You are spot-on with your point on pay for value. If you want proof of this, look no further than the leaked Sony emails doing a search for "salary" or "compensation." Reviews, metrics, etc. are used only as justification to pay people enough not to leave, even at the highest levels of the organization. The whole process is fake. The number is usually based on salary history, compensation stats from competitors, employee complaints, or having a better offer in-hand. This creates somewhat toxic environments where the least loyal employees who whine loudest, puff up their importance, job hop, and interview strategically get the best outcomes.
The closest I've seen to pay for value is in finance or sales roles, and even that is hazy. Employees in those roles have a few things going for them:
1. Measurable output. A trader or salesman can point to his numbers for the year and know what he's worth to the business. The business can see them and know what's at stake if they deflect.
2. Fewer economies of scale, meaning the individual employee provides relatively more value than the firm does. The typical Google engineer can't re-create Search from scratch, but a hedge fund trader can walk out the door with a great idea to work for a competitor. That's great leverage.
3. Competitive external employment environment. If your salesmen are woefully underpaid, a rival employer will snatch them up since they can pay them more than you while still retaining a solid margin. A lot of these jobs are in "winner take all" economies, so employers will squeeze their margins extremely tight to win talent.
4. Competitive internal culture. Don't ask, don't get. If you are managing millions of dollars or trying to close deals, you're probably the type of person to confidently ask for a raise or bonus.
The closest I've seen to pay for value is in finance or sales roles, and even that is hazy. Employees in those roles have a few things going for them:
1. Measurable output. A trader or salesman can point to his numbers for the year and know what he's worth to the business. The business can see them and know what's at stake if they deflect.
2. Fewer economies of scale, meaning the individual employee provides relatively more value than the firm does. The typical Google engineer can't re-create Search from scratch, but a hedge fund trader can walk out the door with a great idea to work for a competitor. That's great leverage.
3. Competitive external employment environment. If your salesmen are woefully underpaid, a rival employer will snatch them up since they can pay them more than you while still retaining a solid margin. A lot of these jobs are in "winner take all" economies, so employers will squeeze their margins extremely tight to win talent.
4. Competitive internal culture. Don't ask, don't get. If you are managing millions of dollars or trying to close deals, you're probably the type of person to confidently ask for a raise or bonus.