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0 pointscstejerean9y ago0 comments

$10M in sales with what profit margin? 20%? In that case the $1.5M in extra sales is $300k in profit. Also a developer with $100k in salary costs about $125k when you consider payroll taxes, insurance, 401k matching, etc. If you factor in the cost of office space, equipment and support staff the total cost per employee could easily be $200k. Most developers also don't increase revenue by $1M per year on a regular basis. So when you look at the whole picture you realize that most developers aren't as underpaid as you think. And the ones that can consistently generate $1M+ in profit by themselves definitely do get paid much more than your typical developer.

If you think most executives have no idea what is going on and add zero value then I am guessing you haven't spent much time around executives. The whole reason your typical developer got their job and is able to keep it in the first place is because executives figured out how to run the business well enough to grow and continue to hire developers and then allocate them to projects where they can increase revenue. If you think it's easy I recommend you give it a try sometimes.

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tezza9y ago

You make some excellent points and I completely agree with the thrust of your argument that people should not be so quick to judge.

However, from my empirical observation of many executives, there are two broad groups.

The ones you described, those that are worth their salt and have carved out their position through helping the business.

Then there is a large group of executives who exist mainly because similar companies have similar structures and they have expectations of roles for say CFO , COO. Then there are roles required by the industry or market: Head of Compliance, Head of Risk, Head of Auditing.

Those executives have not earned their place, they are appointments by pattern matching corporate structures

rad889y ago

According to this logic, our developer has actually earned his wages in perpetuity from this single year of work (or at least so long as that 15% value added lasts). But that's clearly not how it works either.

The issue in this example is ownership. Executives add value and they are granted large ownership stakes in the business. Workers are not. You use the example of the executive who figures out how to grow the business to prove that he is entitled to appropriate some of the other employees' added value -- since otherwise that value wouldn't exist in the first place. But our developer can't take his yearly salary out of the 15% increased revenue he enabled back in 2012, on top of compensation for whatever value he creates this year.

In any event, the example is very contrived. $10M in sales is as arbitrary as 20% profit margins. Margins could be any amount less or a great deal more. Revenues could be sky high or non-existent. You might expect to find a developer making $100k regardless.

Retric9y ago

The vast majority of executives I have worked closely with don't add significant value. They are paid well in large part because there are not enough of them to matter. The CEO of micdonalds getting a 200% raise is cheaper than a 1% raise to their minimum wage workers.

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