"The longer a person stays at a particular level in an organisation, the more most measures of their performance fall - including subjective evaluations and the frequency and size of pay rises and bonuses. It is a finding entirely consistent with the idea that people eventually become bogged down by their own incompetence."
That's a conflation of cause and effect if ever I've seen one. It's also entirely consistent with the fact that people who don't get promoted (the majority, given the pyramidal structure) are stuck and get fed up with their jobs as they aren't challenged any longer.
This reminds me of First, Break All The Rules (see http://www.amazon.com/gp/product/0684852861?ie=UTF8&tag=... to get the book). They point out that many promotions require different skills, and that sometimes works badly. This is particularly true when people are promoted to manager.
To avoid this problem they recommend giving people promotion possibilities within job roles AND requiring that moving into management always come with a pay cut to make people honest about whether they are seeking the job because they think they would be good at it, or because they want a raise. (A manager who is good would likely make up the pay cut with interest over time.)
The second paragraph is good, but doesn't go far enough. We're stuck in an aristocratic management culture, where moving up the pyramid makes you a better person. Not a better manager, better employee or more productive, but a better class of person. All the standard ills of e.g. good engineers needing to become substandard managers in order to progress flow directly from that one unspoken assumption.
Why does your manager get paid more than you? It's a simple question that people simply don't ask. The Coasian model of the firm suggest that employees need managers to prevent the other workers slacking off and free riding on your effort. I'd love to work for a business where the really scare talent treaded the managers as the interchangeable, and easily replaceable, support staff that they really are.
You know... sometimes life throws you curveballs. If you believe that planning will prevent any and all financial problems from appearing then I have a bridge to sell you...
What about people that can't afford a pay cut financially?
Isn't it obvious? If you can't afford the pay cut, don't try to become a manager.
Stop and think about it from the employer's position. If your star programmer becomes a manager, the only guarantee is that you've lost a good programmer. The odds are low that you'll get a good manager out of the deal. So why should they pay more for less value?
Remember. Smart companies don't hand out money out of some notion of what is fair. They pay money because that is the cost of the value those employees are expected to provide. (Note that companies avoid paying the actual value provided, because doing so is a recipe for going bankrupt.) If the deal that they are willing to offer you does not meet your needs, you are free to find a deal that is more to your taste.
They've shown that random selection is good when there's zero correlation between performance at level N and level N+1.
Personally, I'm more interested in what happens if the correlation is non-zero, and performance at level N+1 has more impact than performance at level N? How does the best promotion strategy change as the level of correlation and impact of being higher up the ladder changes?
They didn't give the details of the model. But I don't think you need the model to make some reasonable statements.. Let r = correlation between level N and and N + 1
r = -1 ==> promote worst performers
r = 0 ==> promote at random or based on completely independent criteria.
r = 1 ==> promote best performers
And you can fill in everything in between. Putting it this way almost makes it seem obvious. In fact though, the hardest part is judging r.
impact of being higher up the ladder changes?
They did do this:
measured as a weighted average of employee competence, with higher-level positions counting for more
That's a conflation of cause and effect if ever I've seen one. It's also entirely consistent with the fact that people who don't get promoted (the majority, given the pyramidal structure) are stuck and get fed up with their jobs as they aren't challenged any longer.