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The first startup I worked at, the founder wanted to make salaries not only transparent, but made known as a fraction of the CEO (e.g. 1/3*CEO_pay). The board,

by 18pfsmt 14y ago

The first startup I worked at, the founder wanted to make salaries not only transparent, but made known as a fraction of the CEO (e.g. 1/3*CEO_pay). The board, made mostly of VCs, did not like this idea at all and convinced the founder it would bring down the morale of the engineering team if they saw what the sales guys were making (the sales guys were compensated mostly by commissions, of course). I still think it would be a great thing to establish if done when the organization is small enough (and before any investors were involved).

swombat 14y ago
I believe that can be solved by giving everyone the potential to earn more money if that's what they care about. Ideally, at least while the company is still small-ish, everyone has some kind of way that their work is directly connected to making money for the company. So allow them to earn a bonus based on doing things that earn more money for the company. 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.
- MetaCosm 14y ago
  Offering a developer the option to go into sales is like telling an author that (s)he should stop wasting all this time writing books and get into the sales department of the publishing company -- regardless of the quality of their writing. 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.
NateDad 14y ago
I think sales people are often overpaid, and developers underpaid. After all, the people creating the value and maintaining the product are the ones that are truly "selling" it. The sales people are just pointing people's eyes at what dev makes.
- charlieflowers 14y ago
  I'm a developer, and I used to feel this way. But there are 2 problems with this perspective. First, developers' contributions are much harder to quantify. And second, sales and marketing is really hard, as proven by all the well-engineered projects that have gone nowhere.
- wting 14y ago
  This is a common view held by engineers. Engineers believe in meritocracy and thinks the market behaves the same way. "Build a great product and the customers will come." 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.
damoncali 14y ago
At first glance, making the CEO pay a baseline seems really self centered. What was the thought behind that? From my eyes looking at: CEO: $100k Me: $33k makes me think, "well, I'm a junior guy. That will change over time." Me: 1/3 CEO makes me think "why does he think he's worth three of me? It's an emotional distinction, so it could just be me.
- MetaCosm 14y ago
  ... what about 1/231 of a CEO? http://www.epi.org/publication/ceo-pay-231-times-greater-average-worker/ http://www.epi.org/publication/ceo-pay-231-times-greater-ave...
- wting 14y ago
  This is a form of price anchoring.[0] By representing salaries as a fraction of CEO income, it makes all employees evaluate their worth relative to the CEO. 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 https://en.wikipedia.org/wiki/Anchoring [1]: https://en.wikipedia.org/wiki/Executive_pay#United_States https://en.wikipedia.org/wiki/Executive_pay#United_States [2]: http://www.shrm.org/hrdisciplines/compensation/articles/pages/payratios.aspx http://www.shrm.org/hrdisciplines/compensation/articles/page...
- 18pfsmt 14y ago
  I'm not sure how you can call it "self-centered" as neither the founder nor myself were CEO. The reason to use the CEO's salary was because he had the highest salary. 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.

by 18pfsmt 14y ago

swombat 14y ago

I believe that can be solved by giving everyone the potential to earn more money if that's what they care about. Ideally, at least while the company is still small-ish, everyone has some kind of way that their work is directly connected to making money for the company. So allow them to earn a bonus based on doing things that earn more money for the company. 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.

MetaCosm 14y ago
Offering a developer the option to go into sales is like telling an author that (s)he should stop wasting all this time writing books and get into the sales department of the publishing company -- regardless of the quality of their writing. 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.

NateDad 14y ago

I think sales people are often overpaid, and developers underpaid. After all, the people creating the value and maintaining the product are the ones that are truly "selling" it. The sales people are just pointing people's eyes at what dev makes.

charlieflowers 14y ago
I'm a developer, and I used to feel this way. But there are 2 problems with this perspective. First, developers' contributions are much harder to quantify. And second, sales and marketing is really hard, as proven by all the well-engineered projects that have gone nowhere.
wting 14y ago
This is a common view held by engineers. Engineers believe in meritocracy and thinks the market behaves the same way. "Build a great product and the customers will come." 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.

damoncali 14y ago

At first glance, making the CEO pay a baseline seems really self centered. What was the thought behind that? From my eyes looking at: CEO: $100k Me: $33k makes me think, "well, I'm a junior guy. That will change over time." Me: 1/3 CEO makes me think "why does he think he's worth three of me? It's an emotional distinction, so it could just be me.

MetaCosm 14y ago
... what about 1/231 of a CEO? http://www.epi.org/publication/ceo-pay-231-times-greater-average-worker/ http://www.epi.org/publication/ceo-pay-231-times-greater-ave...
wting 14y ago
This is a form of price anchoring.[0] By representing salaries as a fraction of CEO income, it makes all employees evaluate their worth relative to the CEO. 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 https://en.wikipedia.org/wiki/Anchoring [1]: https://en.wikipedia.org/wiki/Executive_pay#United_States https://en.wikipedia.org/wiki/Executive_pay#United_States [2]: http://www.shrm.org/hrdisciplines/compensation/articles/pages/payratios.aspx http://www.shrm.org/hrdisciplines/compensation/articles/page...
18pfsmt 14y ago
I'm not sure how you can call it "self-centered" as neither the founder nor myself were CEO. The reason to use the CEO's salary was because he had the highest salary. 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.