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Only compensate people a lot after you can tell they are contributing substantially. Otherwise it’s just throwing out money/equity. Also in general you should t

Only compensate people a lot after you can tell they are contributing substantially. Otherwise it’s just throwing out money/equity. Also in general you should try to pay people the least amount that keeps them productive, engaged, and on the team. It also works well to hire very skilled people from other countries that pay lower. Speaking as a startup founder.

jklm 4y ago
To offer a different perspective, I was an early engineer at a startup with strong talent that followed this playbook. Things were fine until I realized upon interviewing for fun that I was massively underpaid (2-3x). I was pretty young at the time, and instead of talking with the founders about the gap, gradually grew resentful and left the company. I’m now on the on the other side of the table, and we pay everyone handsomely but keep the team lean while expecting everyone to operate at a very high level. Not every startup can or should do this, but I feel strongly this is a much better model for retaining talent while balancing cost to the company.
andyQ 4y ago
I can completely understand where you are coming from, but also speaking as a startup founder, i would propose another perspective, efficiency wage theory: “Efficiency wage theory posits that an employer must pay its workers high enough so that workers are incentivized to be productive and that highly skilled workers do not quit.” https://www.investopedia.com/efficiency-wages-5206757 https://www.investopedia.com/efficiency-wages-5206757 While indeed the startup may be incentivized to “pay people the least amount” as long as they fulfill their tasks and keep them in your team; in the long run this amount would normalize to be market (even barely over market) prices. Otherwise you would be left behind and would have to keep spending capital in the overhead of hiring and training new people, which is less productive than having someone trained and motivated. Maybe you didn’t mean it in that way, but I would strongly recommend against playing chicken with the wages of your employees and testing how low you can go and still get applications. I believe doing this will fill positions with people that are not skilled enough to get a better paid job (or have high rotations), and usually that means that your company is going to move slower than your competition.
- fuzzfactor 4y ago
  I always thought these kind of things give rise to efficiency founder theory which posits that founder-induced prosperity needs to be maintained well beyond the level where lesser companies "pay people the least amount that keeps them productive, engaged, and on the team." This is what you will be known for. If you're just going to start up more of those kind of companies, why even bother? Quite a good analogy there about "playing chicken", these are your people so why not want the best for them that you can possibly offer.
astrange 4y ago
I find I contribute more after I get paid better, not before. It's hard to work when you're thinking about how high the rent is.

jklm 4y ago

To offer a different perspective, I was an early engineer at a startup with strong talent that followed this playbook. Things were fine until I realized upon interviewing for fun that I was massively underpaid (2-3x). I was pretty young at the time, and instead of talking with the founders about the gap, gradually grew resentful and left the company. I’m now on the on the other side of the table, and we pay everyone handsomely but keep the team lean while expecting everyone to operate at a very high level. Not every startup can or should do this, but I feel strongly this is a much better model for retaining talent while balancing cost to the company.

andyQ 4y ago

I can completely understand where you are coming from, but also speaking as a startup founder, i would propose another perspective, efficiency wage theory: “Efficiency wage theory posits that an employer must pay its workers high enough so that workers are incentivized to be productive and that highly skilled workers do not quit.” https://www.investopedia.com/efficiency-wages-5206757 https://www.investopedia.com/efficiency-wages-5206757 While indeed the startup may be incentivized to “pay people the least amount” as long as they fulfill their tasks and keep them in your team; in the long run this amount would normalize to be market (even barely over market) prices. Otherwise you would be left behind and would have to keep spending capital in the overhead of hiring and training new people, which is less productive than having someone trained and motivated. Maybe you didn’t mean it in that way, but I would strongly recommend against playing chicken with the wages of your employees and testing how low you can go and still get applications. I believe doing this will fill positions with people that are not skilled enough to get a better paid job (or have high rotations), and usually that means that your company is going to move slower than your competition.

fuzzfactor 4y ago
I always thought these kind of things give rise to efficiency founder theory which posits that founder-induced prosperity needs to be maintained well beyond the level where lesser companies "pay people the least amount that keeps them productive, engaged, and on the team." This is what you will be known for. If you're just going to start up more of those kind of companies, why even bother? Quite a good analogy there about "playing chicken", these are your people so why not want the best for them that you can possibly offer.

astrange 4y ago

I find I contribute more after I get paid better, not before. It's hard to work when you're thinking about how high the rent is.