Monday, May 27, 2013

Peter out: Too expensive for the role

I have always been concerned about the rising cost of employees and more so when I see the roles not changing, talent just good enough for the basic role and salary gone up by 70% to 100% over last 3 appraisals. This is peter mark, I call. This is a threshold beyond which company starts losing out big way.

Has the role changed for higher levels of responsibilities over a period of time? If not why pay more. Simple economics says, pay for what you get. I guess, organisations must start calculating the losses, the holy loss as I prefer to call it, on each employee after 2 years and must ensure that, cost is within the peter level or else follow the McKinsey's "Go up or out".
If you do not follow this, you frustrate the employee if he is ambitious to grow or you keep paying higher salary for someone who does not grow. Either which way, action is required. We all talk about employee life cycle, but have we ever thought beyond the admin part of employee management? There is an optimal value of the employee that has to be leveraged to get the best out of employee's talent and cost within the defined timeline of  1 to 3 years and see, how many have been optimized and where to position the best one's and what to do with the laggards.
I have see the admin, payroll, finance, HR and many other places employees being there for past 6 to 10 years without change in role or skills, or qualifications and become untenable for the cost they charge now due to their levels.
Worst I have seen is when companies have promoted the laggards to position of prominence due to absence of better ones and they deliberately have not hired a smart guy as that will be a challenge to the manager, who chooses to hire and keep only the below average folks in his team for ease of management and keep his position important and unchallenged. He deliberately does not mentor or empower his subordinates and allows them to commit mistakes so that he can rule over them.
Companies need to have a watch on such managers who build termites into the system and kill company's image, reputation an prestige and deliver poor services to employees and customers. 

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