(The following Post is basis few observations and a theory on Salary trends that i had made 5 years back when I had the opportunity of working with Accenture. Consequently, i find the theory to hold, at least empirically. A word of caution out here, this theory would be more applicable to technical people/blue collared workers. I will not extend this to non-technical professionals.)
Other related theories: The Blank Cheque Theory, The Critical Mass theory ( both would be discussed in forthcoming blogs)
Moore’s Law states that the number of semiconductors in a chip would double every 18 months. An interesting analogy is found in our Professional Lives as well. I will call it the "Experience Salary Continuum" which deals with what quantum of Salary you should benchmark against in your career progression. It is purely an empirical formula and one could use it as one out of several other benchmarking techniques. While I have found this theory to hold its turf in many occasions, estimation error gives gravely erroneous results. ( Refer to determining the “x” in the second last paragraph)
Put very simply, depending upon your education, your abilities and skill set, your salary should double every x years. The critical function is “x” years! The trick is to benchmark the “x”. Lets assume that you working at Rs.4 lakh per annum in the year 2000. Presently your salary is Rs.17 Lakh per annum. Is that Good or is that bad? The Experience salary continuum helps. Of the two professions that I know and have seen somewhat, the “x” has the following values:
Administrators/Managers: 2.5 years
Technical People/Engineers: 3-3.5 years (5 years back, when I formulated this theory , it was 3.5. Expecting it to be within the 3-3.5 years value)
Going back to our initial discussion, in 2000, when you joined your salary was Rs.4 lakh. I would run the calculations on both scenarios for now
Administrators/Managers: 8 years means 3 jumps (one jump every 2.5 years). The multiple would thus be 2*2*2=8. Thus your salary ought to be 4*8 = 32 Lakhs per annum. If you are at 17 Lpa, there is a scope for some improvement.
Technical People/Engineers: 8 years means 2+ jumps (the jumps are 3. – 3.5 years here). It is not three, though you are tending towards it. So let us assume the multiple to be between 2*2=4 and 2*2*2=8. A conservative number is 6 and an aggressive one is 7. Allowing for both multiples, on a 4 Lpa starting, the numbers would be 4*6=24 Lpa and 4*7=28 Lpa at current rates. Both scenario’s mean that you could bargain for more.
Unfortunately in our example, for the scenarios, manager as well as engineer, both are underpaid. However, if the starting salary was 3 lpa, then the Manager would measure 3*8= 24 lakhs. He would still b e underpaid. Our engineer, would be around 3*6=18 Lpa and thus he would just make the cut. (Just enough!)
That is the technique, which you can use as bechmarking purposes. More importantly, if the “x” is relatively precise and well based, you can also get to know your worth!
An example of how it helps: With a starting salary of 5 Lpa 5 years ago, I should be 20 Lpa now. I am at 14 Lpa, thereby underperforming by 30% but there are other factors that are holding me to this job. However, if I look for a job change next, I will pitch at 6.5 years benchmark salary. This means that for my next job change, I will try bargaining for 5*6= 30 Lpa. (The 6 is a value between the multiplicative factors, 4 and 8).
The Illustration given above shows the continuum compounding in 2.5 years (The Blue Line) and the red line is the actual salary hike over the 5 years. If one were to change his job at this time, the ideal benchmark is the blue line. We would cover that in a little more detail in the Blank Cheque theory (in one of the subsequent blogs).
What is the basis of the Experience Salary Continuum?
Experience is the one word answer. Demand and Supply is a two word answer. As you grow older with experience, the supply of people with experience decreases and the demand increases. Thus, the geometric progression in salaries.
Does this theory hold true in every situation?
No it doesnot.
As stated earlier this theory is more test proven with people who have technical education (Engineers and managers) . Rem. It may still hold true though for other professions! I am yet to affirm the extension of the theory to other professions.It may not hold true for speciality jobs, like those “Discovery TV’s extreme structures” project managers and engineers. They get paid well and they would falsify this theory.
There may be other multitude of reasons including job shifts and country jumping, which this theory doesnot take into account presently.
Determining the “x” is another critical aspect. This is a pure benchmarking exercise. You would have to use your networking skills on this one. You need to understand how your senior with the same profile, your colleague with the same profile, your boss, your subordinate, even the CEO have progressed through their careers. It may not mean knowing their start date, start salary and today’s salary (though that helps!). A 5-6 year snapshot of their career may be all you need to derive the doubling factor “x”.
I have found this technique extremely handy at benchmarking. My first job change saw me negotiate salary with the context set from this technique. More importantly, I have seen colleagues who earn more than the scale defined by this technique are happier at their jobs. The ones who earn less than the scale defined, are generally grumpy and keep comparing it with the ones mentioned earlier.
Then there are others… who are at the job for the love of it…..
Key words: Experience Salary Continuum
Other related theories: The Blank Cheque Theory, The Critical Mass theory ( both would be discussed in forthcoming blogs)
Moore’s Law states that the number of semiconductors in a chip would double every 18 months. An interesting analogy is found in our Professional Lives as well. I will call it the "Experience Salary Continuum" which deals with what quantum of Salary you should benchmark against in your career progression. It is purely an empirical formula and one could use it as one out of several other benchmarking techniques. While I have found this theory to hold its turf in many occasions, estimation error gives gravely erroneous results. ( Refer to determining the “x” in the second last paragraph)
Put very simply, depending upon your education, your abilities and skill set, your salary should double every x years. The critical function is “x” years! The trick is to benchmark the “x”. Lets assume that you working at Rs.4 lakh per annum in the year 2000. Presently your salary is Rs.17 Lakh per annum. Is that Good or is that bad? The Experience salary continuum helps. Of the two professions that I know and have seen somewhat, the “x” has the following values:
Administrators/Managers: 2.5 years
Technical People/Engineers: 3-3.5 years (5 years back, when I formulated this theory , it was 3.5. Expecting it to be within the 3-3.5 years value)
Going back to our initial discussion, in 2000, when you joined your salary was Rs.4 lakh. I would run the calculations on both scenarios for now
Administrators/Managers: 8 years means 3 jumps (one jump every 2.5 years). The multiple would thus be 2*2*2=8. Thus your salary ought to be 4*8 = 32 Lakhs per annum. If you are at 17 Lpa, there is a scope for some improvement.
Technical People/Engineers: 8 years means 2+ jumps (the jumps are 3. – 3.5 years here). It is not three, though you are tending towards it. So let us assume the multiple to be between 2*2=4 and 2*2*2=8. A conservative number is 6 and an aggressive one is 7. Allowing for both multiples, on a 4 Lpa starting, the numbers would be 4*6=24 Lpa and 4*7=28 Lpa at current rates. Both scenario’s mean that you could bargain for more.
Unfortunately in our example, for the scenarios, manager as well as engineer, both are underpaid. However, if the starting salary was 3 lpa, then the Manager would measure 3*8= 24 lakhs. He would still b e underpaid. Our engineer, would be around 3*6=18 Lpa and thus he would just make the cut. (Just enough!)
That is the technique, which you can use as bechmarking purposes. More importantly, if the “x” is relatively precise and well based, you can also get to know your worth!
An example of how it helps: With a starting salary of 5 Lpa 5 years ago, I should be 20 Lpa now. I am at 14 Lpa, thereby underperforming by 30% but there are other factors that are holding me to this job. However, if I look for a job change next, I will pitch at 6.5 years benchmark salary. This means that for my next job change, I will try bargaining for 5*6= 30 Lpa. (The 6 is a value between the multiplicative factors, 4 and 8).
The Illustration given above shows the continuum compounding in 2.5 years (The Blue Line) and the red line is the actual salary hike over the 5 years. If one were to change his job at this time, the ideal benchmark is the blue line. We would cover that in a little more detail in the Blank Cheque theory (in one of the subsequent blogs).
What is the basis of the Experience Salary Continuum?
Experience is the one word answer. Demand and Supply is a two word answer. As you grow older with experience, the supply of people with experience decreases and the demand increases. Thus, the geometric progression in salaries.
Does this theory hold true in every situation?
No it doesnot.
As stated earlier this theory is more test proven with people who have technical education (Engineers and managers) . Rem. It may still hold true though for other professions! I am yet to affirm the extension of the theory to other professions.It may not hold true for speciality jobs, like those “Discovery TV’s extreme structures” project managers and engineers. They get paid well and they would falsify this theory.
There may be other multitude of reasons including job shifts and country jumping, which this theory doesnot take into account presently.
Determining the “x” is another critical aspect. This is a pure benchmarking exercise. You would have to use your networking skills on this one. You need to understand how your senior with the same profile, your colleague with the same profile, your boss, your subordinate, even the CEO have progressed through their careers. It may not mean knowing their start date, start salary and today’s salary (though that helps!). A 5-6 year snapshot of their career may be all you need to derive the doubling factor “x”.
I have found this technique extremely handy at benchmarking. My first job change saw me negotiate salary with the context set from this technique. More importantly, I have seen colleagues who earn more than the scale defined by this technique are happier at their jobs. The ones who earn less than the scale defined, are generally grumpy and keep comparing it with the ones mentioned earlier.
Then there are others… who are at the job for the love of it…..
Key words: Experience Salary Continuum
