It does mean that there's some people you won't be able to hire, if they demand a higher salary than their peers and won't budge on it - but then again, I'm of the view that I'm better off not hiring those anyway. I think the benefits of having an open, trusting, transparent culture far outweigh any benefits a single individual can bring to the company. Someone who's willing to damage the culture of the company for their individual benefit is probably not someone I want in this company.
What are those cultural benefits? Well, for example, because we are transparent all the way through, this is also reflected in the very open and relaxed culture, and it then is reflected onto our clients - after all, your employees will treat your clients in the same way you treat them. Most companies are "open" in quotes, but then when you get to sensitive information they closed up, which sets up an uneasy tension. We don't have any uneasy tensions at GrantTree. That's a huge benefit to me. I don't like dealing with uneasy tensions and lying to people and hiding stuff.
It's important to combine transparent salaries with transparent ways for people to increase those salaries, in my opinion. If you don't, people will feel stuck (transparently so). But if you do, people will feel that there is a known path for them to increase their pay and they'll work on that path rather than try to ingratiate themselves to get a pay raise in private.
Any further questions about this - feel free to ask. I'll do my best to respond.
PS: If you're in London and looking for a client management, sales or office manager/admin/support role, or if you know someone who is, we're hiring!
Client Manager (x2): http://blog.granttree.co.uk/post/45842335082/join-us-at-gran...
Office Manager/Admin/Support (I really don't know what to call that role): http://blog.granttree.co.uk/post/43396425717/come-work-with-...
Sales: http://blog.granttree.co.uk/post/38246842231/join-granttrees...
So what you are saying is that you are perfectly happy hiring average people and you won't hire people who are better than those already in your employ?
There are a lot of benefits to working in a company like GrantTree that are worth more than the money - and you can get the money eventually, anyway, you just have to earn it. At this stage, though, if your main concern is getting a high initial base salary, don't work with us. In my experience, concern about initial base pay is entirely uncorrelated to how good you are.
Edit: another way to look at it, is that what you're describing is someone who is both exceptional and an asshole. My view is, if you interview someone who is like that, don't hire them. Hire only people who are exceptional but not assholes.
And there is at least decent correlation between ability and the compensation you've received over the past several years.
Agreed. But we're talking about desires, not actions, then.
This "asshole" label comes off as a strong-arm negotiation tactic on your part. (I may be wrong, but that's how it appears. If I am wrong, please enlighten me).
Not at all... However, if/when on the end of a conversation with someone we're hiring, they say "But I need more money", then I explain the system to them. If they then say "I really like your company, but I'm afraid I won't be able to take the offer because it's too low" that's fine. That's not being an asshole, that's just being realistic about what kind of role is a good fit for you. After all, if you have a massive mortgage and 3 kids, getting a massive pay cut - however short-term it may be - is simply not an option, no matter how much you want the role.
If, on the other hand, having all the stuff in this discussion basically explained to them, including why I can't give them extra pay initially because it will damage the company culture, they then proceed to insist that they want to get some extra money somehow "because they're worth it", and start explaining to me why they're worth the extra money, and so on, then either they just don't get it (and then they're a bit stupid), or they just don't care about the company they're thinking of joining, and in that case I would be happy to declare them an asshole.
And there is at least decent correlation between ability and the compensation you've received over the past several years.
Agreed, but I didn't talk about "earning a higher salary", I talked about demanding a higher starting salary in a context where it has been explained that that's not possible.
And I agree -- if you pull that off, and if you follow through with the reward, then it allows someone to take a lower starting salary, knowing that it is just a matter of time until things get back on the right track.
But for many kinds of work, including software development, I've never seen anyone figure out how to quantify individual contributions directly (as Paul Graham talks about [1]). Maybe your company has fewer of those kinds of jobs.
That is true and a fair criticism. I'm only talking about the example of my company, not declaring universal rules. :-)
Doesn't this create a culture of constant value fixation and envy? People think in terms of comparisons rather than absolutes, doesn't this encourage comparison thinking?
Doesn't this create an odd culture setup where you can't promote superstars without getting clearance from everyone else (or at least creating drama), even those who are in no place to judge, or even understand what the superstar does for the company?
Does this work as a sort of mob-justice system for keeping employees from asking for more money... because now they have to do it in public and get labelled / deal with the politics of it?
The way this manifested itself is that after the first salesperson earned their first bonus (pretty substantial), there was certainly a bit of envy. The solution to that was to create a relevant bonus scheme for the operations/client management side that enables them to earn bonuses as well. For client management, instead of being based on new sales, the commissions are based on client retention and getting referrals. This way, client managers know they can earn good money too - they just need to do stuff that brings income to the company.
> Doesn't this create an odd culture setup where you can't promote superstars without getting clearance from everyone else (or at least create drama), even those who are in no place to judge, or even understand what the superstar does for the company?
Bearing in mind we're a relatively young company, this problem hasn't occurred and I don't see it occurring any time soon, for two simple reasons: 1) the "superstars" can see what the benefits of this open, transparent system are, and they want it to continue, so they don't want to break it for their own personal benefit, and 2) if they're superstars, then they're already earning a good bit of money in commissions.
> Does this work as a sort of mob-justice system for keeping employees from asking for more money... because now they have to do it in public and get labelled / deal with the politics of it?
I guess you can see it that way. The way I look at it is not that anyone is afraid to ask for more money - in fact, I would hope everyone wants more money. But they know what the answer will be. There's a known, proven way to increase their base salary quite substantially every 3 months if they put in the effort, and there are known, proven ways for them to earn commissions. So if someone wants more money, it's there for the taking. Why break the system by asking for an exception, when there's ways to achieve the same result relatively quickly within the system, that don't break the transparency culture?
Would an adjustment down be possible (sorry sales, had to move 1% of your commission to ops to stave off a revolt!)?
Do you find the "boil the frog" method to help with this transparent structure? Giving someone 5x 2k raises over 15 months is far less of an event than giving someone a 10k raise after a yearly performance review. Was this something you guys thought of intentionally, or just the way you wanted to run the company regardless of the transparent structure?
It is privately owned, by me and my cofounder, with no external funding, so we can do whatever we want. Bearing in mind the company is less than 3 years old, there will still be a lot of adjustment to do before we arrive at a configuration that I would call "final" (though I suspect it will continue evolving... after all, it's made of people!)...
> Would an adjustment down be possible (sorry sales, had to move 1% of your commission to ops to stave off a revolt!)?
We could, but I wouldn't... that would seem unfair. Sales do give up part of their commission but only when the sale is heavily dependent on ops, for example when it's a referred client (they were presumably referred because they got great service) or when it's an "enhancement" client where we go in and increase their claim size (there's a lot of technical work in that).
> Do you find the "boil the frog" method to help with this transparent structure? Giving someone 5x 2k raises over 15 months is far less of an event than giving someone a 10k raise after a yearly performance review. Was this something you guys thought of intentionally, or just the way you wanted to run the company regardless of the transparent structure?
I hadn't thought of it that way. From talking to our team, I think they're happier being able to earn smaller pay raises regularly, rather than having to wait a whole year to find out if they "made it". That was intentional - I don't like the way many companies wait a whole year to tell you whether you're doing well enough to deserve a pay raise, and right from the get go I decided it would be a six-monthly process, and then made it quarterly.
Sadly, it seems like this would only work in a specific "flavor" of industry. For example, wouldn't work for a software product that takes 3 years to develop and then is funded by ads. But, if you are in a sales-focused industry with short customer turn around, sound great.
When I start a software business, I'll solve the problem in that context too... you might have to wait a few years before I can talk about it though ;-)
My biggest worry/concern is with people who would take that information and use it against you. In particular the whole "lies and statistics" thing.
For example, what if someone ran the numbers and found that across your entire company women got paid on average 10% less than men. Then tried to start a class action suit or otherwise create a huge hassle about it.
Even if your procedures are entirely fair and transparent, there are a great many people, I have found, who will intentionally ignore facts that go against their preconceived notions (like the media for one example).
Does this kind of thing worry you? Would you change the policy if someone did make a huge stink about it?
Ok, perhaps there is some management discretion in setting the goals, but it'd be pretty obvious to the whole company if someone is being set harder/more goals than someone else, so I think this sort of stuff would be dealt with pretty quickly.
There's always a chance that someone will try and sue you for random reasons, even in the UK. This is the kind of thing I'm not going to worry about until it actually becomes a problem, though. Hopefully I will not hire the kind of person who would pull that sort of shit... interesting point though.
So while I am 100% on board with transparency, I also believe it can have a backlash. There's no way to predict it, but creating path for someone to increase their salary and letting it be known before they sign the contract is a good idea.
Absolutely. You can't have transparency and no way for people to raise their salary.
Transparency is great, but often times one person makes more money than another because of a combination of skill set, negotiating power, gender and relationship status, not to mention relationships with other people in the company and the word we hate (favoritism).
There's a way to sidestep all those. First of all, negotiating power does not enter into the equation at all, since the pay is all public. It's (rightly) illegal to discriminate on gender (and I'll go headbutt a wall quite hard if the thought "we can pay her less because she's a woman" ever dares to enter my head). Skill set is measured by the results you bring to the company, not by some vague abstract measure. As for nepotism or favouritism, that just takes some minimal self-discipline, imho...
So while I am 100% on board with transparency, I also believe it can have a backlash. There's no way to predict it, but creating path for someone to increase their salary and letting it be known before they sign the contract is a good idea.
Too many people, entrepreneurs and others, seem to be afraid of paying more money to employees... I find this whole fear ridiculous. I want to have a good reason to pay someone more, because that means they're bringing a multiple of that extra value to the company. If I pay someone £16k a year, it means they're bringing relatively little value to the company. If I pay someone £50k a year, that means they're bringing several times that value to the company.
In short, being afraid of offering ways for people to earn more seems silly to me.
Google makes 96% of all revenue from advertising, yet obviously they don't channel all 40+ billion dollars into the adwords group -- because the companies value / trust / products / features are way more complex than that simple (but accurate) number.
Overall, I would say this has not been a bad thing for us employees. 1. Transparent government is a good thing. 2. I am very sympathetic to a number of people who receive less base compensation then they would in the private sector with similar responsibilities. 3. It shows the importance of career path as there are bands per department (e.g. engineers in one range, computer people in a separate range).
Still, there are down sides. 1. The upper management has found ways to hide salary and compensation. 2. It does lead to some discontent when people are told their is no money for a raise, but person X manages to get one.
This is both a positive and a negative in a few ways:
A couple of positives:
Nobody else knows how much I earn, there isn't any envy for the people junior to me and it doesn't make them feel undervalued - as someone who used to work for less than minimum wage, I know how demoralizing it can be to know how much less valuable to your employer you are than other people.
I don't get jealous of the people above me, I know they have nice cars and bigger houses, but I'm not constantly thinking about this figure and trying to work out why in the hell they are £30,000 per year better than me.
A few negtives:
Negotiating a higher wage is much more difficult, I don't know that A co-worker of equal level gets £2,500 more than me per year just because he negotiated, so I'm more likely to stick with the status quo.
It becomes taboo to speak openly about wages, the boss hides it from us, so we hide it from each other. Any questions to each other are effectively met with "none of your business."
Feeling uncomfortable talking to my employer about wages and increases in salary makes me more likely to leave a company - it's far easier to go to an interview and negotiate with a stranger you don't care about than potentially having hard feelings towards someone you have to work with daily if they refuse you a raise.
Seems to me that rejection is rejection either way (compared to another employee, another company or just in absolute terms).
I think a better idea than going completely transparent is to calculate the group or division averages and publish that number. It offers some of the benefits of transparency while depersonalizing the controversial data. But of course that would only work in mid- to large-sized companies.
I was in an awkward situation where I was paid much more than other people who joined at the same time as me. One day one of my coworkers found out (due to some accident in distributing stubs) and the relationship became really tense -- he thought he deserved more pay (even though he did half the work I did, he saw it as a measure of the value of his time)
You covet what those around you have, you compare yourself to those around you based on the little knowledge you have about them and everything else going on.
Transparency is easy for pay, but not for value.
So transparent salary can be good if everything else is transparent also - otherwise it is very bad and leads to terrible politics.
You might argue that developers are not that closely connected to the company's income (I can see how that would apply). But in my experience, developers tend to care about earning enough money but they're not obsessed about making large commissions, like salespeople are. So if we had developers at GrantTree (we don't), I would simply offer them the choice to move into sales if they prefer the money to the benefits of being a developer (which is a hell of a lot less stressful most of the time, let's face it).
Sure, that means that you'll need to find a new developer to replace them if they succeed in making the shift, but on the good side, you'll have gained a good, highly technical salesperson (worth their weight in gold), and if they weren't happy being a developer, they'd probably have left eventually anyway.
Developers can have very high stress jobs (in critical infrastructure software, which there is a great deal of, software bugs kill people). The hours you put in in as a developer in a start-up shop is mind boggling.
Developers often have to invest months (or years) of time and effort before their work can come out as a product, and their value is exceptionally hard to quantify.
EDIT: sorta, rewrote most of it.
Unfortunately this is consistently disproven in the market. Many technically better products do worse than competitors on the marketplace.
Marketing and sales has a significant impact on products' success. The average customer usually does not spend very much time evaluating alternatives based on technical merits.
CEO: $100k
Me: $33k
Me: 1/3 CEO
It's an emotional distinction, so it could just be me.
http://www.epi.org/publication/ceo-pay-231-times-greater-ave...
On the other hand, representing the CEO's income as a multiplier of the company's average income is standardized and represents a company-oriented view.[1][2]
[0]: https://en.wikipedia.org/wiki/Anchoring
[1]: https://en.wikipedia.org/wiki/Executive_pay#United_States
[2]: http://www.shrm.org/hrdisciplines/compensation/articles/page...
If you want to use more realistic numbers, the engineers were paid $90-150k, and the CEO was paid ~$225k. We had about $1.8M revenue, but still not EBITDA profitable. To give even more data, this is Denver in 2006, at an embedded software/ hardware company.
I occasionally get curious for curiosities sake, but I've never really been bothered. So long as I make enough to support the lifestyle to which I've become accustomed the fact thtat I probably won't be buying a yacht any time soon doesn't really bother me.
I never found it too upsetting, except as additional evidence for why people I thought were incompetent should go.
The issue with what we do in private-sector technology is that performance itself is opaque. If we're insistent on matching compensation to performance on a year-by-year basis, then we're going to struggle with transparent salaries, because it means that performance evaluations are public (and can be questioned) and, to be quite frank, that means we (as leaders) make high-stakes, not-easily-reversed decisions on imperfect information, and that's bound to piss people off.
I like transparent compensation, but there are issues to be addressed.
Fully opaque salaries "work" in a way, but it's goddamn unstable. People talk, and in fact policies that prevent them from disclosing salary are can't legally be enforced (anti-unionbusting provision). Soon, people discover all the things that happened because they were expedient, but are unfair-- the guy earning $185k for $120k work because he was plucked from Goldman Sachs. As soon as one person starts talking, the whole edifice comes down.
To make it more interesting, companies that try to enforce a pay meritocracy get hit in a different way. Most technology companies have such a rubric, where each level and job-description has a tight band, but have an informal and semi-secret "High Compensation Program" for people they take out of Wall Street, in order to get their pay back to a comfortable level within 1-2 years. I'll admit that I've exploited such programs, but they are actually more unfair, because they mean that not only does your Wall Street leverage get you a higher salary, but it also gets you faster career progress. Instead of paying you more than your performance merits, they make you into a high performer with fast promotions and plum projects. Great work if you can get it.
There's no easy way to solve this problem. However, I do think that transparency is a fundamentally good thing.
Now, here's a radical idea. Readers of my blog have noticed that I've been delving into the problems of organizations and concluded that there are 4 organizational cultures. The bad ones are the rank (lawful evil / authoritarian) and tough (chaotic evil / kill-or-be-eaten) cultures that comprise most corporate hellholes. The good ones are the guild (lawful good / superior-as-mentor) and self-executive (chaotic good / open-allocation) cultures. The deep issue is that neither the guild or self-executive culture is very stable, especially amid growth; some stronger alloy of the two is needed.
So, here's a radical idea I'd like to try. Compensation is fully transparent. Salary and every bonus is visible. Exceptional individual performance (especially if sacrificial but important) gets a bonus, with heavy input from the group that the achievement merits it. It's not the 20% year-end bonus that everyone gets. This is possibly 50-500+ percent of salary. Classic self-executive reward structure. That should not be expected by anyone. It should be rare and it's not a ding if you never get one.
Salary, on the other hand, is generous but doesn't come from individual achievement. You're assumed to be a good performer, working hard to do great things. Salary (above market) accounts for that already. You get a better salary by taking a mentorship role. (I'm bringing in what the guild culture has.) If you teach people, you're sacrificing individual achievement for the good of the group, and that deserves recognition. In other words, it's the silent multiplier contributions that often go unnoticed (they're not macroscopic achievements, but they make the organization symbiotic and great) that get you a salary-level bump.
That's the model I'd try if I were in charge.
I'd argue that the problem there is with the performance evaluation process. If it's broken in this way, then transparency will highlight that (and hopefully force you to fix it). If the evaluation process is fair and agreed to be fair, then that should not be a problem.
For example, nobody has a problem with a sales girl earning a commission on a sale she made, as per the agreed commission system. That's an entirely fair way to reward objectively measurable performance.
In other words, fix the performance evaluation system to be itself objective and transparent, and transparency works.
1. The engineer/manager impedance mismatch. We're used to having our "subordinates" (machines) give blunt negative feedback. "Your shit don't compile. Line 189; fix the fucking thing." Most managers are extremely thin-skinned and would rather fire people to silence dissent than have their decisions (as much as they affect other people) questioned. We're aware of our imperfect job performance because it's literally impossible to become good at software without bugs along the way. They have a child-like innocence of their own imperfection, because no one ever fucking tells them (for fearing of getting fired) when they make bad calls.
2. Most organizations use ambiguities in performance evaluation to hide things and like it that way. Fairer performance reviews diminish middle-management and executive power. The problem with healthy corporate cultures (e.g. Valve, pre-apocalyptic Google) is that it's hard to hire external executives. (That's why Google sold its culture off.)
3. Objective performance reviews for software are impossible. Automated code comprehension isn't even theoretically achievable over arbitrary code. As much as the "shoot me an email"/"let's synergize" apes have tried to drive out all creativity and R&D, the intrinsic convexity (see: http://michaelochurch.wordpress.com/2013/03/14/gervais-macle...) of what we gives it enough of an R&D nature to make objective performance assessments impossible.
There's also the age-old question of how you assess, or even define, quality of mentorship.
Research is important, but if you don't go out and teach people how to use what you discovered, they'll write it off as irrelevant, abstract wankery.
This led (among other things) to society's reduced investment in academia/R&D, and MOOCs are throwing their "teaching is just a commodity" ideology right back in their collective face.