Jun 05, 2012 | Post by: Vikki Pachera Comments Off on Is ‘Internal Equity’ a Dying Concept?

Is ‘Internal Equity’ a Dying Concept?

All through the ‘90’s it seemed, I’d sit through annual sessions looking at employee comp, comparing Sally to Sue to Bill and making adjustments to their contributions. The adjustments were small, maybe 20% differentiated the top earner from the bottom within a grade. ‘Internal Equity.’ It seemed right and important then. Someone in HR would aggregate our comp info, share it with Radford and come back saying the company paid in the 80 percentile.

‘Internal Equity’ is predicated on the concept that people doing the same job description ( i.e. ‘software developer’) are contributing the same to the bottom line, to the growth of the business, to innovation. Today, nothing could be further from the truth. In fact, in the last few years, it has become obvious in Silicon Valley that there’s increasingly a much bigger compensation delta between the talent that really moves the business and those that maintain it.

Market Value is what someone is worth to a company in need of that skill, experience and track record. Often, that market value incorporates rich equity positions that this person is leaving behind.

If you need game changers in your business, you may need to completely rethink your compensation models, titling and performance assessments. ‘Playing to win’ today often requires being unencumbered by your current bench.


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