Saturday, December 06, 2008

Why your boss is overpaid

Saturday, December 6th, 2008
Chapter 4 of Tim Harford’s “The Logic of Life” (Random House, 2008) is a revelation. Evaluation of performance in establishing pay and bonus rewards for employees is known to be difficult, so many employers resort to a “tournament model” - using vaguely defined “best performance”. The lack of specificity of goals (and scoring) permits a boss to promise a “prize” for “the best __”, leaving the evaluation to a back-room discussion among the deciders, yet leaving employees to hope that their performance will be picked as the winner.
From page 95: “So bosses will rationally search for more-informal ways of rewarding their best staff. Rather than writing down a specific objective measure of performance, they give themselves discretion to reward “good work” without being too precise about what “good work” is.” <...> (and) <...> :…but for one important problem: Managers are lying weasels.
Sound familiar ? The quote at the beginning of the Chapter is also from Dilbert.
Dilbert: “My problem is that other people keep trying to drag me down, Bob. My theory is that people denigrate me because it makes them feel superior in comparison.” Bob: “Sounds like a stupid theory to me.”