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Corporations are a Fake Meritocracy

Posted on February 6th, 2018
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There’s no secret that the Due family is a big fan of freelancing, solo work, entrepreneurship, and building businesses. One thing any business owner will tell you is that in the wild world of freelancing and self-employment, you are in a true meritocracy compared to corporate America. Having spent a decade in Fortune 500 type businesses before going out on my own, I have come to realize that corporations are, in many ways, a fake meritocracy.

Major companies typically say they are a meritocracy and act like a meritocracy in many ways. However, when you look at the data they are anything but. Let’s take a look at what makes a true meritocracy, where and why big corporations fall short, and how you can thrive with a full-time job at a behemoth employer.

What is a meritocracy?

The Cambridge Dictionary defines meritocracy as:

a social system, society, or organization in which people have power because of their abilities, not because of their money or social position

Outside of unions, most people would likely argue that this is how most businesses should be run. Those who perform well and succeed at their jobs should be promoted, get paid more, become the boss, and ultimately the leader of the organization. On the flip side, those who can’t hack it eventually get bad reviews and leave the organization. You can see this somewhat in effect in the cutthroat Wall Street up or out promotion culture, but there are few other places you see something like this in effect.

I specifically called out labor unions as the opposite of a meritocracy as they breed unified pay scales and similar systems designed to be specifically counter-meritocracy. Some bosses and managers claim they are impartial and fair, but actually just promote those who look, act, and work like they do. Anyone who has spent more than a few years in cubicle land has seen undeserved promotions and deserving people looked over. It is almost laughable that some big businesses claim to promote the best performers when, in fact, managers are more likely to promote team members they simply like better.

Also keep in mind that the most extreme meritocracies may not be so healthy. After all, as much as I love the company as a customer, I don’t think I could ever see myself working in a culture like Amazon. But nonetheless, this is an important topic for both corporate workers and the self-employed to understand.

Staying at a job leads to lower pay

If you succeed in a role, your boss won’t want to promote you out of it. It is hardly breaking news that those who move jobs to a new company get paid more than those who stick around for years, or decades, at one company. A study a few years back found that staying at a job more than two years ultimately leads to a 50% lower income. If this is not proof that meritocracies in corporate America are a myth, I don’t know what is.

As anecdotal evidence, look at my career. I got one promotion that came with a significant raise early in my career at a big telecom company, but otherwise only ever got two or three annual raises in ten years of work at big companies. The biggest raises I had in my corporate days happened when I moved to a new company, at one point getting a roughly 40% raise with a job change.

Right now in January 2018, we are facing low unemployment, which makes it a great time to job hop on the hunt for bigger pay. Sure, it’s a risk, but it is one that often pays off big time in dollars and cents in your bank account. But if you really want to dive into a meritocracy, look no further than the world of freelancing.

Freelancing is a true meritocracy

I left my job in April 2016 to freelance full-time. I walked away from a great salary, great benefits, and a company that I really did enjoy working for to risk it all in self-employment. In my case, it worked out really well. Check out my income reports to see how I turned my side hustle into a six-figure business. I now make more, work less, and enjoy a less stressful lifestyle than I did before.

This didn’t happen accidentally. I didn’t make it to this income level by showing up and sitting in a chair with little productivity. I did it by turning every working hour into the most profitable hour possible. But there is more to it than just working hard and being focused. I keep landing amazing clients and better projects because I always strive to turn in the best quality work possible and I’m always learning, reading, and improving my skills, which come from a foundation of two finance degrees including an MBA.

While that MBA does not guarantee I do better work than someone else, it does signal I am more qualified than most to write about personal finance. But thanks to my experience and expertise, I am better positioned to put forth those top-quality articles that rise to the top of the pack. Because freelancing is a true meritocracy, I am able to write for awesome sites like this one and for top financial brands, commanding top level freelance rates for much of what I write based on the quality of work I produce.

Bringing a freelance mentality to corporate culture

Who can we change corporate culture to reward performance over showing up and becoming buddies with the boss? Changing corporate cultures is not an easy task, but a clear focus on promoting the best performers, rewarding quality over butt-in-chair time, and finding a way to use metrics over opinions in the workplace would be a great start.

Eric Rosenberg

Eric Rosenberg

Eric Rosenberg is a personal finance expert. He received an MBA in Finance from the University of Denver in 2010. Since graduating he has been blogging about financial tips and tricks to help people understand money better. He is a debt master, insurance expert and currently writes for most of the top financial publications on the planet.

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