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Zoom Calls Are Cheaper in Kansas
In my previous writeup, I discussed compensation. I suggested that the metric that we use to set it should be based on value, not cost. Now, for the astute reader, or those that know me personally, the question that you should ask is “Michael, what got you onto this train of thought?” Great question! Let’s dive in.
Over the last few months, my LinkedIn inbox has been filled with recruiter emails. My policy is that I a) almost always respond to every recruiter, except the very spammy ones, and b) take a look at the job description to get a sense of what the market is looking for. The one overarching theme I’ve observed is region based pay structures. But in a knowledge based economy, does that still make sense?
As the post-covid restrictions began to lift, Google had to contend with the reality that some of its staff had moved away from their home office locations. The big question was: Do you compel them to return or do you enable them to work remotely? Remote staff seem to be performing quite well, without ever needing to set foot in the building. Additionally, what do you then compensate them for, since up to that point, if you worked in Pittsburgh your pay was different from someone in Seattle in the same role and at the same performance level. Should that policy stay or should it evolve?
As opposed to figuring out what a new compensation model should look like, Google reverted to its pre-covid policy of region based compensation scales. What this meant was that if one moved from New York to Tulsa and liked Tulsa, they’d now be paid 10-25% less for doing the same work, merely because they were sitting in Tulsa and not in New York. As you can imagine, this received a fair amount of internal pushback. No matter, the change was implemented and many individuals begrudgingly were forced to move back to their home locations, because no one wants to take a pay cut on Monday for the exact same work they were doing on Friday.
Due to how the policy was implemented, anyone could choose to mark themselves as being permanently remote, even if they were remote from a city within which a high compensation Google office existed. If you were to argue that there is inherent value in being in-office, and therefore compensation should be adjusted for that, you’d have legs to stand on in paying more for individuals physically being in the office. Whether that is sound as a policy is for another writeup, here I’d like to focus on the reality at hand. In this case, both employees, the Tulsa and New York based one could be remote, both are doing the same work, both are on the same Google Meet (or Zoom or Teams) calls and yet one is being paid 25% less than the other.
The result? Two employees who participate in equal ways, contribute in equal measure, have equal performance ratings, but one is being paid materially less merely based on where they take their meeting from.
To draw a parallel, this is no different than the gender pay gap whereby a female employee sitting next to her male counterpart in a meeting is being routinely paid less merely because she is female. That’s a moral and ethical problem that at this point we all agree should not exist. Yet, here it is, right in front of us again, paying two people differently not based on their role, contribution, or impact to the organization, but based on where they sit.
If we were dealing with a service based economy, where the locality of the employee mattered, the difference might be understandable. A teacher in New York, providing services to New York students will likely be paid differently than a teacher living in Tulsa, providing services within their community in Tulsa. While we should definitely be having an honest conversation about the value of teachers and equalizing pay nationally, that is a different can of worms. I will leave that topic to my wife who is an educator and much more qualified to speak on the subject than I. In a knowledge based economy, where your contributions are not bound by your physical location, paying differently based on where you wake up in the morning is wrong and misguided.
We don’t know why someone found themselves in Tulsa, it could be family, it could be spousal career, health, or so many other reasons. Frankly, it isn’t our business. For industries to actively penalize individuals because of where they choose to take their meetings from needs to stop, just like paying someone differently based on their gender. If you think I’m making this up, here is a job posting (I will leave the company nameless but I’m sure some Googling will surface the organization)
There is a whopping 20% difference between Zone A and Zone C. What that means is that someone who is more junior in Zone A could be earning MORE than their potential manager in Zone C. Imagine yourself as a tenured manager living in Zone C providing great value to your organization and delivering exceptional impact being paid LESS than your report who has less experience, less tenure, and by all measures less Value to the organization than yourself. If that wouldn’t demoralize you and make you feel not valued and taken advantage of, I’m not entirely sure you have a good grasp of human psychology nor a good moral compass.
Thankfully this isn’t the case everywhere, some organizations do have their ducks in a row, as an example of this post from Modular:
“The estimated base salary range for this role to be performed in the US, regardless of the state, is $207,000.00 - $286,000.00 USD.” (emphasis mine).
That is just one example of something that Modular is doing right, besides the absurdly awesome tech behind Mojo, but that too is for a different writeup.
We need to pay people based on their value, what they bring to the table, and what impact they deliver to the organization. Paying based on someone’s seat location is opportunistic cost minimization at the expense of people’s life circumstances. It's wrong, it's misguided, it's immoral, and it needs to change.