Loud Thoughts

In a global economy, why would an engineer accept less pay just because she is in India, China, or wherever?

Tom Lehrer, who did not leave an email address for me to reply, commented on my blog recently.

It is such a good question.
Three factors:

• Relative income: the lifestyle one can afford depends largely on the income difference to the rest of the society. Simply put, an engineer earning 10 times the average income in China has a higher purchasing power and social status than the one merely 5x GDP per capita in US. Even if the latter earns 3x more in absolute terms.

• Saving rate: where will one live when retired? How much money does she need? How long would it take to accumulate that amount? These appear simple and straight-forward. But for the mobile professionals, they essentially face the famous 4 corner decision: where to work (high/low income regions) and where to retire (high/low living cost regions) and should choose the corner that offers the fastest rate.

  Without doubt, saving where income is high and retire where the costs are low is the best choice. But which is the 2nd best choice? Most people found the “low/low” corner more attractive.

• Market barriers: many factors prevent a mobile professional to move. The cultural and linguistic skills are the most obvious ones. That software engineer is highly professional, but cannot deal with American society for whatever reasons.

There is always the last reason of market efficiency. The difference in labor costs creates an arbitrage opportunity for those who will exploit it. Companies do this all the time. They will continue to exploit until the arbitrage disappears. Labor market is usually not very efficient and takes years to catch up.

Edit on 6/12:

Change the title of the blog. Thanks for the comment that lead to it.

You need people. You need the confidence that your decisions are based on truth and whole facts. You need good advices. You need them to go the extra mile in desperate time. You need to have your back watched. You need them to mind the store when you are away. You need them to succeed.

Some managers reward loyalty above all. They cultivate loyal followers. These lieutenants, in turn, do the same at their levels. At the end, if they are good, they end up with an organization that is tight and formidable. They can go places, in fact, wherever the boss says.

In an enterprise, this does not work. Management is not that easy, not anymore.

Without affordability, managers frequently found they face the decision of rewarding either loyalty or competency.
High performers than gradually leave and the group is left with 2nd-rated but loyal ones. This still works, for a while. The manager can compensate by focusing them and working them harder. But “driving” your staff is hard work, it also has the side effects of removing delegation.

Since loyalty must be bought and the price pretty high, the manager probably afford to reward everyone equally well. Secrecy becomes necessity. But secrecy divides the group and concentrates power. This makes her group not scalable — incapable for completing larger projects. It also creates single points of failure.

Lastly, loyalty, by definition, suspends one's creativity. This is fatal for software.

Management by relationship is much more satisfying. Relationship, although always 1-on-1, needs no secrecy. It is about role differences, instead of power distribution; respect, not authority; specialization, not command and execution.

You must be genuine and sincere. You must learn how to listen. Pay attention to what is said and think about it. You work on it akin to maintaining friendship.

But work relationship is always different than friendship. Most of the time, you do not choose work relationship. Company interest, work ethics, and policy compliance come first. You will do what you will never to friends. “Close but professional” is the idea.

Did you become a manager for power? It is OK that you did. Just avoid using it as much as you can.

RIF, or more commonly known as layoff, starts when the company learned it has more employees than it needs. Why? Most of the time, the company did not plan well. It is only academic to dig out the reasons and many MBA cases did. For you, focus on future, not past.

RIF is not cheap for the company that incurs severance costs, legal expenses, disruptions to normal operations, demoralization of employees, and, usually, bad publicity. If not done well, the company may lose critical productivity that lead to loss of revenue and another RIF — so called death spiral.

You can bet that some aspects of the RIF operation will not be done well. It is part human nature to avoid unpleasant tasks and part rushed. Try to appreciate the works senior managers must have done and understand that they actually did not have much time and were very constrained on maneuvering rooms.

The top executives of the company first decide to invest less on particular investment areas, to reallocate its resources, or both. This step is time consuming and gut wrenching. Sometime, we, mid-level executives, get a glimpse of board-room lock-horns. Most of the time, we simply observe the absence of senior executives for days, during which we get urgent and cryptic requests of information. When they come out of the smoke-filled room (OK, this is for drama, they are usually many rooms involved and execs these days do not smoke), each gets a number and a set of guidelines.

Each of the top execs then summons her staff, or few selected advisors, to plan for her number. This process cascades downward to roughly functional VP or director level. At this level, the single number has morphed into a set of actions that include the elimination/reduction of programs, number of people to layoff, a set of communiques, and a schedule. This is the time, you, the line managers, get busy.

First, learn the communiques and guidelines. Practicality does not allow thorough communication. Do not wait for the presentation or in-person training. Go to the web site, read the email, and study the guidelines. Ask questions only after you have done the homework.

Expect whoever planning this operation to have been hurried. Ask questions so that you can do your jobs, there is no need to criticize. This is hard for everyone, not just you. When you get the details, see if they will lead to disasters. If so, escalate quickly, but do not be insistent. No whining and no stating the obvious. Statements such as, “Do you realize this will impact morale and productivity?” is stupid and insulting. But, “if you substitute this with that, company can save more money, or avoid a major disaster” will be much appreciated.

It is human to dig dirt and gossip. That does not make these activities productive or less hurtful. Discourage by smiling and nodding politely. Gossips starve on the lack of excitement from the recipients.

Although not obvious, being laid-off is not really a bad thing. There is no need to be saddened. Sun gives a relatively generous severance and benefits to those laid-off. In a relatively healthy economy (like China), the laid-off employees usually find new job before the severance are used up.

In this industry, each individual faces competition from around the world. Someone from somewhere is trying to have your job, and vice versa. The only protection is your adaptability and professional competency. You are on a treadmill to upgrade yourself all the time. If you are not learning new skills so that you can do something totally different in a few years, you are risking being obsolescent. What are you learning now? Why would the employer pays you so much?

Being part of a lay-off operation bring this point close to home. If you are one that is receiving the package, thank the company to give you few months off to upgrade yourself. If you are a survivor, try to learn this lesson.