Subjective does not mean arbitrary

jwatte's picture

In the discussion of compensation, and using subjective judgments by the compensator to the compensee (employee,) one frequent question is "how can subjective evaluation be fair?"

"Subjective" does not mean "arbitrary"

There are employees who most subjective evaluators would put on the same end of the value spectrum. Clearly, those are worth more (or less, as it may be.)

In the middle, there are more gray areas, but one way of thinking is: If I need X people to do Y things for me, and I think Alice does Y slightly better than Bob for me, then I'd compensate Alice higher. That's subjective, but rational. I compensate what I value. If I, as the compensation-setter, am rational, I will value things that are actually valuable to the business, and my business will thrive. If I, as the compensation-setter, am emotional or bigoted or whatever, I will make less optimal compensation decisions, and my business will thrive less. (On average, in the large, assuming all else is equal)

So, subjective compensation CAN totally be fair, for a value of "fair" that's useful to both employee (showing what is valued) and business (compensating the delivery of that value.)

The other thing I like about this way of thinking is that, all else being equal, over time, the more rational subjective compensation setters (less bigoted/racist/misogynist/nepotistic/whatever) will end up building better businesses and thus there's evolutionary pressure to crowd out the irrational ones.