Self determined salaries

We have recently finalised a round of self determined salaries at Dev Academy and it was one of the most effective and powerful experiments in self management that I’ve experienced. 
freedom_2_by_sevCANNImage Credit

The Problem

The default setting in most organisations is that salaries are private and negotiated directly between an employee and a manager. The information asymmetry helps funnel power up the pyramid and this also results in people who are good at negotiating getting a better deal than those who aren’t.

Ever since first reading Maverick I have been struck with the idea of staff having the ability to set their own salaries. Stumbling across the The Morningstar Self Management Institute in the early days of Enspiral and reading about their work in the space locked in my commitment to self determined remuneration.

This was really easy when we were just a collective of contractors and everyone would set their own billable rates – if customers were happy to pay that rate then it must be good enough. Even when negotiating rates for internal work it was along the lines of “What do you think is fair? Well let’s do that then”.

But fast forward to the end of 2014, Dev Academy had just turned one and when I reflected on our remuneration process it was obvious we had unconsciously slipped back into old habits. Rohan (my co-founder) and I had agreed upon compensation levels with each new hire as they joined the company and traditional power structures and information asymmetries were starting to emerge.

This was yet another reminder for me that self-management processes need clear definitions and constant reinforcement.

For example, while everyone in the company was onboard with the idea of financial transparency we hadn’t put energy into making our remuneration data easily accessible so the only way for a new person joining the team to find out how much everyone was being paid was to ask each person individually or trawl through our xero account. As you can imagine this didn’t happen too much.

So we fixed things.

our Process

Getting started

The first step was writing up a document [extract below] outlining the thinking behind self directed salaries and passing a Loomio decision to try it out. We established a remuneration team to facilitate the process and act as an initial point of contact to help point people in the right direction.

Individual round

We each filled out a remuneration template and the REM team updated a central spreadsheet while acting as a sounding board when asked. For folks who needed extra support someone from the REM team would sit down and work through the details with them.

Feedback

We collated the salary data and normalised it for time (e.g. how much would this person be paid if they worked full time for a year). This helped us compare apples with apples and made it easier to tackle the heart of the problem which was how much should we pay this person compared to everyone else.

This data formed the heart of an anonymous survey which we sent to everyone in the company with two questions for each person.

a) What do you think of this salary: too high, too low, just right or no opinion?
b) Comments?

We shared the responses with everyone the day before our weekly meeting the next day went through a facilitated session to collectively process the information. This took a fairly simple form of

  • Setting the tone for the session and emphasising the delicacy and importance of this work.
  • Going around the circle with each person talking through their thinking behind their suggested salary and their thoughts and feelings about the anonymous feedback.
    • The feedback for that person was projected on the wall before their checkin to provide a shared context
    • The person opposite in the circle was responsible for looping back what they had heard to shake out any initial clarifications
    • After the looping the circle was open for comments and responses from the whole group

This was an amazing session that helped clarify our understandings of each others roles and was a valuable part of building our culture.

Lock it in

After the “digesting feedback” session we had a few days for people to reflect further and then had a cut off point at the close of business on friday to lock in the compensation levels.

The main points of this were

  1. You were free to ignore or incorporate the feedback from the previous session as you liked.
  2. There was no one who would approve your salary, what you asked for is what you got.
  3. If there were any disagreements on monday it would be handled through our
    conflict resolution. (There weren’t any)

Those final two points where Salaries are approved by default and exceptions are managed by a peer initiating a conflict resolution process are the real magic in the system. It is stepping beyond a company where you have a lot of influence to a company which you actively control.

It’s all about the culture

I have tried lots of experiments over the years to help people realise a sense of ownership and empowerment and this was definitely one of the most powerful. At the end of the day setting salaries is pretty common sense stuff and when you give people all the information they will make common sense decisions.

It definitely requires a strong sense of trust amongst your team and a willingness to give and receive challenging feedback. But if your team isn’t up for that then helping them get into a position where they are should be your top priority.


[Extract from the initial document outlining the process]

Principles

Self Determination individuals set their own pay which colleagues provide feedback on but the ultimate remuneration decisions rest with the individual. Significant differences of opinion are resolved by our conflict resolution process.

Transparency – all compensation packages are visible to everyone in the company in a simple and accessible format.

Risk Adjusted – if a staff member puts some of their compensation at risk by deferring payments and accepting Fairy Gold instead of cash then they receive a fair compensation for that risk.

Intrinsic Motivation – we eschew individual performance bonuses and rely upon people’s intrinsic motivations to do a good job. Any performance bonuses are paid out across the whole company.

Adjustable – Individuals are free to adjust their remuneration at their discretion (e.g. if the type or amount of work they do changes) but are required to update their individual agreement at least once per year.

Trust & Integrity – are at the heart of Dev Academy but especially present in the work of setting compensation levels. We assume that each person is striving for the fairest outcome they can envision for themselves and their colleagues.

Self determined salaries

4 thoughts on “Self determined salaries

  1. Camia Young says:

    Thank you for sharing how you have done this and how it lends to sharing ownership and building culture. It is where we have the greatest room for improvement and much to learn at the XCHC. While we have common intentions, it has been incredibly hard to find the path to follow through. Im constantly looking for clues, and appreciate you sharing your journey.

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