> If you offer too little compensation, you may not attract the talent that you need to be successful. But if you offer too much compensation, management and employees may begin to feel fat and happy and lose the motivation to maximize long-term value for shareholders.
> Salary is a measure of how much value one is adding to a company, and that information should not be a secret.
> If companies are consistently paying management teams 30% away from these averages in either direction, there is likely a problem at the company.
This runs the gamut from superstition (paying people more may make them less 'hungry') to untrue as a matter of fact (salary is an equilibrium of supply and demand, not a measure of value added), to playing to the middle ground fallacy (you should pay upper management within this range dictated by an average).
My statement that paying people excessively can make them less hungry is something that has been observed through experience. I'm not saying that this is always the case, just that it happens and is something to be aware of.
Sure, salary is a matter of supply and demand- which is why I'm advocating for more transparency so that all market participants can make decisions with more complete information of the market. But I'm saying that supply and demand SHOULD be dictated by value added.
I'm not necessarily saying that every company should pay within this range. Just that this is something to be aware of, and if there is significant deviation from these numbers, more thought should be put into the decision making process.
I agree with your central point, by the way. Salary transparency is a great thing. But some things are cliche, and I think the 'hungry' thing is one of them. "We shouldn't pay too much so people stay hungry" is something you'll, e.g., never hear Wall Street folks say about their own companies.
Do you advocate reducing your own income? If it is better for others to be hungry then surely it is also better for you to be hungry. And yet I doubt that you argue with your boss to be paid less.
I am not sure why your employees would be less 'hungry' if you're paying them more unless they feel like they don't have ownership in the product. Or maybe they just didn't jive well with the team.
Either way they are staffing problems - hire the right people and pay them what they are worth.
> Salary is a measure of how much value one is adding to a company, and that information should not be a secret.
> If companies are consistently paying management teams 30% away from these averages in either direction, there is likely a problem at the company.
This runs the gamut from superstition (paying people more may make them less 'hungry') to untrue as a matter of fact (salary is an equilibrium of supply and demand, not a measure of value added), to playing to the middle ground fallacy (you should pay upper management within this range dictated by an average).