Somewhat incomplete article... what is he saying? that you shouldn't pay people well?
There's a lot I don't know about business, but here's an idea I haven't heard of: pay people very little, but with immediate raises. I think the common wisdom is to avoid raises until you have revenue, but if you're going to spend, say, 60K/yr on someone and have funding for one year, you could structure the 60K in such a way as to provide 5 or 10 percent increases in paycheck for the entire year. Since people are happier about getting a raise than having any given amount, this might maximize payroll satisfaction.
What happens in year 2 on the job where its no longer possible to keep raising the pay on a regular basis?
Also, the idea is not to prompt working harder because people actually think they're getting raises, but to make people you've already hired happier, on the assumption that happier people produce more/better.
OK. I stand corrected.
What do you do if, halfway through the year, the corporate board tells you to cut spending? Do you keep your promise to the employees, and risk offending the board? I've had similar continuous-pay-increase ideas, myself, but I'm not sure about promising them up front.
I like the idea of paying partly in equity, by the way. That way the employees are actually part of the company (co-owners), and they can genuinely feel they are building something that is theirs. Maybe the equity payments could be increased over time.
Whatever you would otherwise have done. If you have to lay people off, you lay people off. Since the yearly pay is known in advance, the only odd bit is the schedule of payments... if you have to lay someone off, you've actually spent less than you would have if all their paychecks are the same. But the details of all this aren't really the point -- I'm sure they could be worked out, if someone wanted to try it. I may if I hire employees at some point.
Paying partly in equity seems nice, but it seems even less sustainable than distributing an employee's paycheck unevenly.
In a company that were not growing, it would indeed be unsustainable to pay in equity (unless the value fo the equity were continuously shrinking. But why would a startup company not be growing (valuation rising)? Unless it is a failure, isn't it normally growing?