Hey, it’s Collin. Welcome to Engineering Echelons, a newsletter full of ideas and insights to help engineers excel at management.

Here’s what I’ve got for you this week.

• New and noteworthy news

• A management perspective to consider

• Leadership insights to delve into

• And more…

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Alright, let’s get into it.

Noteworthy Headlines

Construction spending falls amid tariff volatility (ENR)

Highlights:

• Overall construction spending fell 0.1% in July on a monthly basis, according to data recently released by the U.S. Census Bureau.

• Residential spending increased 0.1%.

• Nonresidential spending fell 0.2%.

Americans lose faith that hard work leads to economic gains (WSJ)

Highlights:

• Nearly 70% of people said they believe the American dream—that if you work hard, you will get ahead—no longer holds true or never did, the highest level in nearly 15 years of surveys.

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Management Perspective

Inflation is a persistent gauge for annual salary adjustments in today’s workplace. Oftentimes, employees compare the percent increase in salary to the percent increase in inflation. The net difference between the two is sometimes called the “real” raise. When the “real” raise is negative (inflation is higher than the salary increase), employees can feel like they are getting a bad deal.

So that begs the question: should salary bumps keep up with inflation?

In short: not necessarily.

Salary adjustments need to be reviewed in the context of competitiveness, sustainability, and fairness.

Here are a few ways to do that.

What are the employee’s other options?

Said another way, what could they get from other companies? If there is a big delta between what you’re paying them and what another company will pay them, there’s a risk that the employee will leave for the more attractive option.

A lot of times, managers are looking at “salary bands” for certain positions. If they are within those bands, they feel like the pay is adequate. What managers need to remember, however, is that those bands don’t mean anything to the employees. From the employee’s perspective, a company’s salary band can be very different from their own personal salary band comprised of what other companies are willing to pay.

Similarly, if an employee is hired for an amount far higher than what market rates are, then there is not as much pressure to keep annual bumps up. Say an engineer is hired right out of school for $100k while the going market rate is $80k. Outside of other factors, there is less pressure to increase the salary for this individual in the short term.

A point along these lines I need to make: don’t just compare apples to apples on compensation. Meaning, a job title at one company might not necessarily match the roles and responsibilities at another company. When salary is a driving factor, employees will oftentimes look for different roles to get a higher salary. If another company offers this and yours doesn’t, you’re again at risk for losing the employee.

What can the company afford?

A company with large, profitable projects is capable of spending more on labor than a company with small, marginally profitable projects. That becomes a competitive advantage for the managers who make the most of it: they can recruit and retain top talent.

What is the inflation rate?

Inflation is an imperfect metric that tries to capture the change in purchasing power over a certain time period. Inflation swings wildly from region to region (and even person to person, depending on personal spending habits). Despite this, inflation is still used as the overall number to gauge if you’re keeping up or not.

There are obvious concerns about generally matching inflation rates for salary bumps. Prior to Covid-19, inflation was really low. During the pandemic, inflation spiked. It’s moderating now.

As you can see, pegging salary adjustments to inflation rates leaves you exposed to needing to pay out more when times get tougher.

Final thoughts

There’s no single formula for adjusting salaries. It’s a business decision that needs to be managed appropriately for the business and in a way that makes employees feel valued. What matters most is having a clear, consistent approach—and communicating it transparently—so your team understands how compensation decisions are made.

Management Insights

Jocko Willink on forging relationships as a leader:

“There is another key element to leading any exceptional team: relationships. Leadership requires relationships; good relationships with people above you, below you, and beside you in the chain of command are critical for a strong team. The better the relationships, the more open and effective communication there is. The more communication there is, the stronger the team will be.”

—

Craig Bouchard on the value of brand:

“It’s difficult to find a great firm that does not have a significant, highly valued brand. Brand value is a thermometer that in the long run provides a measure of the totality of what a firm is doing.”

—

Jeff Bezos on innovating:

“We have to plant many seeds because we don’t know which one of those seeds will grow into a mighty oak.”

Management Resource

You don’t get me (Korn Ferry)

This article outlines a disconnect between frontline staff and upper management, and how companies can navigate the gulf.

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• Let me know if you’ve found something worth sharing.

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• Let me know what challenges you see other managers having.

Send me an email at [email protected]

Looking forward to hearing from you. See you next time.

Collin

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