The main tenet of this blog post is that you should argue for your compensation based on the amount of value you add to the company.
That's nice in theory, but the techies' dilemma is that it's often difficult or impossible to put a hard number on the value they have added.
How many customers were retained because you decreased response times by 100ms? How many customers were gained because of that slick UI you created? How many discounts were not handed out because of downtime that wasn't suffered because of your cautious error handling and exemplary testing? How much money was saved because of that documentation you made that helped the new hire ramp up faster?
Even when you can put a hard number on work you've done, like decreasing hosting costs by $15k per month, isn't that why you're paid so handsomely already? How are you going to do that again next year? (Why haven't you done it already?) Wasn't it a group effort?
The reality is, you're basically going to get paid based upon what your employer has deemed everyone else in your position is earning, plus or minus some % based upon experience level, your reputation, and how badly the company needs the position filled. If you don't like that, time to go into management or sales.
The subtle point that's lost in so many of these blog posts is that value-based pricing is a model for consultants. Employees are not consultants.
Consultants are typically brought in to solve specific problems that are perceived to be high-value. If a company hires a consultant to sustainably reduce hosting costs by $15,000/month, a good consultant will probably have no problem pricing the engagement as a not insignificant percentage of the savings over a reasonable period of time. Good luck trying this as a rank-and-file employee. If you're that good and are serious about maximizing your earnings, become a consultant.
The value you add to the company is not based on how many customers were gained from your completion of task X or similar metrics. If you decrease hosting costs by $15k per month and only get paid $5k per month but dozens of others would do the job for $3k, you aren't in a good position to ask for a raise.
Your value to the company is how much it would cost, in time, effort, and money, to find a replacement(s).
Let's imagine we are Board of BigCo. Our CEO just took home fifty mil for what is at best a lacklustre performance.
We could fire his ass, but who do we replace him with? We could get pretty much anyone here on HN to do the job, for just one tenth of the cost. But if we hire say that lifeisstillgood, the inevitable PR disasters will wipe more than fifty mil off our stock / revenue.
But if we hire (insert your name here), a clearly brilliant HN member, they will discover that being CEO of a major company means very little power or influence - these things are like oil tankers and do not turn for anything. So getting an even better CEO than our guy will not manage to bring in much upside.
So unless there is a massive upheaval in the market meaning plenty of opportunity, then replacing a CEO is always a bad idea - the downside is huge, the upside is minimal.
Maybe that's risk adjusted returns - but I prefer cynicism.
Oh, there's also power dynamics at play. In practice most companies are run for the benefit of top management, not shareholders.
Some economist did a rather macabre study of share prices of companies as their CEO's died in various accidents. (Ie removal of the CEO controlled by factors outside corporate politics.)
> The main tenet of this blog post is that you should argue for your compensation based on the amount of value you add to the company.
The truth is that your employer doesn't consider your value as a major part of their compensation offer, they consider what would happen if you didn't exist. Is there or isn't there an endless ocean of other candidates who could more or less do what you do and do it for what they're willing to pay you and no what you're demanding?
In case you aren't sure what the answer is, there is.
The trick is finding a field that doesn't have legions of hungry coders waiting to fill your boots..
Good STEM programmers (i.e. science companies) are very hard to find. The jobs aren't as abundant as web dev, but they are there, pay reasonably and it's easy to show how valuable you are to the company.
Someone made a comment a while ago "The only way to capture your economic value is to put it on the market as a business" and I think they are spot on. The mindset of dealing with people/employees and dealing with businesses seems completely different.
> but the techies' dilemma is that it's often difficult or impossible to put a hard number on the value they have added.
Yes, but the point is that if you want to make a good salary, that's the problem you need to fix. What is your approach when you encounter something that's "difficult or impossible" in your daily work? You apply intelligence and creativity and create a solution.
> The reality is [..] If you don't like that, time to go into management or sales.
Whatever you do, DO NOT try to change the rules. DO NOT try to learn what it is management and sales do to get those nice, big salaries. When something is hard, GIVE UP.
Of course you need to understand the employer's BATNA as well: If they don't appreciate tech, ie. their BATNA is to fire you/ignore you until you leave, then that's what you do. But companies can do that to their sales and management teams as well.
I can figure out which algebra to use and what light research to perform... but may you please educate me on these "Fermi estimates" regarding salary negotiation?
"In physics or engineering education, a Fermi problem, Fermi quiz, Fermi question, or Fermi estimate is an estimation problem designed to teach dimensional analysis, approximation, and the importance of clearly identifying one's assumptions. The solution of such a problem is usually a back-of-the-envelope calculation."
How many customers were retained because you decreased response times by 100ms? How many customers were gained because of that slick UI you created?
These two things can be precisely measured, provided you have the traffic. And you should be measuring them anyway, because that slick UI might be hurting things.
A/B test all the things. Then you'll know both your value, and whether any specific improvement you made is worthwhile.
A salaried employee is never going to gain anything from this except a small bonus, a marginally higher salary increase than his or her peers, or a pat on the back.
there are all kinds of intangibles not mentioned here. what if you have an idea that transforms the company's sales numbers or you dream up a better way of doing the builds that reduces integration bugs. So many ways an employee contributes intangibly.
you're right, pay is basically what your peers make +/-
Yes, particularly in the UK the vestiges of the old class system are that no matter what price the market clears at a blue-collar worker can never be paid more than a white-collar manager.
So if you are in a situation where there is a glut of junior managers and a scarcity of talented engineers, then seemingly inexplicable things start happening to salaries.
I'm fascinated that in the UK, software engineers are not viewed as white-collar professionals. That seems to be a rather big difference between the work culture of the UK and the USA.
Yes, like I say, the class system, and the typical engineer's strongly expressed desire to dress scruffily and generally nonconfom, disregard hierarchy and so on. There's no reason that software professionals shouldn't be on a par with lawyers and accountants, the work is similar enough (describing the current and desired states of complex systems in very precise terms, and creating finely detailed plans for getting from here to there).
> describing the current and desired states of complex systems in very precise terms, and creating finely detailed plans for getting from here to there
What a beautiful and elegant description of software engineering!
What do you think will happen? Will the engineers earn more than the managers, or will the managers salaries go up just because the engineers earn more?
No, you will have managers crying about a talent shortage, and engineers wondering why they get paid so much less than lawyers, accountants and doctors (all of whom count as "white collar").
These "intangibles" can still have a value assigned. Each integration bug eliminated by an improved build process can have a cost assigned to it by using the average time and money cost of previously fixed integration bugs. Example: "Each integration bug costs 1hr of senior dev time at $100/hr fully loaded and 8hrs of junior dev time at $50/hr. The new build process produces X fewer integration bugs per month, for a savings of X*$500 per month."
"Transforming" the sales numbers should also be measurable. Example: "Before, salespeople were closing x% of deals and missing scheduled followup on y% of contacts. Now (x+5)% of deals close and only (y/2)% of contacts are mistakenly dropped."
>The reality is, you're basically going to get paid based upon what your employer has deemed everyone else in your position is earning, plus or minus some % based upon experience level, your reputation, and how badly the company needs the position filled. If you don't like that, time to go into management or sales.
Pretty much this. If you are not part of the profit generating side of the business, you will always be viewed as a cost overhead. Engineering is unfortunately a question of cost expenditure for businesses but even more so for smaller software companies who don't have monopoly.
That's nice in theory, but the techies' dilemma is that it's often difficult or impossible to put a hard number on the value they have added.
How many customers were retained because you decreased response times by 100ms? How many customers were gained because of that slick UI you created? How many discounts were not handed out because of downtime that wasn't suffered because of your cautious error handling and exemplary testing? How much money was saved because of that documentation you made that helped the new hire ramp up faster?
Even when you can put a hard number on work you've done, like decreasing hosting costs by $15k per month, isn't that why you're paid so handsomely already? How are you going to do that again next year? (Why haven't you done it already?) Wasn't it a group effort?
The reality is, you're basically going to get paid based upon what your employer has deemed everyone else in your position is earning, plus or minus some % based upon experience level, your reputation, and how badly the company needs the position filled. If you don't like that, time to go into management or sales.