Sunday, September 19, 2010

For What They're Worth

In the traditional model, a military Reservist or National Guardsman serves roughly one weekend a month and then continuously for a two-week Annual Training period. This gives Uncle Sam some really good bang for the buck, as he still *gets* a servicemember to use during an emergency but for only a tiny fraction of the continuous cost (remember, Uncle Sam is saving here not just on salary, but also on housing and other benefits).

Roughly 10% of that force, however, is made up of "full-timers" who work Monday through Friday in a support capacity to help ensure that everything's ready when it comes time for drill weekend, and to keep the administrative train chugging along the rest of the time.

That number is flexible, though, and is likely to be augmented a bit when a unit is getting ready for a scheduled mobilization. Makes sense, right?

It should. The interesting question that comes up at these times, though, is always how you should allocate your money. If you have a finite pot of dough, you're always going to make tradeoffs -- senior people may offer more expertise and experience, but they come with a heftier price tag, too.

A unit with which I'm familiar is rumored to be bringing two O-5s (that's Lt. Col.) on board, which leads to some inevitable grumbling from on down the chain. The simple math equation says that for the cost of one O-5, you could bring on five E-3s (that's Private First Class). The old morality tale that comes along with this gripe is that senior Officers just sit around drinking coffee, while junior enlisted folk earn their keep by the sweat of their brow. Therefore, only gross negligence or favoritism could allow you to spend your money so foolishly.

Here's the problem with that: Like so many other stark 'right-and-wrong' tales, it ain't necessarily so.

If your unit primarily did maintenance support for helicopters or vehicles, and already had enough manpower towards the top of the food chain, then yes, the additional wrench-turners would be a better use of resources than would the additional desk jockey.

But if your unit was a paper-shuffling staff with a much less blue-collar mission, that logic would start to go out the window. In fact, that additional Colonel might be more valuable to you than would TEN Privates or Specialists.

A Colonel brings decades of experience. Along with that comes knowledge about how to get things done, who to reach out to, and the authority to get others moving on the other end of the line. A Private, by contrast, no matter how industrious, clever, or both, is primarily there to be reactive -- in other words, to take someone else's order. That's wonderful in a cut-and-dry situation where there are clear orders to give and a need for execution, but not necessarily so great when you're talking about the administrative and logistical planning needed to prepare a brigade staff to go overseas.

If you left one of those O-5s in the room for eight hours, with relatively vague guidance about ensuring "unit preparedness," and with full access to e-mail, phones, faxes, etc. he or she very well might be able to get some wheels turning by the end of the day. By contrast, you could put 30 brand-new PV2s right out of boot camp in that same room and not have anything to show for it come quitting time.

Last night, I drove down to Cambridge to meet up with a buddy of mine who runs a multimillion-dollar social entrepreneurialism and web philanthropy business. He is in town to do a couple interviews, and he explained his "1:3:10" rule to me like this: "Your basic, decent employee is going to give you an output level that we'll baseline at '1.' Someone who stands out as being really good -- not necessarily blow-your-hair-back amazing, but a clear cut above the mean -- will put out an output roughly triple the first person. Then, within your organization you'll have a handful of true all-stars...these people's output value is going to be roughly 10 times that of the average, run-of-the-mill employee."

The way most organizations' compensation structures work, it's not usually possible to reward that last group with ten times the dough that the first group gets. In some clear cases (i.e. movie stars or professional athletes) it's that clear-cut, but those are definitely the exceptions, not the rule. In many of those places, then, it's more likely than not that the truly stellar engineers, programmers, mid-level managers, and salespeople are actually underpaid relative to *true-value output.* To use a sports analogy, the people with the most favorable "+/-" statistics may be the least fairly compensated. The straphangers who fall somewhere towards the bottom in pay, but even further towards the bottom in +/-, by contrast, could be getting a freer ride.

I could try to explain this to the next person who tells me what a crime it is that for one good-for-nuthin', fat cat Major, a unit could bring on three squared-away, hard-charging E-4s, but I think the argument would fall on deaf ears.

You, by contrast, have made it this far. Thanks for hanging in there -- now get back to work and earn your keep!


kad barma said...

I've always liked portfolio theory, where what you need is generally shaped most by what you already have. (i.e. if you have a surfeit of chiefs, go hire yourself some more indians, and vice versa).

The compensation issue is the most interesting. In software, that 10:1 rule is often more like 1,000:1 or more. (i.e one brilliant programmer can do what the rest of the company put together often cannot). There are two observations I take from this: First of all, one brilliant programmer is still worthless without the testers and packagers and marketers to complete the business. Second of all, it's generally impossible to predict who that rainmaker will actually be, and salaries are themselves a sort of portfolio theory, where you pay a collection of folks for the probability of discovering the gold at the bottom of the mine. The golden guy or gal can't be paid what they're worth, unless you factor in the cost to discover them and give them a place to shine.

Or, put another way: If you're that smart and you want to make what you're worth, then go start your own company. (And the corollary--if it were really that easy, then everybody would be doing it).

The New Englander said...

Thanks for laying this out -- the "portfolio theory" idea makes a ton of sense...unless you're going to base your system of compensation directly to a trackable performance feature, it seems like you pretty much HAVE to hire knowing that some are going to outperform others...and just as with stocks, or horses, or anything else, some will bring it in for you while others won't. But that could change from year-to-year, too, so it helps to keep brainpower on board when you can.

Also, great point at the end -- and the advice is good for anyone who feels under-compensated or able to do better on their own...why not just go for it?