Why Engineers Are Poorly Paid Professionals — Part II
Quantifying and Identifying Talent
Quick question — if you own a business or manage a group of engineers, how much is your best engineer worth? How much more are they worth than the worst engineer in your group?
I can already answer that you have no idea to how much they are actually worth. I can also say that unless you work at a company like Google full of remarkable people, you would intuitively say that your best engineer is probably worth 3 to 4 times what your worst engineer is worth (possibly more). However, I guarantee that if your best and worst engineers have similar years of experience, the best is probably only paid 30-50% more than your worst. You are not paying that engineer what he is worth to you or your company.
Why? It goes back to that first question of quantification. Think of other areas of your company. If you have a good sales person, they will hit their targets and increase sales over the prior year. A sales person, especially a high level sales manager, may have a huge bonus waiting for them if they hit their targets. A lawyer has to bill so many hours each year (about 2000), and if they exceed that they get a large bonus. Law partners make even more because they get paid partly based on how much business they bring in. Their work is directly measurable with objective rewards. Engineers can only indirectly affect the top line, and therefore their raises or bonuses become subjective rather than objective.
Why does subjective matter? Because it is hard for the engineer to argue against it. HR typically looks at the “industry average” and try to judge your worth by placing you in a specific bucket measured by your title / pay grade, performance review, and where your salary falls within your pay grade. This results in a pay raise between 1-5%, with typically no bonuses. Other professions like law, consulting, accounting, or finance tend to have raises closer to 10% with the opportunity for substantial bonuses based on your direct value to the company.
A common joke when working in corporate America is that the best way to make a lot of money is to job hop. This is because that salary increases within a company may be small, but if you move to a new company you can generally ask for a 10-20% pay bump.
However, within engineering it is not as easy to job hop. First of all, engineering skills tend to be very specialized within the industry and technology your company is in. When I was a manager I would usually estimate that if you got an engineer from a similar industry and technology, it would take 6 months for them to really start contributing. If you got an engineer from a really different field, it could be closer to a year. This includes learning the companies core technology, processes, etc (how to get stuff done). Of course these people would have real projects on day 1, but it took the 6-12 month time frame to become more independent and substantially contribute.
It is also very difficult to identify talent. Part of this reason has to do with signaling. Most professions you can signal your status by where you went to school and where you worked. For example, within the law profession their are prestigious law firms and prestigious law schools. What this means is that if you are an intelligent and motivated person, just by going to a good school or getting a job at a good firm you are considered to be good. They do not necessarily care if you have the perfect background, but judge you more on if you can do the work.
Engineering tends to be the opposite. Hiring managers and human resources tend to look first at skills, secondly at the person. The affect this has is that if you are a smart and motivated person, your first or second engineering job reflects the type of work you will be “stuck” in. You could have attended a top 20 engineering school, received straight A’s, stellar performance reviews, and be a whiz in technology, but if your background is in cell phone transmitters and the company is looking for a wireless router antenna expert, your resume probably does not make it past the first line of review.
Again, this is stupid! Remember, it takes a person about 6 months to learn the companies processes, technology, etc for them to contribute. If you hired a rock star, they could probably come up to speed faster and eventually contribute much more than another less motivated person that has the “better” background. This further creates an incentive for the best and brightest to leave engineering as fast as possible.
So if there is anything to take away from this article are two items:
- Companies need to figure out a way to quantify your best engineers. Then compensate them according to their worth.
- Hiring managers for engineering need to focus more on the person, not the skills. Skills can be learned, but motivation and intelligence cannot.
If we can get to the point where we can better quantify and hire engineers, it will help narrow the salary problem within engineering.
