Compensating humans in the age of AI
Summary
If AI commoditises outputs, then skilful, tasteful people will matter more than ever. Salary is the fundamental way corporations value such people. In addition to standard HR indicators, we need human ways to determine fair compensation.
If you asked me whether I’m a tech nerd or a people geek, I’d put myself in the latter category. Of course, all things aren’t that cut and dry, but there’s a back story to this. Growing up, I had learning difficulties. “Nothing a good whacking wouldn’t fix,” thought my parents at the time. It was an era when the prevailing wisdom was: "Spare the rod and spoil the child." So, my parents whacked me and fixed me. They meant well. I hold no grudges against them. But, it’s only many decades later in life that I realised that I fall on the autism spectrum. Somehow, I had an explanation for my awkward behaviours, learning challenges, borderline obsessiveness and social inadequacies. As someone who copes well with day‑to‑day work and life, this diagnosis helped me analyse my behaviour and personal history better.
My neurodivergence has been a gift in many ways. Unlike naturally social people, I’ve had to teach myself to interact with people. I’ve consciously learned to pick up cues that other people overlook, because it’s natural to them. Indeed, this is why I’ve become more of a people-centric technologist. That’s why this site focuses so much on the people aspects of technology. To me, people matter most, as Martin Fowler famously wrote. That said, I’ve always shied away from technical aspects of people management, such as compensation. Until today.
Pay is fundamental
Compensation, or pay, is the fundamental attribute of most employment contracts. Salary pays the mortgage, the kids’ tuition, and, you know, the mundane things in life, like groceries. In countries like mine, it also pays for pensions and healthcare. Someone once told me, “You can never get compensation right, but you sure can get it wrong.” The moment someone feels underpaid, it impacts their perception of how much their employer values them. How can you be a purposeful contributor to a team when you feel undervalued in relation to your peers? Motivation and trust are the next casualties.
All this isn’t to say that you can’t have underpaid, yet high-performing employees. It’s pretty likely, though, that these are “high-floor” people – i.e. their mediocre performance is better than many average performances. The risk of undercompensating your best people is that you never get to discover their ceiling – i.e. their best.
The tyranny of processes and indicators
As companies morph into megacorps, you naturally turn every activity into a process. There are protocols, policies, metrics, indicators, and then some. I’m a process wonk, so I won’t rail against the efficiency they bring. In my specific case of neurodivergence, I feel secure when I see repeatable and reliable processes. But in some cases, efficiency can be a trap – compensation is one such area.
There are many ways to argue that an employee’s salary is fair. For example, large corporations look at indicators like compa ratios to peg high performers above the median salary for their rank and low performers or new entrants at or below the midpoint. Like on software projects, these indicators are a good sniff test. But just like high test coverage isn’t always a measure of high-quality, resilient software (you can have a high number of poorly designed tests), being green on an HR indicator isn’t always a measure of fairness. If the employee doesn’t believe that their employer is being fair or valuing them enough, throwing the book at them won’t help. The perception of fairness comes from respecting context.
Context matters more than numbers
Every individual has unique circumstances that describe their context. What if they’ve been underpaid or undergraded in the past? Compounding losses add up, and even if a pay hike brings them on par with peers, it may not right past wrongs. What if the individual has a unique set of skills? There may be no easy way to define their peer group. In this situation, all benchmarking exercises fail because you don’t have a frame of reference. There could be many such scenarios that the average sniff test doesn’t account for.
We all know that replacing a high-performing employee typically costs between 1.5x and 2x their annual salary. In specialised or executive roles, this cost can climb to 3x or 4x their salary. There’s a misconception that AI will lower these costs. I’m sorry, it won’t. AI commoditises outputs. People are more than the sum of their outputs. When every human can press a button for commoditised outputs, it's the teams of skilful, tasteful humans that will win on most days. Neurodivergence taught me that. The bigger the corporation, the more the costs of rehiring and poor motivation add up. I suspect the cost of fair pay is lower.
But how does a company arrive at fair pay? I don’t know, maybe ask the employee? Is it really that hard? Sure, there could be a few “greedy” people who may ask for more than they deserve, but the cardinal flaw in people management is to design your systems for the exceptions instead of the norm. Hire well and trust the people you’ve hired. Most people will express only their need and not their greed. Use indicators to guide decisions, not to make them. Use them to guard yourself against making atrocious decisions, but don’t hide behind these numbers. In fact, share them transparently with your people and ask them what they think. Most people will self-assess honestly.
Don’t make them FIGJAM
Yet, most employers drive their employees to the point of having to blow their own trumpets. Yes, some people are comfortable FIGJAM-ing – i.e., saying, “F*** I’m good. Just ask me.” Most people won’t FIGJAM. By default, people are self-effacing and would much rather go about their business and hope the company’s taking care of them. People don’t talk about salary until it’s too expensive to be silent. Should conscientious employers really drive their people to this point?
I’m no HR expert. I already admitted to being a neurodivergent dork. I don’t know who’ll read this article, but if you represent an employer, I have a few suggestions to make salary a less thorny topic than it tends to be.
Take away the information asymmetry between the employer and the employee. Publish (and update) pay ranges for each level in your organisation. Hide nothing, not even the exceptions.
Let people figure out where they sit amidst the pay ranges and determine if they’re overpaid, underpaid, or paid just right.
Reduce the distance to power by empowering line managers to discuss pay with their direct reports. That way, if people have an issue with their compensation, they know their first port of call.
The best managers challenge their people to perform and care about their well-being. So, encourage managers to be more than just performance reviewers, and to advocate for pay hikes for their people.
Finally, use indicators like compa-ratios, only as indicators. You can’t boil people’s sense of value down to an impersonal number. Respect their context. Acknowledge disparity when you see it, even if you can’t fix it. You needn’t be a tech nerd or a people geek to be honest. You only need to be human. For salaried humans, pay is a fundamental measure of value. Humans matter most even in the age of AI. Need I say more?