would get in the market (for a VP), he was still asked to leave. My friend was educated in the best business schools in the US and had many years of blue-chip work experience. The most surprising fact was that he was promoted to Senior Director just six months back. What explains this conundrum that top performers are impacted by restructuring and layoffs?
Before getting into my assessment of the situation, it would be helpful to understand the nature of an employee’s relationship with a company.
The Economics of a Workplace: Most companies share a transactional relationship with employees. The thread tying companies and employees together is compensation – salary, and benefits. The economic principles of demand and supply are at work. A company would want to hire employees for the lowest possible cost – even free if possible. Unpaid internships in media and entertainment companies are examples of this phenomenon. On the other hand, the employee wants to get the maximum compensation possible. In a dream world, every employee would be happiest to be paid the wages of the highest-paid CEO in the world, irrespective of the work they do. The factor that grounds these bizarre expectations on both ends and makes it logical is competition in terms of demand and supply.
When many companies are vying for talent, companies have to keep increasing the compensation to get the best employees. For example, when there is one employee and hundreds of companies, the employee can ask for the highest salary. Likewise, when many employees compete for scarce jobs, companies need just to pay the bare minimum. This intersection of demand and supply curves, called equilibrium, decides where the conflicting expectations of the employers and employees would meet.
Hence, do not be caught in a love-hate relationship with the company or your manager. The company is not a personal dating relationship; it is a transactional economic relationship. If your corporate atmosphere is not ideal, avoid expending your emotional sanity in a corporate setting. Nobody is forcing anyone to stay a second more. Nobody has a gun to your head. The beauty of working in a company is that you have a choice of walking out whenever you want. Don’t allow anyone or anything in your life to rob you of that agency – the choice to set yourself free.
The whittling of jobs: To get permanent job security, you have to be in a space where you have a truly unique skill set, which the company desperately needs. Most companies are aware of this dependency. So to circumvent this choke point, they create redundancy as much as possible. One way to do this is by using work-study to break work into the barest minimum components and then banding over the barest minimum grouping as a job. Hence a company is more comfortable with creating three low-paying jobs for 40,000 $ than one high-paying job for 120,000 $.
One of the people who set up JP Morgan Chase in India explained this concept to me by noting that while in the past entry-level jobs were meaty and enabled a lot of learning, the entry-level jobs of the present have little skill learning and involve a lot of repetition. Work content has been broken up so much that the work has lost meaning. Early-in-career employees stay in these jobs because they pay well above market. The greed for more money and less work keeps people in these jobs. Any sensible employee would know better to chase skills and learning and focus less on compensation. With the right skills, compensation can only go up. Without the right skills, compensation can only go down in the future.
Who wags the dog? In a company, the CEO and management team are answerable mainly to shareholders. They do not have many incentives to take care of employees or customers. While we can debate whether this is fair, this focus is a gift of modern-day capitalism to the world.
Each one of the employees is replaceable, like a cog in a machine. There can be small and big cogs, but it is a sad truth that most employees can be exchanged with one another. Very few people are doing real value-added work. We rarely, if ever, pause to reflect on this thought. The moment one becomes comfortable doing a job without any passion, the first nail in the career coffin is in place. The HR function is typically the team that creates the final list of employees for layoffs. It typically happens that once all the dirty work is done, the HR team is next in line to be fired by the management.
In a corporate setting, there are no villains and no hapless victims. Instead, villains and victims morph into each other, the consequence of a monstrous industrial economy galloping forward. All corporate decisions are meant to satisfy the shareholder – people like you and me. We are the decision-makers in charge and, at the same time, the people impacted by the macro-level consequences of our own decisions.
Following your passion: The purpose of life is not to make money alone but to make money doing the things you are absolutely passionate about.
In today’s world, kids are discussing toys on youtube and making tens of millions of dollars. Some live stream themselves playing video games and make millions of dollars. Surprisingly, thousands, if not millions, of new careers, are being created every year in the world created by the internet. How many of us are in a position to take advantage of the new opportunities? We study for an undergraduate degree in our late teens and hope that knowledge will last us a lifetime while the job market changes faster than ever. Earlier, it would take 1-2 decades to transform a sector. Now we see the transformation happening every five years or so.
If you are an older employee, it is important not to be defeatist in your attitude. It is a travesty to say that your time is up, and it is time for your kids to accomplish your dreams – the ones you couldn’t achieve. This idea is wrong in many ways. Firstly, children will follow their dreams and are not puppets to blindly follow yours. Secondly, why would you trust children with little to no skills to master the modern economy when you, with all your learned skills through education and experience, are doing little to change? Finally, we were not born to live a vicarious existence and sit on our haunches; we are on earth to persevere, work hard, and dream the impossible.
What happened to my friend: Finally, I come to my analysis of my friend’s situation. My friend was being paid way above market for the Director he was hired, somewhere near the 85th to 95th percentile. Most people getting paid at the high end of the salary range stand a very high risk of layoffs.
The reason is that by removing a highly paid employee, one can replace that person with an average-paid employee (at midmarket compensation) and still have a cost saving of 20-30%. Of course, firing employees is a terrible strategy when the market is booming and there is a dearth of qualified candidates. But when the market is in a recession, layoffs everywhere, and a surplus of candidates looking for jobs, firing employees is a great way to decrease costs.
My friend understood this risk and tried to work doubly hard, thus getting a promotion. Since he was overpaid for the earlier role, getting a promotion increase meant he was still overpaid for the new role of Senior Director. My friend also instinctively recognized this issue and was doing double duty including the tasks of a VP. This extra effort would have resulted in an unassailable situation during normal times. Unfortunately, during a recession, most people are doing double the work. Managers are doing the work of their superiors, and hence my friend’s contributions were considered entirely normal for the changed times.
I only pity the person taking up the job my friend exited from. That person will be paid peanuts for a Senior Director position and asked to work at the level of a Vice President, one step above. But unfortunately, this craziness is part of how companies operate. The people who keep emerging from this exploitative scenario and the chaos, again and again, are the folks who ultimately rise to the top. The newsmakers we see in the media – the CEOs of big companies, have all faced these difficult situations and survived. No media will talk about the gritty stories and all you will hear is stories of genius and superhuman hard work.
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