What If Companies Shared Exactly How They Determine Salaries?
theatlantic.com
theatlantic.com
Here's our CEO, Marty Andrews, talking about it at a conference:
Scoring systems are never perfect for everyone, or adjust to everyone contributions, so someone's always going to feel treated unfairly.
Also, unless you bend the scoring rules (which is opposed to the spirit of the system), you have probably reduced capacity of negotiation to attract talent (can't really pay a higher salary just because you got someone that is prospectively good), and also probably reduces your capacity for retention (increasing someone's salary when they hold a key position for the company and/or they progress faster than normal before someone offers a higher retribution somewhere else).
So in the end, while solving many things which are fucked up with secret salary calculations, it probably also brings in some problems? I'd appreciate if you can give some more details on these aspects...
My experience has been the opposite: you know who has higher scores than you, yes, and that they're paid more. But you also know what you need to learn, practice and do in order to raise your scores. It makes the entire system transparent, comprehensible and above all means that your pay is essentially something that's entirely under your control. I found this very liberating.
"so someone's always going to feel treated unfairly."
At some point that will happen, yes. This comes back to the value of transparency: we strive to create an environment where, if someone feels hard done by, he or she can have that conversation openly and safely with the people involved. And it'd be a lot more objective and constructive than if salaries and their computations were closed.
"I think Joe is being paid more than me, but I don't know for sure, and I don't know the reasons ..." is a fast-track route to (justified!) resentment.
"Also, unless you bend the scoring rules ... you have probably reduced capacity of negotiation to attract talent ... and also probably reduces your capacity for retention"
So far that's not been my experience. What I've seen is that the open salary model is a really attractive proposition for candidates, because they know they'll be paid fairly. The salaries are adjusted annually based on market changes, CPI, etc.
In terms of being able to compete against companies with higher salaries, there are two approaches. One: raise the levels for everyone. Two: compete on culture and other perks (of which we offer a lot).
One thing we definitely don't do is make exceptions to the model. I wouldn't recommend it for anyone else taking the same approach, either: in addition to being the wrong thing to do, my gut feeling is that backing down on an approach like this would be catastrophic for staff morale.
Edited: Oh, and we try not to use or think in terms of 'good' and 'bad'. It's not a scale of moral judgement, but a measure of outcomes. Also, we try to keep it as concrete and observation-based as possible. E.g. we don't say "we think this person is a level 4 Fooblerizer", we say "this person has Fooblerized for several clients successfully, and is now leading a team of Fooblerizers on-site".