Can titles be compensation?


It’s a classic Dilbert cartoon: in lieu of a raise, I’m going to promote you to “senior whatever”. Not only does it happen (or it wouldn’t be so funny), but it’s commonplace. But the question is: is it wrong?

Well, if you listen to the CFO, no it’s not wrong. We can’t afford to pay Sam what he wants or deserves, so let’s give him something that costs us nothing. And there is something to be said for that.

And of course people want (even need) cool titles. As I noted over in another FAQ entry, titles are valued by employees and are important for many internal and external reasons. So they seem like a really perfect give-away. People want and value something that costs the company nothing. How cool is that? Almost as good a freebie as stock options

People realize when the title doesn’t fit the person

But as with most aspects of compensation you need to realize that you often get what you pay for. First of all, people aren’t stupid. Both inside and outside people realize when the title doesn’t fit the person, or when the title is clearly exaggerated. Look at banks, where every Tom, Dick, and Mary is a Vice President. Everyone knows that, in a bank, even the teller at your window is but a promotion or two away from being a VP. Take Wells Fargo, with 152,000 “team members”, I’m willing to bet that there are no fewer than 20,000 VPs.

This, of course, leads to title inflation. At a bank, if you aren’t talking to a “Senior VP” you are talking to a nobody. And it leads to a world inside the company where people are fighting over seemingly ridiculous title issues. The first time you make an unworthy promotion, all the people who were at that level feel devalued. They all now want to be a “senior whatever”. Pretty soon you have people running around calling themselves Chairman, CEO, and President, and trying to convince people they hold down three full-time jobs.

Here again, people aren’t stupid, they look at the person, their title, and do a quick compare. Most can smell something fishy if it’s there, and they immediately discount the title on the business card to something more realistic.

You can’t throw titles at people like rice at a wedding

All this means that you can’t throw titles at people like rice at a wedding. You need to dole them out more carefully. But it doesn’t mean you simply shouldn’t use titles as compensation. They can be very effective.

I recommend that you design a “job ladder” for on which you can place all employees. This ladder not only outlines clear and distinct titles for every position, but serves as a roadmap for the employer and the employee. With clear qualifications for each and every position, you can promote effectively, and get your money’s worth when you do promote. I’ll have more on Job Ladders soon, stay tuned.

How important are titles?

Job titles serve a number of purposes, and treating them lightly is done at your peril. Job titles help to indicate organizational structure to newcomers and outsiders, they tell people the relative importance of the person they are working with, and they reward their holders.

Job titles serve a number of purposes, and treating them lightly is done at your peril

Some companies are famous for their disdain for titles, even mocking them, using titles such as chief humor officer, head honcho, and the like. Imagine what the new person, especially from another culture, thinks when they see “head honcho” on a business card. Even if they do understand what the words mean, they either think this person is a joke and not worth working with, or they are confused as to who this person is. Are they so important that they can get away with this joke, or are they such a low person that no one cares what they put on their business card?

Business Card

These people are missing an important aspect of titles: they communicate to people you meet, in a short and easily understood format, where in the organization this person stands. You see a business card that reads “CEO” or “Managing Director”, and you immediately know that this is the top person in that organization. You can assume they have the power to commit the other organization to agreements you might make. If you see “vice president” you can tell they are not a peon, but that there will be more work ahead to get a commitment on behalf of the entire company (especially if it’s a bank, where VPs seem to multiply like rabbits).

Having titles that are clear, common, and well understood is very important. Choosing “Top Dog” over CEO may seem cute at the time, but it can reflect badly on you and your company. In that respect titles also can communicate company culture, where Top Dog may be fine for a surf shop, but not good for an auto parts manufacturer.

Some use titles to communicate other aspects of culture. For example, in the US choosing Managing Director over CEO sends a message about the company, and perhaps its heritage and even ownership. Many feel that this lends a sophisticated European air to the firm. Of course, that can be overused and even ridiculed, but it is one example of where titles can be used to present one element of organizational culture.

Assign clear, common, and well-respected titles, and dole them out sparingly

Finally, titles are seemingly vital to their holders. Some employees get so wrapped up in their title, that concern over it can get in the way. Even I am guilty of this, writhing in pain over being simply a Vice President of Human Resources at Microsoft, rather than “Senior VP” or “Executive VP” (or, heaven forbid “Chief People Officer” {ugh}). For me it was a matter of respect among my peers in the outside world, where every person in a comparable position in a Fortune 500 had a fancy title. In the end, it really didn’t matter, but I only realized that years later.

This leads people to use titles as compensation, but that’s another question, and you can find that in “Can Titles Be Compensation?”

So, all in all, yes, titles are really important. Design a clear organizational structure, assign clear, common, and well-respected titles, and dole them out sparingly.