Saturday, May 25, 2013

My Thoughts on Paying Big Bucks to Attract Managerial Talent to Government

Urban expert Aaron Renn, publisher of the Urbanophile blog, and I are having an interesting email exchange about paying better salaries to upper level management in government.  Renn, for whom I have a great deal of respect,  argues to attract top level executive talent to government, we need to pay higher salaries.  I won't publish his email as I never publish emails without consent.  But I will publish my email (with a few minor revisions) as it represents the philosophical difference I have with him regarding executive pay:
Aaron,

Your comments reflect a fundamental disagreement I have with many people who argue for high CEO, government and nonprofit managerial salaries.  Namely that you measure what we should pay these managers by what others are paying.

I don’t buy that. To me the question is not what others are paying for a position, but what salary is required to attract someone to a job who is capable of doing the job well.  The fact is we’re not talking baseball shortstops where there are only a few people on the planet who can play as well as Derek Jeter.  That’s why Jeter is paid, rightfully, a lot of money.  But if there were a ton of shortstops that play as well as Jeter, for much less, do you pay Jeter a lot of money anyway?   No.

We’re talking about managerial jobs that literally thousands of people can do and do every bit as well as the small pool of top level managers who continually get recycled.  Look at the CEOs who consistently lose money for their company.  I venture to guess that plenty of people who can lose money every bit as well as the those CEOs

There are tons of people out there who could have done a better job than [former Public Safety Director] Frank Straub, as evident from his performance.  Even with [IndyGo Manager Gilbert] Holmes, I don’t see the special talent that he brings to the position that makes him somehow different from hundreds if not thousands of people who could fill that position.   Again, these are not baseball shortstops where there is only a handful of people who can hit .300, with power, while playing excellent defense.

The people who occupy these managerial type positions like to think they bring special, unique talents to the mix.  But they don’t.  They like to think that because it justifies their high salaries.  But those salaries that they are paid is based on what others are paying, not what one has to pay to attract that level of talent in a free market.  It’s just not a free market when it comes to executive talent.  Look who sits on corporation boards approving CEO salaries...other CEOs and people making high executive salaries.  They're not going to bite the hand that feeds them.

If I was Mayor, I would take the Moneyball approach to getting people…reaching out to people who are outside the normal circle of recycled managerial talent.  I venture to say that I could put together a team every bit as good as those Mayors paying high salaries to the same recycled managers.
Added Note:  That does not mean I would put 20 something year old kids in charge of managerial positions with no oversight as was going on in the Indianapolis Department of Metropolitan Development.

13 comments:

Had Enough Indy? said...

That's funny - I just had an email exchange with someone other than you or Renn, wherein I noted that the number of idiots in high places within government are greater than chance would dictate.

Higher salaries might be justified for actual expertise - but these folks usually they are political appointments of no further significance. They learn on the job and get appointed to yet another job because of their political connections, still not expertise.

Had Enough Indy? said...

sorry - should read "usually are political"

Pete Boggs said...

It's a meritless, misguided notion; whereby you get people who arrogantly, laughably & simultaneously, wave all knowing resume's while waving knowledge of things gone wrong under their mismanagement (pick your favorite current scandal).

They quickly morph from claims of Einstein to Sargent Schultz.

Paul K. Ogden said...

It amazes me that people at the top level of government, the Frank Straubs, the John Clarks, etc., can just land one gig after another despite failing spectacularly in previous jobs. Why is that? Look what Clark did at Jacksonville and Indianapolis, misusing the public's money. Why would anyone hire him after that? But they do. Look at Straub? He was a disaster in Indianapolis and yet Spokane hires him.

The Urbanophile said...

It's the free market. If you want to attract talent, you need to pay for it at market rates.

I certainly won't say you need to pay millions or hundreds of thousands to attract people, but paying the ridiculously low salaries that people in Indy get paid is ridiculous.

You basically can't do a national search for any key position in city or state government because you can't pay enough to get people to make the move. That's why we ended up with Frank Straub. Indy, the 13th largest city in America, had to go bottom-fishing in White Plains.

The people who take these positions either are doing a "tour of duty" in public service (which only a local will do) or are politically active.

If the city and state at least paid salaries that enable top people to live like corporate middle management professionals, the field would be much wider for recruitment.

Honesty, I'm surprised at the high quality of public employee we actually have given how little many of them are paid. And unlike in other states these jobs don't come with gold plated pensions.

Pete Boggs said...

It's called public service for a REASON. Overpaying anyone to put another layer of blubber on government is no accomplishment; but more likely a protection racquet.

Paul K. Ogden said...

The Urbanaphile, that's where we disagree...it's not a "free market" when it comes to government executives. You're paying people based on what other people are paying managers. But if there are people out there who can do as good a job or better for less, that means for whatever reason the free market is not working. I do not buy that these managers bring special or unique talents to the table that make them better than hundreds if not thousands of other people who could do the job equally as well. I think the problem is when we look for managers we line up the usual suspects and pick from among a small group of candidates who are always looking for jobs. We need to expand our thinking when it comes to who can fill these executive positions.

Cato said...

High salaries could be paid to government employees. Top-level staff could certainly be allowed to earn a top scale of $47K to $49K. There's nothing wrong with a select few government employees earning such high salaries.

Indylivin317 said...

Universities are the worst offenders.

guy77money said...

I agree with you Paul there are a tremendous amount of good managers out there who have lost their jobs due to companies closures, reorganizations,etc and they would jump at a opportunity to get a government job in the 50 to 100 grand range. Not sure what Renn's real job is, but the talent is out there in abundance and can be had for cheap.

Citizen Kane said...

Salaries should be reasonable, but usually they are just looking for Yes-men (and sometimes women) who won't rock the boat and will go along to get along - so who best to hire than a political hack?

There are plenty of people who get hired at the lower levels who have the ability to move up in the hierarchy, but instead of moving up, they get pushed out with regularity - because they dare to question the status quo.

By the way, I have yet to meet a Director of any Indianapolis City Department who was worth their pay because they generally are not leaders, despite purporting to be. To them, the rank and file is only there to make them look good. When in fact, the director should be doing everything possible to allow the average worker to do their jobs more efficiently (reducing bureaucracy while getting better results for the public, etc.) I suspect that most departments would function fine without a director (because then you could implement efficiencies without someone saying no) - no one internally would probably even notice (same goes for the 25th floor - no one even knows who works there, I suspect).

Pete Boggs said...

Having abandoned its Constitutionally purposeful frame; morbidly proportioned government is metaphorically personified in the life of a man named Ricky Naputi:

www.nydailynews.com/life-style/health/world-fattest-man-died-900-pounds-article-1.1353829

Nicolas Martin said...

The ruling elite and its acolytes always argue that if they are given more power and privilege they will rule rationally and efficiently. They are, by nature, the enemies of liberty and autonomy.