> “Firms now essentially can threaten the remaining employees: ‘Look, I can let you go, and everybody’s going to think that you’re the worst in the pool. If you want me not to let you go, you need to accept below market wages,’”

This is exactly what unions are for. Any time there are enough skilled workers avilable that a company can let good employees go as a warning to others not to complain about substandard wages it's clear that the imbalance of power has resulted in exploitation. There is strength in numbers though which is why companies go to great lengths to convince people that you all alone negotiating with a huge corporation of people who have more money and resources than you'll ever see in your lifetime and who can replace you with someone else easily is somehow totally fair. No matter how special they might make you feel, you are almost always disposable to them and they will drop you at any time and for any reason, even if it's just to make an example out of you to keep your ex-coworkers in fear.

For the very few employees out there who actually are totally indispensable, any sane company would be looking for your replacement immediately because there's no telling what might happen to you or when. No company should fail because one employee dies in a car cash or gets a cancer diagnosis. Until you are also replaceable the company isn't safe. They'll pay you handsomely to keep you, right up until the moment they don't have to.

I think the other thing that's perhaps missing is that some companies have so much momentum (with thousands of people) that it probably doesn't matter when they lose people. The company will continue to thrive because there is demand for the product.

The only other thing I have to say about it is I have noticed a high correlation with the reports produced and the things employees have been telling management to do for a long time - that is to say, there is some utility to having an outsider provide the information... even if that information isn't novel at all.

The top employee is probably getting noticed and headhunted by the clients.

The top employee is probably getting pissed off at the mediocrity surrounding them, and annoyed at constantly having to share credit for their hard work with their bad manager who did nothing.

The top employee quickly realises that this is a badly-paid gig, and plans to spend the minimum time doing it that will confer the necessary Resume points.

The worst employee has no other options, is scared of losing this gig because they struggle to find other gigs, enjoys being able to hide their mediocrity in the team, and will stay as long as possible. They'll probably end up being promoted.

The wiki page doesn't do it full justice, as I understood it it is:

* A firm can easily end up in a situation where weak performers stay as long as they can, and strong performers leave because they can operate independently. This can have a very strong effect because the partners or permanent management starts seeking out work to keep the bulk of their remnant people busy, which is not the high end work that builds the firms reputation.

* Instead, make offers every year to the top 3 people from each Ivy League law school, but the offers are for 18 months only.

* If the new people aren't going to make partner ever, don't keep them around. Let them know well before the 18 months are up, and have them pick the corporate clients they like and work with them so they can jump over to working for the client directly, and they will then always come back to the mothership when the giant, interesting, complex case comes along.

* Out of each "class" you make partner offer to only the best, maybe none, each year.

This differs from the article because the firm is keeping the best and sending out the rest.

But maybe most firms aren't like the Cravath, they prefer to over charge clients for a weak performer then charge and pay a strong performer ? Maybe this makes sense if you have a very short term view of the life of your firm and it's reputation ?

[0]: https://www.aeaweb.org/articles?id=10.1257/aer.20200169

It's political and I have begun to strongly believe that the best leave or are schemed against by the mediocre cabal. You cannot continue in a large firm in India if you are anywhere near good.

The premise here might have some insights, but is hardly paradoxical (missing from the title posted here); you'd expect low-quality firms to have low-quality practices.

Kaniel, Ron and Orlov, Dmitry, Intermediated Asymmetric Information, Compensation, and Career Prospects (February 4, 2020). Available at SSRN: https://ssrn.com/abstract=3532128

see also: discussion of the consulting business model from David Maister’s book Managing the Professional Service Firm

https://commoncog.com/the-consulting-business-model/

Quantifying this would be interesting though.

I've seen this written about before... roughly, after a few years into your corporate career, your job splits into two parts: the skill part (your effort and ability to get stuff done) and the political part (navigating humans in a corporate hierarchy). Say what you like about the political part, for most people, it is unavoidable.

Laughing out loud)))

Yes, re the gamesmanship on pay, but if you don’t have the specific ability to bring in new business, then you’re on your way out, no matter how good a lawyer (or whatever) you are

As employees rise up the corporate ladder, their compensation packages increase, but the amount that the company can charge for that employee's work is limited (clients will be wanting to keep a certain margin for themselves too)

The really good people have leverage so the can stay or go as they please. Meaning the people that get hit are average-ish (in the context of firm, not wider market). People good enough to make it to middle management but no further. You don't need to fire them either - they catch the drift when they don't get promoted, and those too stupid to notice were never "good".

>“Firms now essentially can threaten the remaining employees: ‘Look, I can let you go, and everybody’s going to think that you’re the worst in the pool. If you want me not to let you go, you need to accept below market wages,’” says Kaniel.

The below market rates are primarily an effect of CV-prestige rather some intricate machiavellian mind game. People tolerate it because "I was a senior role at X" has value long after you left.

That said any developer and engineering should be extremely careful when it comes to unions. In Germany they typically agitate against the interests of the engineers, especially in large companies. This comes naturally as unions get power according to democratic principles, so in most cases they agitate for benefits for unskilled workers at the cost of the engineers. At companies I worked for the Betriebsrat, which is staffed by the elected union, actively advocated for outsourcing engineering activities, so that manufacturing workers can get increased benefits.

- You are a manager of a team of 4

- You hear layoffs are coming

- You have one amazing direct report, 2 just ok and 1 awful

Who do you fire?

Most people say "Of course, fire the awful person"

I say: "When this actually happened, the manager fired their best person"

Other: "But, but why? That's not fair!"

Me: "You know layoffs are coming. You are the most expensive person on the team. If you fire the awful person there may be questions about why you even hired them. They then fire you and keep your amazing person as the manager (probably for less money).

You fire your best person, well then now you as the manager are the best person AND you can make the argument that that awful person needs 'more managing to be effective'"

It's not pretty or noble or heartwarming but this is how the logic goes in a lot of big firms (especially around layoff season).