What is a manager worth?
February 9, 2009 by Phil Gerbyshak
Filed under Business
President Obama proposes we limit executive pay to $500,000 for institutions that got bailout money. See the full story here. It got me thinking about what all managers are worth, pay wise, and I think I came up with an interesting way to look at it:
If each step you go up the ladder is twice as much responsibility, how about capping each step at double what the highest paid associate at the level below makes.
- Front line employee makes $40,000 per year
- Front line manager makes $80,000 per year
- Second line manager makes $160,000 per year
- Third line manager makes $320,000 per year
- CEO makes $640,000 per year
Pretty simple, and yet potentially very fair. And if you include some performance bonuses, you might hit upon something almost everyone could agree on.
What is a manager worth to you?
Money roll 3 courtesy of zzzack
Pay for non-manager expert roles is underrated. It is a pity that so many organizations still do not have a non-managerial career path.
Promoting your best technical expert to a management position as a reward for past performance may leave a lot of people very unhappy.
@Rob – Promoting technical experts to management is not always the best move to make. There are some very bright technical people who do not have the desire, education, or proper experience or background to move forward as a management role.
Too often, a technical expert would want to take over and handle the project/problem him/herself. They have a hard time of letting it go to their staff.
Other times companies promote from within regardless of qualifications or desires. This sometimes hinders those who DO desire to move up in their roles, take the nessessary classes, etc.
@CK: I did not make my comment explicit enough: What do you pay the manager of (a group of) such experts? Up to double the highest pay? I have seen very few organisations that “accept” that an expert can earn a better salary than his manager; I personally feel that this should be possible. And it “breaks” Phil’s schema.
Wouldn’t this just incent managers to overpay their staff so that they can make more? For every $1 I give my highest paid employee, I get $2….
The other problem with this is the number of layers at, say, a major bank. There’s the CEO, Sr. VPs, VPs, divisional managers, regional managers, branch managers, staff…if not more layers.
Assuming an org chart like that and the double-the-layer-below-you pay structure, if the staff get $40k, the CEO gets $2.5 million.
Also, it’s funny, but when Ben & Jerry’s went away from being the little, tight-knit company it started as, one of the first things to go was the rule that the highest-paid employee couldn’t make more than seven times what the lowest-paid one did.