A guy who does concrete work for us on the side told me he was going to give his boss his two-week notice the next day. “Did you find a better job?” I asked.
“Oh, no,” he laughed. “That’s just how I get a raise.” It turns out that he’s given notice three times over the last two years. Hold that thought.
While “success” can (and should) be defined differently by different people, one measure is money. In that regard, Bruce Springsteen, with a reported net worth of $1.2 billion, is remarkably successful. It might be worth noting that Springsteen says he’s not quite a billionaire because he’s spent a lot of money on “superfluous things.”
Either way, his financial success stems at least in part from his longevity, or what Warren Buffett calls the Methuselah effect: the advantages of a long life combined with a high rate of return. In Springsteen’s case, that’s the return on six decades (and counting) of touring, and a music catalog that sold in 2021 for $500 million.
Employee Pay and the 80-20 Rule
Springsteen also feels the money he pays his band members is key to his success. According to Springsteen:
The actual arc of rock ‘n’ roll bands is to break up. Think about it–how many bands have stayed together against how many who broke up? I pay [my band] a tremendous amount of money. That greases the wheels pretty good. And then, I’m a pretty nice boss.
He’s right about bands not staying together. As singer-songwriter Timothy B. Schmit says in the 2013 documentary History of the Eagles, “In my experience, every band is 10 seconds away from breaking up at all times.” While the E Street Band lineup has changed over the years, some have been with it since the early 1970s.
Springsteen is also right about musicians not paying band members particularly well. There’s a difference between being in the band and being a member of a band. Many artists employ freelance musicians on short-term contracts, say for a particular tour, which means they’re always on the verge of being unemployed. Plus, as in acting, wages offered can be surprisingly low since there are plenty of other out-of-work musicians eager to take their place.
If you’re an artist with an audience, an easy way to increase your bottom line is to tightly control wage costs. Plenty do.
But not Springsteen, who says:
If you get the art right, the music right, and the band right, you go out and play every night like it’s your last night on Earth. That was the serial philosophy of the band, and we’re sticking to it.
Employee Pay Research
The same applies to business and the talent level of the employees you hire. Estimates of impact vary. A 2017 study from Vitalsmarts, a leadership training company based in Provo, Utah, found that superstar employees are three times more valuable than their peers. A McKinsey study determined high performers are four times more productive than average performers.
That’s the low end. On the high end, Netflix co-founder Reed Hastings feels the best programmers deliver somewhere between 10 and 100 times the value of an average coder.
Another example is from Google. As Laszlo Bock, the former senior vice president of people operations at Google, writes in his 2015 book Work Rules:
Organizational researchers have shown, similar to the 80/20 rule, the majority of your company’s output comes from a minority of “superstar” performers: what’s known as a power-law distribution.
If you aren’t familiar with power-law distribution, here’s an example. Imagine you have 10 employees, and you to graph them in terms of job performance. Your chart will probably show a couple of high performers on the left, one or two poor performers on the right, six or seven average performers in the middle. Think of the classic bell curve.
Fair Employee Pay
The power-law curve describes a long tail of decreasing performance, with one or two superstars on the left and then a bunch of average to below-average performers drifting off to the right. Like this:
That’s a better way to think about employee performance. Take pro basketball, and the Celtics. Jayson Tatum would be at the far left, then Jaylen Brown, then maybe Holiday and White — you get the point. Think of it that way, and it’s easy to think in terms of pay for performance, or pay for value. Employees on the far left are worth more. Employees on the far right, not as much.
Stick to the traditional bell curve, though, and Bock feels one result is that many leaders “undervalue and under-reward their best people, without even knowing they are doing it.”
The same can happen when you apply traditional pay scales. Most companies have pay scales. Every position is worth a certain amount, and eventually even the best performers top out.
It makes sense. Employee pay should be fair. But “fairness” results in superstars making only a little more than average employees. Then, as Bock writes:
In a misguided effort to be “fair,” many organizations underpay their best employees, producing the very unfairness they are trying to avoid.
And, more important, creating top talent turnover. But “fair” isn’t “this is what the market says” or “this is what I can get away with paying.” “Fair” is what the employee is truly worth.
In Springsteen’s case, that’s “a tremendous amount of money.” To him, great musicians, great employees, are worth a lot more. Loyalty and longevity create consistency. More important, the music, both recorded and live, is the product, and the better the product, the more successful Springsteen can be.
Great employees are worth much more than average employees to your team, your customers, and your bottom line.
Superstar employees? They’re worth dramatically more. So when you find people who push your power-law curve further to the left, pay them like you want to keep them–before they ask for a raise, or threaten to quit. Because you, and your business, need to keep them.
