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Why I Never Let Employees Negotiate a Raise

• banned_man 18y ago
  What about employees who think they deserve to be rated higher on the (somewhat subjective) scope and skills metrics?
  • RobGR 18y ago
    Yeah, I agree - the negotiation comes in when someone says they are rated too low, asks to talk to the review comittee about it, and leaves when they don't get it. That said, I think this system is probably superior to most.
  • coglethorpe 18y ago
    They "negotiate" by leaving.
    • electromagnetic 18y ago
      I agree, I work in construction where there are clear, visible differences between two employees. If this kind of thing happened at one of the companies I've worked for or with then everyone would quit. The only people this benefits are the poor employees. I have some natural advantages over the next guy, namely that I can carry about 140 lbs of equipment, while a lot of the guys I've worked with can only carry probably 70-80 lbs. Basically I spend half the time with the petty crap and end up finishing the job sooner. I don't believe I should be getting paid the same as the next guy, I also don't think I should be paid as much as a guy who can carry 200 lbs and can get things done faster than me. If someone does 20% more than me, they should be paid 20% more. I don't believe in pay brackets and crap like what Unions use, because I've seen what unions do to people. I knew a guy who'd been in a dry waller's union for 20 years, he hadn't had a single pay rise since he got put into a foreman role, and he'd seen a lot of guys his age be canned because their wage was ridiculously high and they were too old to do the heavy lifting.
      • LSalin 18y ago
        Based on Joel's ladder system, you would be paid more because your skills are higher (carrying 140 pounds versus 7-80 pounds for others).
      • ShabbyDoo 18y ago
        I suspect (from nothing more than your writing skills) that you are quite a skilled tradesman.* Why don't construction companies hire strong but unskilled guys to haul stuff and let you be the guy who does the more technical stuff? * People who write well generally think well. Construction, beyond brute strength, requires mechanical thought. Therefore,...
        • radu_floricica 18y ago
          I have a client company who's receptionist has seen me as a courier, pc-repair main, client and programmer. Freelancing is fun :)
        • electromagnetic 18y ago
          It all depends on the construction site. The companies that do building houses and small business offices generally do have a few really strong guys doing the heavy hauling, back in the UK where I worked you'd get a guy carrying like 200 lbs of brick up a ladder. However, I specialized in the Handy-Man kind of work so there's too many different job sites or the companies too small to actually have a specific guy hauling stuff. So in the jobs I worked you had to be both smart and strong. Electrical, plumbing and gas can be extremely complicated to put in, especially when you're modifying a house that's over 50 years old. (At 17 I started working as a reviewer and the editor considered me the best they had. So I believe I have a high aptitude for writing. I've had a couple short stories published, and right now I'm working on a novel.)
      • aboodman 18y ago
        Wait, you work in construction and read hacker news?
    • muon 18y ago
      In have seen people, who leave at the critical time of project execution, then they back off with better deal. This has made sick of those kind people, and the management. In the end others look foolish for being honest.
  • run4yourlives 18y ago
    Immediately, you've now moved beyond salary and are discussing job performance. That's what you want to be discussing after all.
    • TomOfTTB 18y ago
      You're just using word play to try to validate your point. Any salary discussion is going to go straight to the employee's performance. The problem with this system is it takes the focus off that individual employees performance and puts it on the rest of the office's performance. Suddenly you aren't talking about how good that employee is you're talking about why Joe in the next cubicle over rates higher than him. That's exactly where you don't want salary negotiations to go.
      • run4yourlives 18y ago
        It not word play; there's a difference between "You aren't paying me enough for the work I'm doing" and "I don't belong at the level you say I do." The former is open to much more interpretation than the latter, being that the latter has a documented set of predefined expectations, such as years of experience and daily duties. It's hard to be obscure about whether or not you lead a project, or whether or not you have 5 years experience. Joe in the next cubicle rates higher because he is either your - or your colleagues' - senior. This is self evident. What you are left doing is saying "I lead my project better than Joe leads his project." This isn't a salary conversation, it's an annual bonus conversation. Annual bonuses are designed to measure performance in most cases.
        • TomOfTTB 18y ago
          I still don’t agree in that I simply don’t think the real world works that way. On the Joel point: Joel runs a small-ish company and it’s become obvious in several HN threads that his employees are people who essentially worship the ground he walks on. That’s great for them, for him, and for that company and I’m happy for them all. But what that distinction means is that sometimes Joel’s advice doesn’t apply to the rest of the world outside his little utopia. In my experience living in the rest of the world people don’t respond well to "your salary has nothing to do with your performance but you MIGHT get more 9 months from now." A bonus is great but it’s just that: a bonus. Salary is where employees are paid for their services and that’s where they expect to be rewarded for their performance. Again, hopefully your employees are well off enough that they couldn’t care less about waiting 9 months. But in my experience the "wait for your annual bonus line" usually leads people to look for companies that pay their employees based on their performance. P.S. You still didn't address my central point which is the fact that this method puts the focus on other people's performance in relation to the employee rather than the employee's performance alone
  • rgoddard 18y ago
    If they think they should be rated higher, then they should give the reasons why. If those reasons are valid, then the employer can change the rating. If the employer is unwilling to change it for irrational reasons, that means that the rating system is not objective and the system is undermined and has lost its meaning. This becomes a separate problem entirely. If the reasons for valuing themselves more are not valid or applicable to the company, then the employee is over valuing themselves in this context. If the employee is not willing to accept this, then they have the option of declining the offer and moving on.
• nickb 18y ago
  What a silly rule. This 'equality rule' is why union shops have some of the worst productivity levels in the industry and why union workers have zero incentives to innovate and become more productive. Under this plan, people have no incentives to give more and work harder. Inevitably, the equilibrium for this type of a system is the productivity of the weakest worker. Sorry but communism just doesn't work.
  • nradov 18y ago
    As I understood the article, the fixed levels only apply to base salary. There is still room to reward high productivity through bonuses and equity.
  • Hamhock 18y ago
    If you look at the chart on the second page, it's clearly not "communism". There's a "scope and skill" component to salary level. If I want to make more money there, I increase my skill, and push to get more responsibility. It's just saying that people with the same skill and responsibility get paid the same.
  • r00k 18y ago
    "Under this plan, people have no incentives to give more and work harder." There are some people ("salesy" types particularly) whose performance is motivated almost exclusively by money, but I find this to be the exception. As was mentioned in the article, hard work tends to come from high job satisfaction. Compensation is only one component of that, and arguably not the most important, provided it's not unfairly low. Finally, if you're right and Joel's wrong, how do you explain Fog Creek's success? Do you consider them an outlier? If so, can you give a counter-example of when you've seen this system fail? Fog Creek is strong evidence of the efficacy of this approach, while you seem to be relying on nothing more than your opinion.
  • df07 18y ago
    As a Fog Creek employee, I can attest that the profit sharing at the end of the year is a pretty big incentive to work harder. Also see http://www.joelonsoftware.com/articles/fog0000000070.html http://www.joelonsoftware.com/articles/fog0000000070.html for a discussion of why Joel doesn't want to have incentive pay.
• dawie 18y ago
  Maybe this works for Joel. I find it funny though how performance does not get included in his calculation. Some employees are more productive that other employees and get more done therefore they should be payed more. An employee with less skills can still be more productive that an emloyee with more skills. The reasons CEOs make millions is because their performance is directly measurable in how well their company did that year.
  • run4yourlives 18y ago
    I'm pretty sure he mentions that bonuses are something he still uses, among other things.
  • sangaya 18y ago
    "The reasons CEOs make millions is because their performance is directly measurable in how well their company did that year." They make millions because they negotiate a contract that says so, irregardless of performance. They're able to get that contract due to the perception that with them leading, the company will make more money than if they weren't. It's essentially a bet the company is making on the CEO, because even if the CEO drives the company into the ground the contract is still in place.
    • jimbokun 18y ago
      They make millions because the people determining their pay are CEOs of other corporations with a vested interest in keeping the average CEO salary as high as possible.
      • mkramlich 18y ago
        Agreed. I think there are multiple factors but I'm positive that is the largest single factor. Basically they get that much because they can. I actually have a more complex and subtle theory to explain it involving a system to keep feudal aristocracy alive in the modern age, but I'm afraid it is too involved to describe in the tiny page margin space I have remaining. (Only half-joking!)
    • 18y ago
• bkbleikamp 18y ago
  So..is the implication that writing software is not worth anything? I think some pretty successful entrepreneurs would disagree. There is nothing innate about building something in college that makes it less valuable than building it in an office you sit in 40 hours a week.
  • ryanwaggoner 18y ago
    You're really missing the point here.
    • ars 18y ago
      His first sentence maybe, but his second asks why school experience doesn't count for the formula.
    • bkbleikamp 18y ago
      No, I wasn't missing the point. I was asking why writing software in college doesn't count.
      • middus 18y ago
        I guess because everyone does it anyway so it does not make a difference.
        • unalone 18y ago
          Define not making a difference. Certain college-started companies have become enormous.
          • bkbleikamp 18y ago
            Exactly - I do not think the coding Mark Zuckerburg or Larry Page/Sergey Brin did while they were students was trivial + it lead to two "game changing" companies, so to speak.
• danbmil99 18y ago
  Trying to run a company by formulas like this rarely works. And a 'take it or leave it' approach to negotiating compensation (yes, you are negotiating, even if your stance is not to) would seem to encourage hiring of employees who either don't know their own value in the marketplace or, worse, are looking for a place where there is less pressure to perform. It might make sense for a non-profit, but if the company is for-profit, it makes sense for the employee contracts to reflect that fact. Of course it's incumbent on you as manager to pay people what they really are worth, and not play favorites for emotional or other random reasons.
  • anamax 18y ago
    "Take it or leave it" is the best price that you're going to get from a given party. It's unclear why one would prefer a lesser price. It's also unclear why taking a "take it or leave it" offer vs some other metric implies "don't know value" or "looking to coast". Then again, I'm pretty sure that a significant number of employees at non-prifits aren't volunteering, so if a non-profit wants to keep them, it has to be competitive wrt their compensation. While some/many employees at a non-profit may be volunteering,
• ryanwaggoner 18y ago
  I'm one of those people who has a really hard time with the idea of having left money on the table. When I'm in foreign countries, I love to haggle in the markets, but no matter how big a reduction in price I get, I always walk away wondering if they're laughing at me behind my back because I still paid 10x the going rate. Anyway, working for a large corporation with an opaque salary system was an exercise in frustration. I moved to SF and took a job at a midsize company making what I thought was a very decent salary. I was just out of college and making more than my parents, so I thought I was doing really well. However, after a bit of digging and research, I discovered that the "going rate" for my position was actually 20 - 30% higher. Ugh. I can totally see the appeal of a transparent salary system, especially when you throw profit-sharing into the mix.
  • flatline 18y ago
    "I always walk away wondering if they're laughing at me behind my back" They're probably not laughing at you. They are either confused because the foreigner got a decent price out of them, or grateful you didn't hold on for a lower rate. It's the ones that don't haggle that they're laughing at...
    • patio11 18y ago
      My brother gets immense satisfaction about haggling in China. "Don't you give me the foreign devil price! I grew up in Hong Kong, I know how this game is played! This T-shirt is shoddy and only worth 1/6th of what you are charging, I will pay 1/5th and curse your name!" He can pull it off, despite having grown up in Chicago and being white as the driven snow. Personally I'm glad that Japan is largely a sticker-price society, the stress would wreck me.
      • wlievens 18y ago
        I once haggled off a lot of the price on a purse (gift for my mom) by accident: I told the merchant I was checking out the rest of the market first and would come back later. He just kept going down until I felt no reason not to buy the item.
• Edinburger 18y ago
  Years of experience is only sometimes correlated to employee value. So, including it in an inflexible formula to determine level will cause mis-levelling. Exceptionally talented staff with few years under their belt will be levelled too low and more experienced staff who aren't so capable will be levelled too high. Supplemental point: IANAL but I think it would also be illegal to factor years of experience into salary calculation in the UK.
  • blackguardx 18y ago
    This is very common in the US. Actually, at most places, the number of years you have worked is the major factor in determining your salary.
  • drothlis 18y ago
    Read the article, particularly the table at the end. After 1 year of experience, the years of experience make no difference to your rank, except for people with an "average of scope and skill" of 1 (out of 6).
• geebee 18y ago
  I wish Joel made his salary info public. I completely understand why he doesn't, but it would be illuminating.
  • teuobk 18y ago
    In an Inc column a while ago, Joel mentioned that his offer for new grads is $75k/year. Not sure how that scales with experience, but Glassdoor might give you some idea about going rates in the NYC area. As a sidebar, I've discovered that the cultural reluctance to discuss wages is not shared with other countries. In China, for example, it's quite common to compare salaries.
• WebTom 18y ago
  I makes sense as long as you are not paying less than $90k/year senior level web developers. Does anyone know how much is a Fog Creek Software senior developer salary?
• tptacek 18y ago
  Answer: "Because we don't call it 'negotiating a raise', we call it 'applying this formula'." Two immediate problems with the formula and one problem with the concept. First, "scope", factor 2 in the formula, can be external to the employee. It's in Spolsky's interests to hire people who "could" manage multiple projects if given that responsibility, but the demand for those people inside Fog Creek will tend to be lower than the demand for lower-scoped responsibilities. His formula thus does one of two things: it incentivizes him to hire less talented people --- even when he may want a buffer of talent inside the company --- or it creates a totally subjective ranking system where 10 people are qualified to lead a project, but only the "favorite" does. Second, "skills", factor 3 in the formula, is also subjective. That he's coded it in a chart doesn't change the fact that the "skills" spectrum is basically the line over which every salary negotiation is fought anyways. Which leads to the general critique of this, that coding and regimenting salary negotiation does nothing except code and regiment salary negotiation. OK, so Fog Creek is transparent about the behavior they want to incentivize. But so what? The real world still creeps in and subverts this system: * "I'm capable of leading this project, but I'm never getting a lead role because 5 people with seniority are always going to take the next available slots." * "I was given this task to complete, but it was poorly specified, and so my output didn't contribute to company success." * "You'd be ranking me at a higher skills level if you put me on a project that would give me exposure to new technology." * "You'd be ranking me at a higher scope of responsibility if you'd just recognize that my team lead is a moron." All the same pathologies seem to remain intact in this system. Curious as to what I'm missing.
  • sokoloff 18y ago
    it incentivizes him to hire less talented people This seems spectacularly unlikely given Joel's other writing and the fact that he's running a profitable company, the profits of which substantially depend on the quality of staff he hires. Saving 1% of payroll and giving up any substantial "edge" in development is a bad trade, and regardless of your opinion of Joel, I suspect he's smart enough to know that. All the same pathologies seem to remain intact in this system. All of those same pathologies sound to me like pathologies with the people not the system, and the solution is to just recognize that people who can navigate themselves around small obstacles are actually more valuable. People who complain at year-end about why they couldn't acheive their maximum potential need to be steered into a mindset where next time they find a speedbump to drive over or around it, not to stop and complain about the uneven pavement.
• jballanc 18y ago
  This system can only work if there are non-monetary benefits to working for the company, like a stimulating work environment or increasing independence with increased demonstrated skill... ...my guess is that's why Joel gets away with it!
• umbrae 18y ago
  I went to a Fog Creek open house year before last with this pay-scale transparency in mind (Joel had talked about it in an article about 6 months beforehand) and nobody I spoke to had any idea what I was talking about. It was pretty disappointing.
• iuguy 18y ago
  Wait, so employee A who works late nights and busts a gut to ship gets a pay rise, which means employee B gets a pay rise even though they didn't? Or is it that employee A wouldn't get a pay rise because then employee B would have to get one?
  • smokinn 18y ago
    You're thinking of a normal company. Joel has previously said no one at Fog Creek does overtime.
  • rythie 18y ago
    More likely is that in negotiation system, employee B gets a pay rise because he is good negotiator and employee A loves his job but is less confident so doesn't even ask for a pay rise, so gets nothing.
  • sethg 18y ago
    Is employee A working late nights because he or she is working hard, or to fix bugs introduced by careless coding the previous afternoon, or because for every hour physically at the office, 45 minutes is spent reading HN? It's hard for the manager determining salaries to tell the difference.
• iuguy 18y ago
  As someone that runs a profitable company I can tell you right now that my company would a) not be able to hire really awesome people and b) lose all the better guys as a result of this policy.
  • lliiffee 18y ago
    Can you explain why? Are you saying that this system would make it difficult to pay the most talented people what they are worth?
    • danbmil99 18y ago
      yes, that's exactly what he's saying. The dirty secret is that the variation in employee 'worth' to a company varies much more than a tight range of salaries based on statistical averages. It's not just talent; some employees become inordinately important due to their knowledge and acquired experience in a narrow area. Losing them might mean shipping a product 6 months late, which could be fatal. Of course there's a potential here for employee blackmail, but hey, live by the market, die by it. It's a constant struggle to be 'fair' yet maximize your return on investment. These two goals don't automatically align.
• bluelu 18y ago
  So what happens if your points get decreased. Do you start earning less than? I don't think that's even possible here (Europe)
• andreyf 18y ago
  Please post printer-friendly versions: http://www.inc.com/magazine/20090401/how-hard-could-it-be-employees-negotiate-pay-raises_Printer_Friendly.html http://www.inc.com/magazine/20090401/how-hard-could-it-be-em...
• raffi 18y ago
  One thing I liked about the military is that we were paid based on time in grade and rank. I at least knew I wasn't being cheated out of something someone else was getting.
• deleted 18y ago
  [deleted]
• ars 18y ago
  "Here's the thing: Fog Creek is extremely profitable" If I buy from them, I'm going to negotiate for a lower price.
• c00p3r 18y ago
  Why to reinvent the wheel? Some payment system from various storts is already here.
• charltones 18y ago
  I think you need much more flexibility than this. I've worked for several companies with this kind of scheme and had to fight and juggle with the system and the scales to be able to reward my staff appropriately. It is very easy to end up with a middle-of-the-road performer, who has a broad skill set and much experience and is therefore very highly valued by a formula. It is extremely frustrating to have to pay them more than someone with less experience and fewer skills on paper, but who is perhaps making a tenfold greater contribution to the company. Rigidity in the formula itself is not the only problem. I've encountered rigidity in how to apply the formula. I was responsible for a team of engineers in such an organization a few years back. They were a fantastic bunch altogether, but we had a real star who transferred in. She'd been barely raised above the starting graduate scale, despite making a pretty significant contribution to the company as a whole. When I discovered this, I set about re-assessing her ranking based on the company's formula and basically worked out that her salary needed to double - it had to jump about 3 pay bands. My request was turned down - it was apparently too big a jump! I was left wondering if I should ask her to stop doing some of the things she was doing - like mentoring new employees, since the company wasn't prepared to pay her for it. I didn't stay there, and neither did the star engineer. I think in a smaller, less bureaucratic organization perhaps these schemes have a better chance of working, as long as the formula leaves you enough flexibility.
• biohacker42 18y ago
  Very good article. I'd also like to mention that as a libertarian I strongly desire to see efficient free markets and those require INFORMATION. Attempts to hide information are almost always market manipulation. In the case of secret salaries, the market is being manipulated for the benefit of employers and employees who are very good at salary negotions in addition to their other skills.
• Raplh 18y ago
  I have worked for a university which, under budget pressure, allocated for < 1% average annual raise, but STILL put all the effort into review to spread it out so some got .7%, some got .8% and so on. What I remarked from this was: all the pain and anxiety with none of the benefit. More recently, the company I work for seems to have moved away from an emphasis on raises and towards an emphasis on bonuses. Somehow for me this is psychologically infinitely superior. I actually can't remember the time series of my bonuses. I suppose if the company was stupid, it would report my bonus as "your bonus is 20% lower than last time" or "your bonus is 30% higher than last time." But they just report the amount. Contrast that with salary changes, which in my experience have always been reported to the employee as a percent change, just in case the employee was not thinking that way anyway. What these guys are doing appeals to me very much. The real changes in salary come from moving up and down the ranks, which is a public process even though not transparetly linke to salary changes generally. A super simple salary system is very appealing to me. Give me my feedback in significant (>1% effects) chunks, and keep me from doing the equivalent of staring at 16 indistinguishable brands of soap wondering how they picked Tide for me.
• Create 18y ago
  www.ericsink.com/articles/Compensation.html