When employees are happy, you’re paying them too much
A friend of mine recently went to work for a 50-year-old 200-employee company that has bumbled along with modest success as a niche supplier in its (very large) market. She talked about how happy the employees were and how so many had worked there for decades. I said “That means they are overpaid.” She questioned me on this point. I cited a study of married people that found that each thought he or she was doing more than 50% of the chores. The explanation was that a husband is guaranteed to be watching when he himself is doing a chore, but doesn’t see all of the things that the wife is doing (and vice versa). The same phenomenon applies at work. An employee knows all of the things that he or she does personally. The employee isn’t aware of what the others in the company are doing. Consequently, the employee develops a major overestimate of his or her relative productivity and the percentage of overall work done. (Programmers, starting off with massive egos and having little contact with other human beings, are perhaps the worst overestimators of all, especially the 80% of programmers whose contributions are purely negative.)
An employee will overestimate his value to the company by at least a factor of 2. If he is not griping about his salary, it means you’re paying him at least twice as much as he is worth.
[Shortly after this conversation, the investor who had recently purchased the enterprise decided to fire the long-serving Chief Operating Officer.]
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