You aren’t paid what you’re worth. You’re paid what you can negotiate.

Or so said the in-flight-magazine ad for a negotiation class I read a couple of decades ago.

It’s a bit o’ wisdom that’s correct, but while it might be a useful insight for your average job candidate trying to maximize their salary, it provides little help for a payroll analyst assigned to draft the company’s compensation framework.

Last week’s missive provided just such a framework. Within it, the annual raise … and by extension, salaries or hourly pay rates … are determined by the labor marketplace. The law of supply and demand for a given job category dictates its median pay.

This way of looking at compensation is useful in large part because of its objectivity. It delivers an outcome where an employee has no financial incentive to leave for greener pastures, while their employer has no financial incentive to replace them with a more economical supplier of effort.

It is, if I say so myself, both complete and pragmatic, which, if you have to create a corporate compensation framework, are major advantages.

They aren’t, however, satisfying if you’re an employee and think you’re underpaid. Quite the opposite – if you’re an employee and think you’re underpaid it’s probably because you look at the value you create by doing your job well, and figure you deserve to see more of that value reflected in your paycheck.

Which leads to Compensation Rule #1: If you want to be paid for the value you deliver, you need a way to objectively demonstrate the value you deliver. If you’re in Sales you can do this. Interestingly enough, if you’re in Sales you probably are paid for the value you deliver. Likewise Product Development. If those aren’t you you’ll have to use your ingenuity.

If there’s a Compensation Rule #1 there must be …

Compensation Rule #2: You aren’t paid what you’re worth. You’re paid the lifestyle company management thinks is appropriate for the work you do. In the heads of company management there’s a rough-and-ready translation of job titles to lifestyles.

So if you’re, say, a Senior Developer you can be sure the CFO (for example) has a mental image of what size home you should be living in, in what location, what model and age car you should be in a position to drive, and so on.

It’s a nicer home and in a better neighborhood than an Administrative Assistant but not so nice, nor in as nice a neighborhood, as your manager.

Good things come in threes, and so there is, inevitably …

Compensation Rule #3: In addition to your lifestyle, and parallel to the official org chart, your place of employment has a pecking order based on the jobs and titles of its employees. From this perspective you’re paid based on the social stratum company management thinks a person with your job belongs to.

As a general rule, managers figure they’re the social superiors of the employees who report to them, just as their managers are their social superiors. And so on. Especially in management, an employee’s perceived social stratum frames the compensation the company’s executives figure they’re worth.

Bob’s last word: Disappointed? Think compensation should be more of a science?

Be happy. In the best companies, it might not be a science, but it just might make it to art.

Which just might give you more wiggle room to negotiate than you’d have if it was a science.

Bob’s sales pitch: As we enter KJR’s home stretch you’re running out of chances to add your ManagementSpeak to the repository. So now’s the time to stop procrastinating and send in your favorite “What managers say and what they really mean.”

On CIO.com’s CIO Survival Guide: “The ‘IT Business Office’: Doing IT’s admin work right.”

What it’s about is establishing an organizational home for all of IT’s administrivia. It’s about the difference between running IT like a business (bad idea) and running it in a businesslike way (a necessity).