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Comment by swombat | Hacker News Reader

We're really trying to nail a good way to deal with salary negotiations when onboarding people, at GrantTree - one that gets out of this "gotcha" approach to salary.

So far the best we've figured out is to be the first ones to name a number, and be super-transparent about how we arrived at that number.

The reasoning is that "in a salary negotiation the first person to quote a number loses", so since we (as the employer) are in a naturally stronger position, we deliberately "lose" upfront to avoid forcing the other person into a negotiation dynamic where they're going to try and push it as high as they can, and we end up trying to push it as low as we can. I think everyone loses out from this, and it starts the working relationship with distrust.

Instead, we run a pay evaluation process internally, including feedback about the value of the role and the person from all the people who interviewed the candidate. We publish all that feedback, as well as the suggestion/reasoning of our pay trustees (a group of people who use that feedback to try to place the candidate on our pay scale), along with the number this maps to, and the full pay scale, and the list of how much everyone is being paid in the company so they know where they stand (anonymised, because not everyone is comfortable yet with someone who is not yet a team member knowing their salary).

So far we've successfully used this process once and it led to a great onboarding experience. It's a recent development. I hope it continues to work, and allows us to avoid the games described in this very helpful podcast. I thought I'd share it in case other employers here are struggling with the same question.

This won't work in every company. Have a read through http://danieltenner.com/open-cultures/ if you want to understand more about how we run the company - hugely important in making this work.

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I've struggled with this a lot. I used to believe in making it a negotiation. The more I've seen, I've switched to paying for the position. Unless hard negotiation is part of the job description, it shouldn't be rewarded. I've also found that rewarding hard negotiators pushes companies down the path of paying men more than women for the same job.

If you can't stay in business without underpaying a lot of people, your business is in trouble.

Without salary negotiation, the company gets to choose the price. Unfortunately, Silicon Valley has shown that it is willing to collude to keep that price down. Therefore, when companies argue that they're banning salary negotiation to "promote equality", you should assume that this equality is merely a gimmick to hide the true purpose: lower wages.

If there really is a difference in negotiating ability between women and men, it would seem far more beneficial to teach women how to negotiate for a fair wage rather than abolish the entire thing altogether. In fact, teach all employees to quantify their abilities and how much value they will provide to their employer. Demonstrate that if companies are unwilling to pay them a fair wage, that they should not devalue their employment.

But the most recent steps toward banning negotiation will ultimately hurt all employees. When companies like Apple, Google, and other Silicon Valley companies agree not to hire employees from each other, and threaten to replace tech workers in the US with less-expensive H1B visas, we should question their true motives. This newest idea of "banning negotiation" is nothing more than another tactic used by a profit-maximizing entity to reduce costs.

I don't think "teaching women to negotiate" is practical. Is Google or Facebook supposed to send candidates to negotiation classes before offer negotiation time? Is there evidence that a training class can overcome whatever combination of nature and nurture causes the discrepancy?

Let the market drive the compensation level. If "the compensation for the position - take it or leave it" is too low, then the company won't be able to hire anyone, and they will have to alter it over time.

If it's "take it or leave it" from the employee, you wind up underpaying people with humility, and overpay people who are overconfident.

Note: I'm not at one of the large companies that have been in these lawsuits, and lost an internal fight to move to the "one price" policy that I'm advocating for. I'm doing my best to implement it in my part of the organization, and even there it doesn't always work.

Of course Google and Facebook are not going to send candidates to negotiation classes; they would stand to lose from such an arrangement.

Rather, there are many ways to approach this:

1. Salary negotiation could be included within curriculum at CS schools. (Schools would love if alumni made more money!)

2. Techniques could be included in books (like "Soft Skills"), podcasts, etc.

3. The culture in Silicon Valley could emphasize the importance of negotiating a fair wage.

Left to their own devices, companies WILL exploit those who believe that negotiation is "bad". Companies might not even do so intentionally, but might do so merely by hiring the cheapest employees who have the highest skills.

A side effect is that even if only 75% of employees negotiate to higher wages, the "market rate salary" for employees will increase. If, instead, 75% of employees did NOT negotiate, you'd see a depression in wages.

> 1. Salary negotiation could be included within curriculum at CS schools.

This is such a good idea. The modern school system oscillates between industrial training and academic pursuit, and very practical skills like this one (or householding finances) which could directly benefit the actual person, are terribly neglected.

What is it that stops teachers from talking about everyday matters related to money? Is it their own sense of inadequacy on the subject? Fear of letting out how much they (don't) make? Is it "political pressure"? Or simply that they love their academic subjects so much, they'd rather not talk about more prosaic stuff?

Taught software dev for four years in higher ed. I always had modules on resume/cover letter, behavioral interviews, core value matching, self promotion, salary negotiation, and other job-related things.

Student feedback always suggested these were incredibly valuable lessons.

> Is there evidence that a training class can overcome whatever combination of nature and nurture causes the discrepancy?

There is also the issue that the same behaviour is seen differently when coming from men and women. What is assertive in a man can be aggressive and offputting in a woman. Which means you'd have to have different kinds of courses for different genders, and it only starts there (more minority groups with less studies of what happens when they act the same as a white male). So, there is even more of a hurdle for potential training classes to overcome.

How much of that is the result of intrinsic gender differences vs. learned culture?

I always hear assertions about negative reactions to assertive women. Has any science been done on it?

Yes, it appears that women are penalized for assertiveness (more than men).

http://www.huffingtonpost.com/entry/men-see-powerful-women-a...

https://hbr.org/2013/04/for-women-leaders-likability-a/

Thanks!

Negotiations still take place, they just happen in a different format. For example if the Technical Lead is having trouble hiring due to low salaries for the positions, he would make the case to management that they need to raise the salary range for those positions. And the added benefit to this format (in a transparent organization) current employees would also get a raise which would probably help with attrition.

I think for very senior roles, individual negotiations still might make sense, as the value prop of those hires is highly variable and can have big impacts on the organization. But for roles like Software Eng I, and Software Eng II, etc... in the long run it is better for morale, attrition, and equality to use defined salary ranges. And you can still use bonuses to adjust compensation based on performance.

In these cases, though, we're relying on the employer to institute those salaries. However, the employer usually does not have an incentive to pay more if they can get the same thing for cheaper.

The employer isn't magically immune to market forces simply because they move to a transparent salary system. If they are significantly under-paying their employees, and they are not making up the difference via other benefits (shorter working hours, bonuses, etc...) then they are going to run into a lot of trouble hiring and holding onto employees.

And just because a company has defined salary ranges doesn't mean employees have no voice in the matter. If they feel those salaries are not keeping up with market rates, they can make that known to management, or they can go find greener pastures.

Except when they overcome those market forces through collusion. See: wage lawsuit against Apple, Google, and other tech Titans

In this discussion you're assuming the "employer" as a separate entity from the "employees". This was an enormously hard dichotomy for us to overcome, because it required me and my cofounder to let go of control over the salary structure and hand that over to the company as a whole. That requires a huge amount of trust that "the employees" care about the company as much as we do, really want it to be a success, are capable of informing themselves to make good decisions on behalf of the company.

It is a very worthwhile path, but it certainly is not easy for the founders (and is probably impossible in a large traditional, top down, public company where "the owners" are a faceless group of shareholders who definitely want to believe they are in control - even though they definitely are not).

At this point, we (my cofounder and I) have pretty much zero control over how much people are paid in the company. We provide advice to people making those decisions but we are not the decision-makers. And the conclusion of that experiment is that people actually seem to care far more about getting the arbitrary salary formula right than we do, so I believe it was very much the right choice to let go of this lever and let the company design its own salary structure.

Thanks to this situation (however difficult it was to get there), the problem you outline is not there because there is no "employer" entity separate from the employees that could collude or have incentives different from the employees.

Women can get (possibly unintentionally, possibly not) punished for exhibiting negotiation and leadership traits that are valued in men.

A friend recently had an offer, ready to sign, but the salary was lower than she wanted. She wrote back asking if there was room to move upward. She had the offer withdrawn.

This is pretty unfortunate. But we don't know if the company would have done the same for a male.

We don't know for sure about this instance, but evidence suggests that it's more likely to happen to a woman than a man - https://www.cfa.harvard.edu/cfawis/bowles.pdf

Sometimes it's worse than that -- women are seen as a cheap ticket.

I remember one of my first colleagues as a professional in this industry had to fight and fight to eke out a lousy 3% raise, despite being s superstar employee.

Later I found out that she was making 30% less than me, and They had just threw a ton of equity at me to try and keep me from leaving.

> When companies like Apple, Google, and other Silicon Valley companies agree [..], and threaten to replace tech workers in the US with less-expensive H1B visas [..]

When did these Silicon Valley companies threaten to hire less-expensive H1B visas? Do you have any citation on this? Are the H1Bs working for these companies paid less than non-H1Bs? Looking at the publicly available salary data for these companies - AmaGoogFaceSoft kind - seem to pay their H1Bs very well.

The reason is that psychologically, humans already account for the fact that women have it easier in life.

Take Buffer, for instance: their salary information is "transparent."

Consequently, since they've eliminated the possibility for negotiation, I will never approach them for prospective employment.

A "master" engineer taking low equity living/working in SF only makes ~$155k: no thanks.

https://buffer.com/salary?r=1&l=10&e=3&q=1

In my humble opinion: this kind of hiring strategy rewards low performers who get lucky and dissuades and marginalizes A-players who know what they are worth.

This is a fantastic side-effect of transparent cultures and salary structure: people like you who, for reasons good or bad, do not want to work in this kind of environment, don't apply.

You may believe that sets you apart as an "A player" and means we only hire B players. I believe the concept of A players and B players is false, and have discussed this here: http://danieltenner.com/2014/09/11/there-are-no-b-players/ . That said it is your right to believe this dichotomy exists and that you are on the right side of it. I put it to you that if you insist on having an A/B player dichotomy your desire for an environment which makes you feel worthy through paying you more makes you inherently a B player in the environment at Buffer or GrantTree, where this kind of mindset will have all sorts of side-effects that will make it difficult to work with you.

Almost all the people who we interview are very keen to work in this kind of environment. The last job we had opened (admittedly a relatively low skilled job) we had 200 applicants, interviewed about 20, and almost all those 20 were really, really keen to work in this open environment (and none found it a turnoff, though some didn't really understand what it meant). I like to think we hired someone who will be able to do the role very well and be happy doing it in our company. What I love about your comment is that you are far from alone to have this reaction, but because we are very upfront about our culture, people with your reaction never seem to apply. That's a win on both sides: you don't waste your time interviewing with us, and we don't waste our time interviewing you.

> where this kind of mindset will have all sorts of side-effects that will make it difficult to work with you.

I find it difficult to work with people who are compensated less than me. I want my coworkers to be better than me.

I do not want to work with people assessed as "masters" making $155,000/year in San Francisco, CA. I am accustomed to working with people being paid more.

Full disclosure: Over four years ago, I was receiving offers $10,000+/year more for like roles (SF, FTE, backend development). I would certainly not proclaim myself a "master," either. Especially not 4 years ago.

> I love about your comment is that you are far from alone to have this reaction, but because we are very upfront about our culture, people with your reaction never seem to apply.

Please do not turn this into a matter of "culture."

I find nothing wrong with a culture of transparency. I find Buffer's actual compensation packages problematic.

The lack of negotiation ability makes what might otherwise be a fruitful business relationship impossible. I do not believe that transparency and negotiations are mutually exclusive.

Sincere counter-question: how can you retain talent with fixed salary ceilings? Why would someone stick around when they're leaving a ton of money on the table?

Entirely my opinion: this is potentially the A/B dichotomy.

If someone is developing their skills, is extremely productive, is increasing their worth, at one of these companies they can choose to leave money on the table (altruistically donating their higher value to a for-profit company) or leave. Are they a "bad culture fit" because they wanted to make what they are worth?

Thanks for the open follow-up response. Re-reading, I realise my previous response was a bit unnecessarily snarky. Sorry for that.

> I find it difficult to work with people who are compensated less than me. I want my coworkers to be better than me.

I much prefer that attitude to the opposite :-) Though surely even better is to work with great people whom you're learning from in a variety of ways, whether or not they are paid more or less or the same. A lot of the value that someone can bring to your life is not correlated with their value to the market.

> The lack of negotiation ability makes what might otherwise be a fruitful business relationship impossible. I do not believe that transparency and negotiations are mutually exclusive.

I can't speak for Buffer, but in GrantTree it is not that you cannot negotiate, but that you cannot negotiate in secret - so it's more a discussion than a negotiation (I hope... sample size is limited at the moment!). As I mentioned in my original post, we start the ball rolling by saying where we think you fit on the pay scale and why, and if that's not where you think you should fit you are welcome to engage in a discussion to help us get it right!

> Sincere counter-question: how can you retain talent with fixed salary ceilings? Why would someone stick around when they're leaving a ton of money on the table?

> If someone is developing their skills, is extremely productive, is increasing their worth, at one of these companies they can choose to leave money on the table (altruistically donating their higher value to a for-profit company) or leave. Are they a "bad culture fit" because they wanted to make what they are worth?

There's a really good question here and I don't have a great answer to it. If you or anyone has any suggestions I'd love to hear them. To an extent, part of my answer would be: surely that's true of any small company. People might grow faster than the company. When that happens, I guess they leave and move on to something else. I guess that's ok. It's not like everyone has to keep working for GrantTree for the rest of their life! People might leave for this reason or for another reason. I hope they then look back at GrantTree as a place where they grew and learned a lot, had a great time, made some great friends and did some worthwhile work. In that time, they contributed to GrantTree's growth as well as their own, so it's not like the company is left high and dry here.

And no, I don't think that makes them a "bad culture fit" in that sort of insulting way. It might mean they are no longer a good fit for working here. That's ok. People change. Companies change. Someone that was a good fit to work in a small 3-people startup is not necessarily a good fit to work in that company 20 years later, obviously. That doesn't have to be an insult or a put-down.

What about a simple policy of revisiting the salary discussion on a regular (annual?) basis. As long as it's transparent and universal (not just for people who ask for a raise), it seems like it'd be in line with your philosophy.

We do that already.

Does "people like you" mean individuals who want to be compensated appropriately? How much can the transparency of an organization be valued at?

""Instead, we run a pay evaluation process internally, including feedback about the value of the role and the person from all the people who interviewed the candidate. We publish all that feedback, as well as the suggestion/reasoning of our pay trustees (a group of people who use that feedback to try to place the candidate on our pay scale)""

Problem with this approach is that inevitably part of the formula is also "level" -- so you just converted one problem (negotiating $) to another (negotiating level.) That is when the real tricky people come in -- those who want a high level and just manage others, often adding no value (good managers add a lot of value, but if you tell people that the only way they can make more money is by being manager or senior managing level, then you force people who should not be managing into managing roles.)

> if you tell people that the only way they can make more money is by being manager or senior managing level...

This is actually a separate issue. A healthy engineering organization needs to have parallel technical and management tracks, with similar growth opportunities (both compensation and responsibility) at every level. On the tech track, think about a path that leads to CTO.

Of course, you'll still get people (in either track) arguing they want a higher level than they merit.

I read about someone who described his own salary negotiation: he writes the minimum salary he's willing to take, the recruiter writes the maximum they're willing to pay , then you show your numbers. If minimum > maximum, call it a day otherwise you continue the negociation.

His trick was to write a minimum of 0 as in if you're not satisfied with his job he won't take your money, supposedly he got much better offers doing the negociation this way, probably because he gets the other party to give a number much higher than what they would otherwise have said. Also it may have been for contracting work and not an employee position. (Can't remember where I read this, probably on hn though).

In a world of unpaid internships, I think there are probably a number of employers who would break out the contract with a big, fat goose egg on it if you tried this.

Another way to approach this problem is to not anchor salaries based on previous salary. I've worked at a company where we hired obviously talented people with little experience. We hired them on as jr devs, with commensurate salaries, but within a year their salaries had increased to their productivity levels (30-40%).

I've seen too many people with low salaries get "exceptional" raises of 5% when everyone in the company gets 3%. So you have an employee who works his way out of tech support into dev admin but he's the bottom of a very large band. There is no hope for that person to get to salary parity when mountains have to be moved to go from 3% to 5%.

> "in a salary negotiation the first person to quote a number loses"

This assumption is wrong. Read about the anchoring effect. Your process still seems fine though.

If the assumption is that employers tend to quote a higher initial number than prospective employees, then the anchoring effect supports the claim that the first person to quote a number loses.

What's that assumption based on? I would assume the opposite, that the employer negotiates in their self-interests, and tend to quote lower numbers.

Right, but even then, you're in a position to counter their initial offer and move up from there. If you name the number first, then it only has one direction to move (and it's not the good direction).

That rationale contradicts negotiation approaches that I've read about in a few places, specifically the idea of "anchoring." (Other commenters have also mentioned this) I'm not sure how much data there is to support either approach.

https://en.m.wikipedia.org/wiki/Anchoring

The problem with this approach is that no matter how transparent you are or what numbers/ranges/data you give, the candidates on the other end will always think you're taking them for a trip. It's the same problem that car salespeople at "no-hassle" or "no-haggle" dealerships deal with. Even though they really cannot budge on their out-the-door price, you'll still have tons of people trying to eat at their already minimal profit margin.

I'm not sure that there is an individual solution to this problem. EVERY company (or most companies) would have to be ultra-transparent about their salaries before people can trust something like this, which works against how a lot of high-profile companies currently compensate (i.e. fixed salary ranges, highly variable bonuses)

There's definitely a problem there, I agree. In practice, the people that we take to that stage of the interview process typically have quite a lot of self-awareness and also know a fair bit about our company by then, so so far it's worked out alright. But I definitely see that that could be a problem with some people. As I said elsewhere it's not something any company can just implement without thinking about it and have it just work. It takes a lot of work in many areas of the business.

Asking the salary question of a prospect is un-necessary, and doing it to find opportunities to low ball someone, it's game-playing - it's wrong. The company should know about how much that person is worth. Low balling really isn't necessary to live up to your management responsbilities on the company side of it.

On the employee side, best to get out of the question as quick as possible. One thing to say is, I have offers higher than that already. They can find out your current salary, but the other offers, doesn't have to be disclosed.

> The company should know about how much that person is worth.

If anything, a person would know even better how much they are "worth". E.g. they know the necessarily short interview wasn't accurate.

Not to that company. I may be worth 150 in the marketplace, but that company pays everyone 120. The company is finding people at 120 and balks at the 150. The employee probably goes somewhere else and that's it.

Yes, open information, even going so far as to teach your bargaining partner, is the best way to reach a really fair end result and making people feel that way.

None of those factors are why someone is worth $X salary.

You say I'm worth $X. I go get a job offer for $Y. If $Y > $X, you were mistaken.

It's both as easy and as hard as that, for candidates. If you want to get anywhere close to your earning potential, you'll have to have more than one option when job seeking.

It doesn't matter what you're paying other employees or whether that information is known to employees.

EDIT: To clarify, this is about market value, not intrinsic value.

No one is worth any intrinsic amount. The amount is relative to the work they do, the industry they're in, the state of the economy, how many other people can do that job, how many have actually applied, etc.

Any salary formula is entirely arbitrary. We have a pay scale simply because it is a useful tool for conversation, not because it represents any sort of intrinsic property of the person being placed on the pay scale.

If your main concern is getting paid as much as possible then we're probably not the right place for you to work anyway. We try to pay well but we certainly can't afford to pay as much as, for example, banking, or Facebook. Importantly, we have no interest in trying to sucker someone into working with us if money is their primary motivation. They won't like it here.

To answer a likely reflex-response to this: that doesn't mean we think people should be working for free, or that we judge people who want to earn more money. It's totally fine to want to make more money. Different people have different expectations and requirements at different stages of their life though.

> Importantly, we have no interest in trying to sucker someone into working with us if money is their primary motivation.

Are you a charity doing good work with orphans? Or are you a business trying to make as much money for the investors as possible? If the latter is true, why wouldn't someone work for you with "money as the primary motivator" ?

(This is not Rhetorical, I actually know nothing about your business. But I do see this argument a lot from companies that are 100% for profit and do nothing to better the world)

Neither. We're a purposeful, for-profit, founder-owned[1] company. Just because we are for-profit doesn't mean profit is our only motivation. It's a false dichotomy to suggest that because you want to make money that must be your only driver.

Our view of business is that, much like humans, it can achieve and balance multiple objectives. You want to make money: does that mean you want only that to the exclusion of or above other objectives like finding love, raising children, being a good person, etc? I assume not. We want to make money: does that mean we want only that to the exclusion of or above other objectives like having fulfilling work, working in an open organisation, being respectful of others, etc? No.

[1] Though opening up the shares to employees within the next couple of months... it's taken a while to put the right system in place. Options wouldn't work because we have no intention of ever selling the business.

Edit: Given your clarified question, I will also add that what we do is to help other tech businesses to raise government funding so they can develop cool tech. Many of them have raised money from investors - I don't think that necessarily means that their only purpose is money (though it's certainly true of some). See argument above.

I don't see why paying people less would lead to an improvement in love, family, being a good person, respect, transparency, etc -- unless you're saying that due to pay difference vs market, you'll also expect less work out of them.

And money is rarely the actual motivator. Often times, money is the mediator to the things that really motivate people, such as purchasing daycare and enrichment activities, splurging on medical care plans, financial security, etc.

> I don't see why paying people less would lead to an improvement in love, family, being a good person, respect, transparency, etc -- unless you're saying that due to pay difference vs market, you'll also expect less work out of them.

There's definitely no necessary causal link here. We aim to pay enough that they won't leave because it's too little but not so much that they will stay just because of the salary is too high. It's a pretty hard balance to achieve... not sure if we have. We used to phrase it as "pay people fairly" but then "fairness" is so relative as a concept that it is essentially useless.

Having transparent pay does have a clear link with creating a good working environment, in our experience, however - and transparent pay doesn't mix well with having salaries basically based on people's negotiation skills (rather than a more open system like I've described), in backroom deals.

> And money is rarely the actual motivator. Often times, money is the mediator to the things that really motivate people, such as purchasing daycare and enrichment activities, splurging on medical care plans, financial security, etc.

I wish that were always true... my observation is that some people are in fact motivated by the money, and the status that comes with being paid more than others, more than by the things they can actually do with the money. I find it puzzling, but so it is...

> not so much that they will stay just because of the salary is too high.

I can imagine a case in which a sufficiently high salary could lead to someone staying in a position for which they have no passion.

Still, like you say, it's a delicate balance, and on either side you of not getting good work out of your people. On the low end, you just wouldn't be able to secure high-value candidates. On the high end, you might keep people who have no interest in their roles.

I do think the latter case is less likely, though.

I can't find the study, but a South American government(I forgot which country) had the same fears. They wanted better employees and they were afraid if they paid them too much they would get people primarily interested in the money and not the job. But they decided to try it anyway, and lo and behold they were surprised to find the higher played employees were not only better employees but also more motivated intrinsically by the job. I would be curious to find any evidence to the contrary.

I try to be very suspicious when my views about how the world works line up with some way that I'm benefited monetarily. For instance it's very hard for me to have a clear and accurate opinion of oursourcing and h1-b's.

Practical example: my current employer pays me the same in base salary as my previous employer paid me in base salary + duty + overtime. Oh, and they do it without ever telling me I ough to work more.

For me this translates to happily walking the extra mile. It also means my wife is ok with me working a bit extra here and there because I love my job. And it means a whole less paperwork and talk about overtime or not.

I would float to you the idea that what you're reacting to is not necessarily the higher wage but the fact your new employer seems to trust you more and perhaps even care about you more.

Very possibly yes.

But it sure helps when telling my wife I should work a couple of extra hours.

> You say I'm worth $X. I go get a job offer for $Y. If $Y > $X, you were mistaken.

Here's the disconnect. In this scenario, I'm not saying, "you're worth X". I'm saying, "I'm willing to pay someone $x to do this job." If someone else is willing to pay you more for the same job (all else being equal), I'd advise you to take the other job.

If I can't find anyone qualified to take the job for $x within a reasonable period of time, then I'm below market and should adjust.

The beauty of that analysis is that it ties to current employee compensation as well. If my offers are below-market, then I have a much larger people problem: either my current team members are below market skills (bad) or are at risk of being poached (also bad).

As a candidate, I might look at that and value the culture it represents: transparency, fairness, likely diversity, people-centric...

The "we like people who care about more than money" (the passion gambit) can be a a giant warning sign. And is at the root of the "why would I accept less money from you than my market rate, so that you, the founder, can make more money" concern.

But it assumes that the owner, is in fact, making more profit "off your back". This might be false. The owner might instead care about investing back into people and the working environment: an indirect "perk", if you will.

Everything's a trade-off. No one is forcing you, as a candidate, to act against your best interests. There are just different kinds of interests.

Exactly. We know and recognise that pay scales are arbitrary. We are trying to get it right by neither underpaying nor overpaying. We are also trying to get it right by enabling a mature conversation on the topic, so instead of feeling undervalued and quitting after finding a better job, people within GrantTree can simply start some sort of process to get their pay adjusted to what they believe is a fair market value for their work. Alternatively, they might find out, through the process, that their work is not valued as much by others as they value it. This, if they are humble enough, is a signal that either they should be working on something else, or clarify to the rest of the company what the impact of their work is. Either way, this is an open process accessible to all, instead of something behind closed doors only available to those who are ballsy enough to ask for a pay raise.

It's far from perfect, and it's often difficult and demanding of people (particularly those who are on the various pay task forces that assemble and disband to make changes or evaluate people), but it's working alright so far for us. It's also a huge learning opportunity for everyone involved.

> But it assumes that the owner, is in fact, making more profit "off your back". This might be false. The owner might instead care about investing back into people and the working environment: an indirect "perk", if you will.

There is no good idea humanity has ever had that cannot be twisted into a trap to fool people... unfortunately every good thought ends up being used by someone somewhere to screw someone else over. I like to think we (my cofounder and I) are on the good side of that assumption, but it's important for us to remember that if we shift to the wrong side of it then the whole system becomes polluted by this desire - or rather, this fear of not having enough.

So why would I accept less money from you than my market rate, so that you, the founder, can make more money? At the end of the day there is 1 pie, why should I donate part of my pie to you?

Because the job is more interesting than the alternatives? Because there is room for major career growth? Because the work/life balance is better? There are tons of reasons it would be preferable to take a lower-paying job. Salary is by far not the only consideration (and for some, not even the most important one).

You would accept if:

- You're not broke

- You think the work would be more interesting/fulfilling than places that pay more.

Of course, I'm sure there's a tipping point where you don't care how interesting the work is. But in my mind you'd use the above criteria if someone is offering you $95k/yr when you're currently pulling $110k/yr.

Ok I accept that answer at face value.

Now, is the inverse also true? If I take a job with you- can I work 4 day work weeks and stick strictly to the 8 hour workday?

Money is not your only motivator so I don't see why this would be a problem for your employees.

We have two people who are on 4-day weeks. It depends on your role(s)... Some are less compatible with part time work.

They get same, equal salary then to the 5-day 40 hour people? Otherwise it would look like you're just profiteering as your main motivator.

Interesting. Why do you think that would be "profiteering as your main motivator" to have as a general principle that as you scale your work you also scale your salary? I'm not sure how that follows. It also seems to be the general principle in all the companies I'm aware of that support part time work, but perhaps there's something I'm missing. I'm all ears.

>Why do you think that would be "profiteering as your main motivator" to have as a general principle that as you scale your work you also scale your salary? I'm not sure how that follows.

I'm in 100% agreement with you. So you do pay less to those who work 4 days a week. That's fine and it makes sense. Just confirming.

Then I don't even need to ask: you're also saying that for every hour over 8 hours staff is paid overtime? That would be consistent with paying 4-day a week folks less. And would be the nail in the coffin that profiteering isn't your main motivator.

No, we don't pay overtime. There hasn't been a recent decision about that, so it's more a historical artefact at this point, but my rationale for not paying overtime (apart from the fact that it's uncommon to get overtime pay as a full time employee in the UK) is that I don't think overtime should be encouraged in any way. For the same reason we don't allow people to sell their (30 days) yearly paid holiday allowance back to the company - the days are there to take them, not to trade them for a bit of extra pay.

If I'm understanding your argument right, I think you're saying that because we try to evaluate how much people should be paid in a rational way that includes some assumptions around time being correlated to amount of work, that means we are "profiteering". I'm not sure that's worth dignifying with an answer, but here goes:

GrantTree is a business. We need to make a profit in order to continue to exist, to grow, to be an exciting place to work, to have the resources to invest in our people, to be able to develop new products, and so on. We also need to compete against other businesses in the same market, some of whom are quite aggressive. If we get the balance between people's contributions and their compensations wrong, we'll be uncompetitive and won't survive. It's that simple and has nothing to do with profiteering.

I commend the decision to not encourage overtime, and in the UK that probably doesn't take much pleading for you to achieve. I've lived and worked in France and worked closely with most nations around the world including the UK.

Ultimately from your description it sounds like the increased non-profiteering wages would not come out of company profits. Thus in the end it's just like all the other businesses then. No need for all the flowery language about how there's other priorities than making money. If you had to ditch everyone and go to Malaysia to "be competitive" then you'd do it.

If you are "for-profit, founder-owned" do you likewise plan to have a cap on how much you, the Founder, can make both in salary and equity/dividends/exit event like your employees?

I think the sentiment you are seeing here (not necessarily taking a side, just playing devils advocate) is that it might seem a little hypocritical to portray a culture where compensation caps (and ones that seem a little below market rate judging by other comments) are expected when there is no limit to the upside you as the founder might see down the line or from a potential exit down the road. Startups are inherently risky for employees, and while Founders certainly shouldered more of the risk, employees are typically rewarded with equity worth the risk, market rate salaries, or some combination. To not compensate employees in such a way seems like it might be taking advantage of a mindset when you the Founder might not be held to the same standards.

Again, if addressing this very issue is part of the opening up of the shares to employees you reference, awesome. This is a very hard problem to tackle and one where it must be damn near impossible to get everyone on board, so I commend you for making the attempt. I'm making lots of assumptions that I hope are simply not the case. Just wanted to clarify and push a bit more on why there seems to be a consistent theme to these comments.

Because getting to the point of being a successful business is a really long road, and going down it with someone whose primary motivation is to make money for themselves is going to make that trip way less fulfilling.

I assume everyone starting or working for a for-profit business is primarily (though not solely) motivated to make money for themselves. Otherwise, they wouldn't be starting or working at a for-profit business.

That assumption doesn't bear out in practice, in my experience. There are plenty of people who believe that for-profit businesses can also achieve great, positive purposes in the world, and want to be a part of it.

Cases in point: Tesla and SpaceX. They aren't charities. They are very purposeful.

Charity vs. for-profit is a false dichotomy. A charity is a specific form of non-profit. In addition, there is the (relatively new) benefit corporation which, while technically for-profit, has explicit non-financial goals.

That said, nothing about being motivated by money means you can't have a purpose as well. That's why I was careful to draw a distinction between "solely" and "primarily". Making money while also improving the world is just enlightened self-interest.

Tesla and SpaceX are both massive exceptions to the rule, not examples of the norm.

You are not Tesla or SpaceX.

And in fact if you want to write code that goes to space, you have 4 or 5 options top in the US? Vs many other business models (webapps for music) there may be 50 or 100.

> Cases in point: Tesla and SpaceX. They aren't charities. They are very purposeful.

Those are just two companies, ran by the same guy. I think finding even a couple dozen more examples would be very difficult.

Have a look at the companies listed halfway down the page on http://danieltenner.com/open-cultures/ . Not all qualify as purposeful orgs, but quite a few do. Reinventing Organisations, mentioned on this page too, is a book that studies a dozen examples of purposeful, open culture organisations, if you're interested in learning more about this.

Funnily enough, Elon has a reputation for paying below market.

> Are you a charity doing good work with orphans? Or are you

> a business trying to make as much money for the investors

> as possible? If the latter is true, why

> wouldn't someone work for you with "money as the primary motivator" ?

It is possible to offer a fair return on investment without having to take every possible step (ethical or otherwise) to maximize profitability.

Some would argue that developing a purposeful organisation (whose purpose is not just to make money) actually also produces better returns, but I think the jury's still out on that. There are some striking examples but they might be cases of survivor bias.

Seriously, if you can't afford a great employee, that's fine. But don't try to belittle someone because of your company's incompetence to pay. And don't stand on a morale high ground. It is disgusting.

> To answer a likely reflex-response to this: that doesn't mean we think people should be working for free, or that we judge people who want to earn more money. It's totally fine to want to make more money. Different people have different expectations and requirements at different stages of their life though.

No belittling intended.

Sounds reasonable.Was this added after I replied?

Nope. But don't beat yourself up over it! Missing a piece of a comment happens all the time. Hopefully you see there was no offence intended to people who have different views on this. I think it's totally fine that different people think differently about these topics, and I don't consider my view superior in a general sense. It just works better for me.

"If your main concern is getting paid as much as possible then we're probably not the right place for you to work anyway"

That kind of phrasing is generally code for, "We pay crap wages and expect you to live at work."

Generally, perhaps - not in our case. We pay what we (meaning, the staff, who decide their own pay) believe to be a good wage, and we have excellent work-life balance - we have a number of new parents who have commented that GrantTree has been a very supportive culture for them in the first 6-12 months (which are pretty hard apparently). And we have remote work, flexible working hours, etc.

> we have a number of new parents who have commented that GrantTree has been a very supportive culture for them in the first 6-12 months

"I was 20 minutes late because I had to take my newborn to the hospital and they only gave me a written warning!"

>And we have remote work

"On the fifth wednesday of every month I can work from home!"

>flexible working hours

"I worked from 9am to 10pm yesterday so I get to come in at 10am to 10pm today!"

GrantTree might be one of the few outliers here and if so I congratulate you, but this is typically what employers mean when they say those sort of things.

> "I was 20 minutes late because I had to take my newborn to the hospital and they only gave me a written warning!"

Or: since my child was born I've been able to be home by 5pm every day without any problems.

> "On the fifth wednesday of every month I can work from home!"

Or: one of our people is currently taking part in Remote Year. He's just spent the last few months in South America. http://remoteyear.com

> "I worked from 9am to 10pm yesterday so I get to come in at 10am to 10pm today!"

Or: we don't track working hours at all, and people often choose to work from home or do whatever makes sense given their circumstances. They work because they want to get their work done, not because someone's hovering over them with a finger ready to point at them.

> GrantTree might be one of the few outliers here and if so I congratulate you, but this is typically what employers mean when they say those sort of things.

Yes, it is quite sad that every good thought gets copied and corrupted. I can't do much about that.

Nice. Spoken like either 1. A trust fund kiddie with privileges to work for pleasure 2. An older person who purchased their family home before they started costing 3M$

Try again: 3. a couple of migrants from Romania and Poland with no starting wealth, living in a flat that we couldn't even afford to pay for (but my cofounder on the previous business, which bombed, basically let me stay in his flat on the promise that I'd pay when I had the cash) back when we started GrantTree. Add onto that that my parents fled Romania in 1980 with nothing and I was stateless until about age 12.

There are many, many people starting from far worse conditions, though, I'm not complaining. I had a stable childhood, a good education and I have great friends and parents and an amazing wife and cofounder. That's worth way more than any trust fund or inflated property.

>we have no interest in trying to sucker someone into working with us if money is their primary motivation.

If money is not your primary motivator, why can't you pay more?

Nice! This comment is spot on!

A company still has to have money in order to operate. I would assume that even without money being the primary focus, they have to be careful about paying out too much or they will be out of business.

Indeed. We are in a highly competitive market, and have a number of interesting projects going on to disrupt that market that won't pay off immediately. If we don't manage our costs reasonably well we won't stay in business.

Money is like rocket fuel. If you're accumulating it for its own sake, rather than to get somewhere, I'd say you're doing it wrong - but that's just my opinion...

The individual employee can say that too.

I'm in a highly competitive housing market, and my children are in a highly competitive educational market. A number of interesting projects that won't pay off immediately.

Since when is an individual expected to just defer to a greater good in an employment arrangement? Which is most likely "at-will"?

I'm certain the shareholders and executives aren't making such self-defeating sacrifices.

> Since when is an individual expected to just defer to a greater good in an employment arrangement? Which is most likely "at-will"?

1) You should never "defer to the greater good". I would not advise it. If this environment doesn't offer something of value to you definitely do not apply or join such an environment.

2) I completely agree that this approach is incompatible with the ultra-violent approaches to "at will employment" of the US and much of Europe. I find the process by which most people are fired in american companies abhorrent. I don't want to go into too much detail about what our current process is to deal with situations where there is a performance problem, but basically it involves engaging with the person and providing them with a lot of support to help them figure out what the problem is, and how they can fix it, and offering them a number of decision points about what they can do to fix it. Obviously, from a distrustful viewpoint this might seem even worse than a clean firing - and rightly so. This kind of stuff absolutely doesn't work in a distrustful, fear-driven environment.

> I'm certain the shareholders and executives aren't making such self-defeating sacrifices.

On what basis are you certain of this? Do you know something that I (cofounder) don't? I suspect that in the long term this approach will result in a more successful, longer lasting company that I feel even more proud of being a part of, so I don't think it's self-defeating in the long term - I disagree with doing anything self-defeating, I think no one appreciates it and it rarely results in anything good. But I don't know for sure that it will actually result in a better company. In the meantime, my cofounder and I could certainly have taken far more money out of the business and have not done so, so your assertion is incorrect in the short term (5 years) at least.

If you are not paying top of market wages, one or more of the following has to be true:

1. You don't believe top developers are intrinsically 'worth' the amount that FB/Goog/Amzn/ and many other SV companies pay, that it's not a net win for the company to have top talent.

2. You think that you don't need top developers, that really you're just going to be fine recruiting a bunch of B players, and it's some other 'thing' (business? Sales? Marketing? an 'idea'?) that will make you better than competition.

3. You are incapable of harnessing top development talent to produce adequate ROI that would justify top salaries.

Money is not my primary motivator, I love my job. I wouldn't leave just for more money. However, salaries in a certain ballpark are a strong signaler to how much a company values software engineers.

I think it's insulting to see developers significantly underpaid and have you attempt to justify it the way you do. If money is not your primary motivator, wouldn't you be OK taking a bit less salary and having that distributed out to other team members?

Most of our hires are not developers. We're not building cutting edge tech. We have some internal tools but I don't believe they require "top developers" by whatever metrics Facebook might use. That said, I think the few developers we have are exceptionally good - versatile, multi-skilled, quick learners, broad experience, the ability to conceive, manage and run a whole software project without very little help... and whatever they decide to develop, they do develop. As a developer myself, tech cofounder of my two previous startups, I rate them as excellent developers and would be happy to work with them on any project. One of them, with no academic credentials, is the smartest person I know.

Re: your second point, I don't believe in the concept of "B players". See http://danieltenner.com/2014/09/11/there-are-no-b-players/

I am sad that you see this as insulting. I'm not justifying anything. These developers (like others in the company) have largely chosen their own salaries. One of them is in the top pay bracket in the company. They also chose my salary, btw.

Where does it say GrantTree pays significantly less than market rate?

Note: I'm not the parent poster.

> 1. You don't believe top developers are intrinsically 'worth' the amount that FB/Goog/Amzn/ and many other SV companies pay, that it's not a net win for the company to have top talent.

You're conflating two things here.

I don't think that "top developers are intrinsically 'worth' the amount that [[..]] SV companies pay" (emphasis mine).

There is nothing intrinsic about a developer's value. A developer's value to their company is some proportion (<100%) of the value they add to the company.

Their value to FB is unrelated to their value to XYZ Corp.

> it's not a net win for the company to have top talent

That does not follow from a view on the intrinsic value of developers. I know that it is a net win to have top talent, but:

a) They might not be "worth" (to me) what FB etc will pay them.

b)I might not think that I have to compete on salary to get top talent. I may have a method of convincing talent to work here based on non-financial incentives.

>)I might not think that I have to compete on salary to get top talent. I may have a method of convincing talent to work here based on non-financial incentives.

Great point and I sort of side stepped that. It's not one not talked about enough. I didn't get a sense of that from the poster I replied to, but perhaps there is a compelling story there.

Money is the primary motivation to work. Would you be upset at an employee for working on their own project or for a different company during business hours? If you would not allow this then money is your primary motivation. You are giving money to the employee for ONE reason, you are buying their time to produce something of value for your company. Saying you aren't interested in people who are primarily motivated by money in a job comes across as disrespectful of the time of the employee.

As someone who once took a 50% pay cut to do do something I wanted to do (work in Japan) and another 25% pay cut many years later to work on a project I really wanted to work on I don't know if I can agree that money is the primary motivation to work. Maybe for you? Maybe even for most people? Although I don't think I know a single person who is working for money. If that's all they wanted they'd be doing jobs that pay more.

> Money is the primary motivation to work

For the overwhelming majority of people, the decisions about work are a balance of competing interests.

I could go out and get a part time job working on weekends, and make more (overall) money, but I don't because the money I make in 5 days is enough, and I place some value on my free time.

But the reverse it true, I could probably convince my employer to let me work 4 days a week for a 20% pay cut (or 0 days a week for a 100% pay cut), but that would drop my pay below the level I want/need in order to support my family and be able to do things on the weekends.

I could quit my current job and go back to working in finance for more money than I make now. I don't want to. I've done that, and I prefer the work I'm doing now, even if I'm paid 20% less.

I could quit my current job and go work for a charity and make 50% less than I do now. I don't want to take that sort of pay cut.

It's because of these balances that we have some well educated, highly employable people making a (relative) pittance as school teachers. And why some people spend their evenings doing open source "work" instead of taking on a second job.

Very few professionals in western countries have money as the single primary motivation to work. Once you can afford to pay your bills and maintain a comfortable lifestyle, you become quite willing to trade off the extra money to increase your overall enjoyment of life, whether that means more leisure time, or more interesting work, etc.

It is quite reasonable for for-profit companies to aim to provide a compelling work environment through factors other than pure financial reward.

It's also quite reasonable for workers to select job opportunities based entirely on the financial reward (though I think that's actually relatively rare).

That company and that worker are probably not a good fit for each other.

What percentage of the revenue derived from an employee's labor would he receive, in an ideal world? The correct answer to this is probably something between 30 and 70 percent, depending on a variety of factors. The real-world answer to this is "however little we can possibly share, because we want to hoard it all for ourselves", and personally I find that to be a distasteful reality (I find most investors' justifications for their wealth very hollow, they usually all boil back down to "well, I started with more money than them"). Employees have way undersold themselves; I think objectively, most professional employees would probably still be quite profitable to the company if their salaries were quadrupled. And to answer a likely-reflex response to this, yes, I have run companies with employees before.

Considering that founders are making themselves fabulously wealthy on the backs of their employees, I think we'd all appreciate a little bit more respect than you're showing when you poo-poo employees who want something more closely approximating 1/4 of the share they actually deserve.

I'm not fabulously wealthy, nor do I expect to get so from GrantTree. Yes, I am fairly well off at this point, able to buy (jointly with my wife) a small 2-bed flat in an ex-council flat in London - that's after spending 5.5 years starting a business that has raised over £35m of government funding for 600 UK startups and employs 27 people. If you think that's fabulous wealth, you have a different definition of it than I have. Yes, the business is technically worth a pile of cash (we're about to do a valuation for the purpose of issuing shares to employees so I don't know yet exactly how much), but we're not planning to sell the business so that can only be realised through long-term survival and success of the company.

The team has themselves set a target for wages to 40% of revenues, in line with your suggestion. I would have set it higher (and in fact right now our wage bill is closer to 60%) but that was not my decision to make. The 40-60% is of course not evenly distributed, though I would also quite like the thought of that, but the team themselves decide how to allocate it, so I guess they're doing the best they can.

I find the reality you perceive distasteful too - and I agree that it is widespread and it is sad that that is so.

This isn't correct.

When I say you're worth $X, I mean: "you're worth $X to me".

If you get a job offer elsewhere for $Y, you're still worth $X to me.

Even more pedantically: it's more like "you're worth at least $X to me" where there is some unknown maximum $X+delta that $Y may or may not be within.

> You say I'm worth $X. I go get a job offer for $Y. If $Y > $X, you were mistaken.

Not necessarily. The first employer says I'm worth $X to them. The fact that I may be worth more than $X to another employer is not a contradiction.

In general, there is nothing "wrong" with a particular employer and applicant being unable to agree on a mutually satisfying salary. It doesn't necessarily mean either party made a mistake in the salary negotiation.

According to standard economic theory though, the fact that someone says "I'm worth $X to them" is completely irrelevant and, because the transaction never happened, never becomes data. That's how market rate is determined and generally why D/S curves only have 1 intersection point - the point at which the transaction occurs.

The only data point that matters is the one where you got hired and started receiving paychecks, all others are not factors at all.

> According to standard economic theory though, the fact that someone says "I'm worth $X to them" is completely irrelevant and, because the transaction never happened, never becomes data.

I don't understand that. If an employer offers $X, I'd say that means the applicant was worth at least that much to the employer, assuming the job offer was legitimate. I suspect it's fairly rare to get an offer for $X, only to find out that the employer was lying and won't actually pay that much.

I have seen quite a few employers and some of them are noticeably much better at converting developer work into revenues than others. Those companies are able to offer higher salaries even to worse developers, simply because they can make more money on every quality-equivalent unit of work.

The $Y amount may be higher than $X because you are actually worth $Z to a median company, and $Y > $Z because that particular company is in the 90th percentile at turning developer work into revenues, and $Z > $X because that company is in the 20th percentile.

So, generalizing, the company that is capable of offering the most to you is going to be better at managing development teams, which is usually a symptom of being a better employer overall.

> You say I'm worth $X. I go get a job offer for $Y. If $Y > $X, you were mistaken.

Not at all. Company A may value you at $X, and company B may value you at $Y, and they may both be right.

I think the disconnect is that a certain job might be worth $x to the company. If the industry rate for that type of worker is actually $y then as much as it sucks for the company, it just can't afford that to buy that role right now.

You can offer $x and explain your reasoning, but if $x < $y, you might not get any candidates. Don't then complain about the "shortage of qualified tech workers".

You're absolutely right. Firmly agree you are worth what you can get in the market. This is why there's so much job hopping. Salaries don't tend to rise with market value--they tend to rise (or not) based on some company-derived formula that's based on some largely irrelevant measurement of the employee's performance.

What's my house worth? Who knows until I go try to sell it?

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