John Sumser starts us off today with a partial riposte to Jeff Hunter's post last week on Talent and Spirituality. Both are very worthy reads, but they also manage to tiptoe around the elephant in the room: rising inequality. While this may seem to be a primarily political issue, inequality today is foremost an economic issue, which means it all starts with the HR department. So in celebration of election day here in the US, I'm going to break a rule and talk some politics, just this once.
In the mid 90s two important and controversial books came out from roughly opposite sides of the political aisle and both came to roughly the same conclusion that the US was becoming a meritocracy, and that barring something unusual, it would become more and more meritocratic with each passing day. For those of us that struggle each day with bumbling management, this does not sound like such a bad thing at first. But writ large, the implications become more ominous.
The two books were Christopher Lasch's "Revolt of the Elites and the Betrayal of Democracy" and Herrnstein and Murray's "The Bell Curve." Lasch wrote as a New Deal liberal who believed that America's elites (which in his mind included Hollywood celebrities as much as oil company CEOs) were forfeiting their sacred duty to help ensure that the country worked well for those of us not blessed with perfect cheekbones or an Exeter-Yale-HBS pedigree. What made Lasch interesting then as today was his opposition to much of what would be classified as "socially liberal" positions. He believed in families and communities as the pillars of society, and saw social libertarianism as being equally corrosive to those things as economic libertarianism.
But The Bell Curve was something else entirely. Herrnstein and Murray were academics like Lasch, and they sought to demonstrate through exhaustive statistical analysis that society was becoming economically stratified along cognitive lines, which is a fancy way of saying that the smart kids were taking over. The problem, as the hard-libertarians Herrnstein and Murray see it, is that cognitive ability is no more fairly distributed through society than Gisele Bundchen's metabolism. Over time, the smart people are going to keep marrying other smart people and having smart kids who go to Harvard and grow up to meet other smart people and run the world.
Staffing, Productivity, and the Talent Tax
I believe we are already seeing the effects of this in business today. As businesses become more efficient in the use of information technology, individual workers become more productive, in the same way that a construction crew can do more work with one person and a backhoe than with six men with shovels. But the rising tide will not lift all boats equally.
Today, most companies pay most of their software engineers about the same amount of money because no one, the software engineers included, really knows how much value they create. As a result a few very good people are very badly underpaid in comparison to their real value. A small number of them realize this and start their own businesses so that they too can get in on the game of underpaying other people. But far more stick around, and in effect pay a "talent tax," much of which is redistributed to all the average and mediocre engineers in the department.
This is, in engineering terms, a system optimized for stability and manageability. The software engineers as a whole may occasionally complain that the salespeople are overpaid, but you will not have to deal with engineer Jim asking why engineer Jane makes four times as much. The problem is that none of this happens in a vacuum, and at some point a competitor may catch on and hire Jane away. Over time your choice will be to pay market rates for Janes or be stuck with a team full of Jims*. At the extreme, this may lead to what economists call "equilibrium without clearing," which translates as "you're selling but I'm not buying." Companies may be willing to pay $250k for a bona-fide star, but not $80k for three average performers. This is already seen in the sports and entertainment worlds (where talent is the product), and "workers" are either out-of-sight rich or waiting tables to pay the rent.
Is Education the Answer?
Lasch believed that a more democratic educational system could restore equality between the elites and the general public. Herrnstein and Murray worried that education would only ensure that the all of the innately gifted would get an equal chance to succeed, whether born in Greenwich or Detroit; the average would still be systematically outclassed. In a corporate sense we see that companies today are working on improving their employee training and development programs, but they are also putting a lot more into selection and assessment. Education takes place ultimately over a period of decades, and even if it is possible to raise someone up one or more levels, it takes a long time. The benefits of more precise hiring and promotion, however, are nearly immediate.
Work without Meaning
Hunter believes that the challenge ahead is for companies to find ways to summon the creative spirits of their employees. But I will bet you that there are plenty of well-paid accountants, software engineers, and sales executives who would gladly trade 50-90% of their pay to be professional athletes, jazz musicians, or painters. But the world simply does not have any use for that many baseball players or poets, even if they are decent at it. What will happen if the same can one day be said about programmers and marketing managers?
* Coincidentally this effect is also seen in the way that slow moving or highly-regulated industries tend to have more rigid seniority systems, old boy's networks, and nepotism than highly-competitive ones.They quite simply can afford to be inefficient.
By Colin Kingsbury, Chief Evangelist / Co-Founder HRMDirect Inc.
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