14 ms·

We Let Our Employee Set Their Own Salaries

307 points by ry0ohki 13y ago

mdkess 13y ago
I really like that this is collaborative and anonymous. I could see as the company grows, bands and bonuses being set by popular vote. At the same time however, you have to pay market rates. If a good employee has an offer for 20% more than they are making, and they just had their first kid so they'd kind of could use more money, what do you do? On one hand, you give them a raise - which breaks the collaborative system. On the other, you don't give them a raise, and you lose a key contributer who was bringing in far more revenue than their salary. The fact is, your best employees are going to be constantly getting offers above what you pay them, and you need mechanisms in place to keep them. At the same time, transparency has to really be transparent if it's going to be a core value of the company - if I was told everyone was making $X but I found out that some of those people were making more, I'd be annoyed. So my question is, how do you solve this?
- SatvikBeri 13y ago
  You always have tradeoffs. Which tradeoffs make sense depend on the culture you want to foster, the size of your company, and probably a hundred other factors. Transparent criteria for salary mean that you avoid the politics associated with salary negotiations. And making even a single exception typically breaks that, meaning that now everyone at the company is incentivized to get higher-paying offers and bring to you, asking for more money. Ben Horowitz wrote a great post on this: http://bhorowitz.com/2010/08/23/how-to-minimize-politics-in-your-company/ http://bhorowitz.com/2010/08/23/how-to-minimize-politics-in-... Personally I would say that you should avoid ad-hoc raises. I really like the idea of matching salaries to titles and matching title changes to a bi-annual performance review (for companies over a certain size.) And it gets a lot of the advantages you want-transparent compensation, no incentives for politicking, ability to pay people differently, and the ability to adjust the pay for the role according to market rates. Edit: Fog Creek's compensation system is a good example. http://www.joelonsoftware.com/articles/fog0000000038.html http://www.joelonsoftware.com/articles/fog0000000038.html
  - michaelt 13y ago
    Matching salaries to titles means your best-performing developers can't get a raise without becoming managers, or getting a raise for everyone in their title (i.e. a raise that's much more expensive for the company), or leaving the company. Seems like quite a pair of handcuffs to put on yourself.
    - SatvikBeri 13y ago
      Most places have more than one developer title. See e.g. the Fog Creek link.
- flogic 13y ago
  I think in this case you have 2 choices. One, you let that employee move on. Or 2, you have to re-enter the group salary discussion. Being dishonest in your transparency would quite probably do irreparable harm to the culture.
- thomaslangston 13y ago
  One option is to be small and have a tight grouping of potential. Another option is to reward those employees with non-cash rewards. Finally if their contribution is easily measurable, a bonus or commission system tied to those metrics could be transparent and perceived as fair.
- thedufer 13y ago
  Where I work, we have a similar system of transparent salaries. There is a scale, but it is not very granular (the rule of thumb is that if most people couldn't guess a given employee's salary level, they're in the wrong one) and dependent on skills and industry experience. There is a good description here: http://www.joelonsoftware.com/articles/fog0000000038.html http://www.joelonsoftware.com/articles/fog0000000038.html (SatvikBeri also linked to this article). That is still relevant except for a few points - we no longer give stock options and reviews are annual instead of biannual. > If a good employee has an offer for 20% more than they are making... We let them leave. That said, it doesn't happen often (I don't know of a time it did). Our salaries (and annual bonuses) are generous, and any differences are more than made up for by various other perks. That said, we do lose new hires to bigger offers. If this happens too often, the entire pay scale gets moved up to reflect market changes and/or inflation.
- seandougall 13y ago
  > So my question is, how do you solve this? I think I can offer some insight on that, because I'm Figure 53's employee #2 (after Chris). I live near San Francisco, where with some effort I could quite possibly find a job that paid 20% more than I'm making with Figure 53 if I wanted to. And my first child will be born in the next 3 weeks! Oh, I also bought a house in June, for extra measure. :-) Would a 20% raise be enough to draw me away from Figure 53 to work for one of the many startups around here? Hell no. A 200% raise wouldn't be enough. Some of the many reasons why: - I'm passionate about our products, but even more so about the art that gets made with them. I'm a musician who learned to code in order to make the tools that I wanted to use, and now I get paid to make those tools, and help other people use them. Whether it's a high school play or the Olympics, it's really freaking cool to see what your customers create with your work. - Family is important to me, and working from home (and not on a 9-5) means that I'll be able to spend time with my daughter even after I come back from paternity leave. Chris is of a similar sensibility, so I never have to do any convincing on that score. - I don't have to worry about whether the company's going to be around next month, because I know our money is being managed conservatively. We're in it for the long haul, which our customers also appreciate. In short, Chris solves the issue of employee retention by making Figure 53 compete in many more important arenas than salary, from the more banal things like job stability to the more intangible things that go into quality of life. That's not to say that we aren't being compensated appropriately for what we do -- Chris has made it clear he's all ears if any of us ever feels we're being short-changed. But otherwise, if I went to him and said, "Hey, Schmooblr LLC is offering me 20% more, pay up or I walk", that would be a sure sign that I was not a great fit for the company in the first place.
andrewljohnson 13y ago
Disappointed by the lack of any numbes at all. No revenue, salaries, funding numbers... Expect to learn nothing from this article, and you won't be disappointed. While we're at it though, letting employees set their own salaries is stupid. It seems like a short term gimmick, absolutely plagued with problems as a company grows. I don't even believe it's true - you'd end up leading people to the number you require, and it's like declaring the organization is flat, then leading it with subtle manipulation and hidden cliques. In a weird paradox, startup CEOs love to avoid leadership, blog about it, and say it's a hip new approach.
- count 13y ago
  Is it stupid? It's working for his company, and he says it's a good fit for now, and doesn't know if it'll keep working or work for anybody else. Have you ever tried it? Can you point to scholarship where it was tried and failed? And the 'subtle manipulation and hidden cliques' is how human reality works - a flat organization structure just allows that to be the natural environment, rather than trying to force that natural human nature onto a strange arbitrary structure. You only get one set of politics and handicaps to fight, instead of 2 counterposed sets. And finally, making decisions by fiat or decree is not leadership. Read literally anything about leadership, stretching back centuries of human thought on the subject, and you're realize how off the mark you are. He LEAD the company to the voting process, he LEAD the company on deciding how to develop/deliver/market (successfully, apparently). He's definitely a leader.
- adbachman 13y ago
  Preface: I work at Figure 53, nearing three years. We're an LLC (so he's owner, not CEO), not a startup, not funded, profitable for five years, and we only have five full time employees. I think the set of principles we've been operating under have been working pretty well and I believe Chris to be a genuine person, but I'm biased by being personally involved with this particular story. It might also be important to note that while he didn't give the numbers in the story, we all who voted got to see the numbers before and after (he's never hidden them from us) and the effect the new salaries have on our bottom line. I can see how it could go wrong given employees trending towards unhappy/defensive and a boss trending towards dishonest, but that would be an awful situation to be in no matter what kind of gimmicks the bosses introduce.
derefr 13y ago
I'd be careful with this: this "democratic" budgeting has a similar feeling to "democratic" scheduling--that situation where you tell people to work "whatever hours they like." Everyone sees everyone else putting in extra hours "for the good of the team", and so you get a team slowly whipping itself into a death-march no one actually wants or needs, and resenting anyone who tries to just stick to the (healthy!) 9-to-5. Similarly, in this situation, I'd strongly bet on there being a ratchet effect, where salaries are voted down in tough times, but not voted back up in good times.
- kintamanimatt 13y ago
  That's easily solvable. Make the instruction, "Work whatever hours you like with a cap of x hours. Cap cannot be exceeded unless exceptional circumstances happen."
  - andrewljohnson 13y ago
    Except some employees work long hours and love it. Those are often your best guys.
    - jebblue 13y ago
      For how long? When do they burn out? What happens when they burn out? What happens to the team, project, product, company, customers, their families?
    - richardlblair 13y ago
      Those aren't necessarily your best guys. Those guys might have to work more because they are spending too much time messing around, and not being productive. Personally I like to give it as much as a can for a solid, honest, 8 hours and call it a day. This way I can give it my all everyday, and still get the R&R I require.
      - StavrosK 13y ago
        I don't think there's much correlation between how much someone works and how good they are. I like to think I'm pretty good, and I work 8 hours a day, and some of my coworkers are also great and work more than that. I generally value my work/life balance a lot and really don't like exceeding 8 hours a day/40 hours a week (and can feel my productivity drop after roughly those amounts of continuous work), but this is probably mostly a personal matter. I don't let other people's working longer hours than me affect me, though, because I know that my total productivity would decrease if I worked longer hours. If that's not the case for other people, or if they like work so much that they want to do more of it, or if they are bored in the evenings/weekends and want to dabble in something, that's great for them. I think the factor that helps is that I don't have management that will say "yeah, but X worked 60 hours a week and you didn't", but I'm pretty up-front about that anyway, and just stand my ground. All that having been said, I do find the US work ethic a bit crazy. Working crazy hours isn't good, and the amount of hours worked per week isn't usually proportional to productivity.
count 13y ago
I wonder what kind of scale or 'type' of organization this would work with. It's effectively a re-worked version of what partnerships (law/CPA/etc) do for the partners themselves (vote on how much of the profit to take, vs. paying employee bonuses/etc.). My gut assumption is that this will work up until the point where you have more than 2 'layers' of employees, or in any organization where all of the players involved are not highly skilled individual contributors (what would your secretary or janitor vote their salary to be, in an office of coders/etc?).
ronaldx 13y ago
This is a curious idea but I don't know if this solves any existing problem. The motivation of the employees is to choose the red dot (employees' choice) not so high that you have to overrule their choice, but otherwise higher than the blue dot (employer's preference) and the white dot (current salary). Looks like they were successful this time :) This would be more interesting article if employees were willing to reduce their own salary in lean times, or to relinquish a raise in good times. I think a low red dot would illustrate a healthy company where employees have great buy-in to the success of the company - to the point that they are willing to protect the company's cashflow at their own expense - but this technique is going to create that situation. I'd be interested to come back to this experiment in 5 years time, let's say. Good luck!
- thomaslangston 13y ago
  I'm not sure it was intended to solve a problem, but I think it does provide benefits of increased employee autonomy and mental investment. That may move the needle on employee hiring, retention, or performance. Or it may just make the owner happy, specifically in the example the author appeared to value shared ownership as a goal in itself. The author also appeared to appreciate the vote on pay as a metric to determine how the employees viewed the state of the company (i.e. how big the communication gap was between himself and the employees given the company's promotion of internal transparency).
rdl 13y ago
I intellectually really like these experiments, but one of the things virtually every startup advisor tells you is "only innovate when and where you must" -- basic things like how you do accounting, offices, etc. should be standard, so you don't screw them up, so you don't think about them too much, etc. Big companies with spare resources can afford to experiment on non-core things, and a 0.1% improvement in A/R efficiency would be material to GE, but not to a $150k/yr revenue startup. There is an argument that hiring is one of the "core" things for startups, and it is hard to do, so innovation might be warranted. Something like this experiment in setting salaries is only good if it makes recruiting/retaining/utilizing more effective. If you're doing it for any other reason, you probably have the wrong priorities. (The other part of this, paying everyone the same, actually does make a lot of sense in early stage startups, too.) I think bringing people into the organization is probably harder than retaining them, though. (at least for the first year or two) I'd personally be more inclined to experiment with "set your own referral bonus" rather than "set your own salary". (I think in SFBA right now, for engineers, that number should be USD 20k. USD 10k might be justifiable. In a lot of cases, people like gifts more than the equivalent amount of money, so maybe USD 10k + USD 10k in travel/gifts/etc. Charity donations might also be valued more than money in some cases.)
- loceng 13y ago
  Not sure how you measure the qualitative value of empowering your whole company, and allowing a collaborative decision to occur. It would be interesting to see all the other dots though - and how much communication between people there was before voting.
- fnordfnordfnord 13y ago
  > -- basic things like how you do accounting, offices, etc. should be standard, I fired a company once that was paying me quite well, and where I liked my co-workers and liked my job very well, just because they wouldn't make some changes to these simple things. They were stuck in a very rigid office culture mode where everyone had to dress the part, keep certain hours, park in a certain place, etc. I'm not the only good employee they chased away like that either. Unlike me, some of the others went to work for competitors, or formed companies that competed with them.
Bjoern 13y ago
Doesn't this open model proposed by Joel Spolsky make much more sense? http://www.joelonsoftware.com/articles/fog0000000038.html http://www.joelonsoftware.com/articles/fog0000000038.html
- philliphaydon 13y ago
  No, anything he has to say is not really worth reading now-a-days.
anonymouz 13y ago
The second graph is a perfect example for a shiny but utterly useless graph. I get that he doesn't want to share the exact figures, but without at least putting a zero point somewhere there is no sense of proportion at all.
- jonesetc 13y ago
  I felt the same. To me it looked like his original idea was way off from what they voted because of the lack of scale.
- Chris_Ashworth 13y ago
  Fair point, I may revise the graph if I have time in the coming week.
brianberns 13y ago
Wait, so every employee at the company makes exactly the same salary?
- Morendil 13y ago
  Question seconded. The OP strongly implies that, and if it's not the case then the description of the process is oversimplified.
- walshemj 13y ago
  Some hardcore worker coops do this though when I worked for a well known coop in the uk they had moved away from a purely flat model.
- PeterisP 13y ago
  As the article states - yes, but it's 5 semi-equal quality employees so not a big deal. Of course, if you would add, say, 10 minimum wage product packers / call desk operators to the mix then it would/should be different.
- Chris_Ashworth 13y ago
  Correct. (At the moment.) (We're not saying we have to keep it that way forever, and don't expect to.)
delinka 13y ago
I am reminded of CD Baby's employee profit sharing initiative: the summary is that employees asked for a profit sharing program, and the owner said "set it up" and they pretty much took all the money. I suppose the lesson is that the owner/CEO should be involved and observing these decisions.
- Jasber 13y ago
  For anyone else that's curious about this: https://news.ycombinator.com/item?id=342134 https://news.ycombinator.com/item?id=342134
releod 13y ago
Looks like the OP is not Chris Ashworth. I would also be curious to see some actual numbers behind this topic. Especially the number of employees + founders, and the skill sets of that combined team.
- Chris_Ashworth 13y ago
  1 founder, less than 10 employees: http://figure53.com/company/ http://figure53.com/company/
acjohnson55 13y ago
I have to say that I admire the author's attempt to rethink the employer-employee, capitalist-labor dynamics. As someone who once spent all my time working on a startup I owned (and jealously guarded that ownership stake), I often wondered whether these dynamics are really even just. Are we just perpetuating the issues of class division and privilege? Sure, company owners typically take bigger risks in a startup than paid employees, but often, it seems to be the case that most people who take the plunge have safety nets, alternatives, and upfront capital that represent significant privilege over the norm. Perhaps, relatively speaking, its just as risky for the employee who takes a paid job that may not exist in matter of months. In our society, for people in which the startup thing really works out, our system could make you a multibillionaire. You could literally have one thousand times the wealth of someone who is a multimillionaire. Or a million times the wealth of someone whose managed to squirrel away a little bit of cash from the two jobs they work. It takes some serious stones and principles as an owner to deviate from a system that's designed to enrich you if everything goes to plan. I hope it works out.
sthommes 13y ago
At a very early stage but well-funded startup, where everyone is relatively equal in age, capability or experience, I think the idea of everyone making the same 'monthly nut' money, like $100K per annum could be appealing. In the Bay Area, I actually think $100K after taxes/medical/401K deductions would be reasonable, high side. Cash/Stock bonuses could then be variable based on contribution. Equality, transparency and trust would be key
robomartin 13y ago
OK, I'll be the grown-up in the room. Are you fucking kidding me? No, really. OK, maybe, just maybe, if you have a very small homogeneous team and all of you are hippies this could make sense. Outside of that scenario it has disaster written all over it. This is just being a lazy CEO and not wanting to make decisions. Part of your job as a CEO is to understand such things the ebbs and flows of the business and ensure that it can survive even potentially deadly (financially speaking) scenarios. Do people vote themselves a pay reduction during bad times? Good luck with that one. Do all employees understand and plan for future acquisitions, investments and expenditures? Of course not. Sometimes you have to horde cash to get ready to make an investment, launch an initiative or hire more people. It is my experience that few people in a typical organization truly understand the financial dynamics of a business. People tend to see a two million dollar sale as two million dollars and not as the risk it can represent and the timeline to making a profit. Sometimes only the CEO has a true mental image of reality. Here's an example out of my own life. True story. I closed a $2.5 million dollar sale. This is for a hardware product. We are to be paid in four $625K installments, with the fourth one being against delivery. Walked away from the meeting with a PO and a $625K check. Fantastic, right? No. I was actually very concerned. This was early 2009. The economy was in bad shape. Banks were not lending. Everyone was bleeding money in one way or another. Most people would see a $2.5M sale as a huge win. I saw it as a potential mine field. Of course I was happy to have won the business. The reality of a CEO is to have a larger mental map from which to operate. This larger mental map told me that, while this was a nice win any number of things could go wrong and hurt us. Here's a reality in the electronics manufacturing business: Lead times can be horrible. It isn't unusual to have to wait twelve to twenty weeks for components. In addition to that, a lot of orders are tagged with the "NCNR" acronym: Non-Cancellable, Non-Returnable. In other words: You can't back away from an order. What does this mean when you need to deliver $2.5 million in product in four months. Well, it means you have to write a huge pile of purchase orders as soon as possible. The profit margin on this sale, if everything went perfectly, was approximately 25%. There are two ways to see this. The immature/adolescent way to see it is: "Man, you are going to make $625K!". Reality means "We have to spend $1.875 million to get this done. The latter is where the minefield lives. Employees are not in tune with these realities. They want a reliable paycheck every week and they want security. And, yes, they want to make as much money as possible. None of this is meant to be pejorative, it's just a reality. So, what happened? Well, within a week of receiving that first $625K I find myself writing nearly $1.5 million dollars in purchase orders. I had to. If I did not pull the trigger right away we could not deliver on time. Most of the PO's were for NCNR items. The next twelve months would send me to the hospital at least once from the stress I had to endure. The bank that was financing this deal for my customer decided to pull back. Our second installment didn't arrive for several months. When it did, it bounced. In the meantime the warehouse was filling-up with components we had to pay for. I had to use a combination of all of my credit cards as well as the full available equity in my home to pay salaries, bills and keep the business afloat. I did not fire anyone. It was a nightmare of unthinkable proportions. The proverbial kiss of death. At least one person actually died as a result of this business transaction. No, not in my company. The CEO of an associated company had a massive stroke and heart attack. The stress was just too much for him to handle and he could not take a break to look after his health. Sad. The story is far more complex than the short version above and far more nuanced, don't try to dissect it because you don't have enough information. I am simply using a simplified version as an example of business reality. It's a contact sport and sometimes you get bloody. During this time most of my employees were not aware of the mess I was juggling. Why not? Are you kidding me? The easiest way to destroy a company is from within. People want sausage, they don't want to see it made. Most employees at a multidisciplinary business don't have enough information to understand what's going on. You'd have to spend a ridiculous amount of time educating everyone in order to ensure that they get it. That's an irresponsible misuse of time. Your testing technician needs to be in the shop testing boards, not looking over balance sheets. Same applies to your shipping clerks, receptionist, marketing manager and graphic designer. So, yeah, I am coming off a bit harsh on this one. And rightly so. I think this CEO isn't a CEO at all. He wants to be buddies with his presumably homogeneous team. This decision is bad on many fronts. It sets up a bad situation. You will have to veto or flat-out take this "right" away at some point and, when you do, it will be hell. The other item is this idea of the CEO choosing to get paid the same or less than everyone else. OK, well, five buddies start a business together, fine, that makes sense. In most other situations this makes no sense whatsoever. Most businesses outside the reality distortion field that is the SCV/Venture-Capital world are self-funded efforts with huge financial and time investments from the CEO/Owner. A lot of them require slaving away in your garage for years before you can scale. There is almost no way any employee can match the level of investment, effort or sacrifice this class of CEO put into the business before the first employee was hired. No way. CEO pay and employee pay have no correlation whatsoever. One is responsible for a very narrow domain. The other is responsible for everything, often at a personal level. Pay your employees fairly, treat them well, be generous about vacations, be considerate, help them if they run into tough times (sick kid, parent, financial problem, etc.), pay for conferences and training courses, take them out on morale building trips and, if finances allow, be generous with bonuses and your recognition of their contribution to the enterprise. You are running a business, not a hippie commune.
jtc331 13y ago
So what you're saying is that you read Atlas Shrugged and decided to put Rand's conception of the worst possible way to run a company into actual practice?
- innguest 13y ago
  I think what he's saying is he read this [1] instead and then decided to put it in practice... again. [1] http://www.amazon.com/Maverick-Success-Behind-Unusual-Workplace/dp/0446670553 http://www.amazon.com/Maverick-Success-Behind-Unusual-Workpl...
- wiml 13y ago
  I don't think taking business advice from Ayn Rand novels is a particularly smart thing to do.
chiph 13y ago
Sales are up, so everyone gets raises. What happens when sales decline? By giving everyone an increase in salary, you're committing to pay that amount for the foreseeable future. If you can't ... then layoffs will happen. So what if you used a salary + bonus structure? The problem is that firms have been abusing this for years, and employees are wise to it now. "Bonus? Never seen anyone pay on it, so doesn't matter."
- Ellahn 13y ago
  Without the numbers, you're supposing too much. From reading, I believe he had too much money in the bank, and too much getting in. So, yeah, we can't keep this stored forever, since the cart's still going up, and we have a lot to spare, let's raaise salaries to something we can keep in our current situation, possibly still storing a little. If he was dumb enough to just raise to infinite and beyond (The sky is the limit!), I don't believe he would have been so successful until now.
dysruption 13y ago
Hasn't anyone read Atlas Shrugged?
- thomaslangston 13y ago
  I have. The correlation to the novel is limited however in our example. We're not talking about industrial complexes full of employees with vastly different market rates; we're discussing a 5 person team. To abusively stretch a definition, "Communist" policies like this seem to have some success in very limited scope, such as family households. The other comments indicate it is apparent to everyone that as presented such a system would not scale to a larger organization. Such policies could be used as inspiration or a baseline to build scalable compensation plans that recognize individuals (or teams) that provide varying market value.
lettergram 13y ago
I believe the author is right, this would not be right for every company. However, for small companies with a diverse skill set it is likely warranted or at least fair that everyone is paid the same. I also like the idea of letting the employees vote, because it gives them (A) more connection, emotionally and financially to the companies success (B) enables employees to imagine their self-worth which in turn makes them strive to be better. One comment I must make is that I do not believe this will work in the long term. I am guessing when the company goes onto hard times there would likely be a unionization to force to keep from a pay cut (which is bad). However, there are cases where because everyone is in it together they are willing to not be paid for a period of time. An example of this would be an interesting conversation I had with a founding member of Molex (they make connectors in every computer pretty much in the world http://en.wikipedia.org/wiki/Molex http://en.wikipedia.org/wiki/Molex) who claimed that the owner came in one day and said there was no way to pay any of them, but if they stuck with him they would have a job for life and the pay would be based on company profits. The old man I was talking to was the janitor from 1940 and was still the janitor in 2005 and was one of the highest paid in the company (ironic huh!). Anyways, the point is even a billion dollar corporation starts off this way and it seems reasonable enough and good enough to get loyal and hard working employees. There will be a time for change, but for now it is an interesting experiment and will likely work.
- Chris_Ashworth 13y ago
  We've discussed the long term, and we all agree: it's not something that will stay like this forever. In the long term I don't think it would be fair to maintain a perfectly flat pay structure; we won't always hire people with the same set of skills or experience or responsibilities. I don't expect to keep this system forever, but it's a good fit for us at this particular moment in time. I expect it will change as we change.
StandardFuture 13y ago
>The fun (and terrifying) thing about running a company is that you're allowed to do... anything. When you stop and think about it, that is one really powerful statement. Which must be why it's so easy to mess up running a company, because channeling that power is no easy thing to do. It takes a lot of self-control and even more control in general. I think a lot of hackers/startups underestimate this by thinking that because they can control machines then that automatically implies that they can handle a petty company.
goofygrin 13y ago
This is retarded. The owner has employees. Not partners. He is carrying all the risk. Slow pay? He pays. Personal guarantee needed? His house is on the line. Needs cash to hire the next employee or to float more payroll while the work ramps up? Ya its his cash. He's effectively made everyone an equal partner with unequal risks and responsibilities.
- kybernetikos 13y ago
  I wouldn't make the point quite like you have, but yes. Employees lose a lot less than the owner if the company is run into the ground because it's paying the employees too much. That's not to say that that is what is happening in this situation - I don't know, but while I love the transparency aspect, I would not expect the 'allow employees to choose their salary' to reliably create a good outcome for the company. (Having said that, allowing management to set salary secretly doesn't always work great either.) I expect that it only stands a chance of working well if your employees are genuinely bought in to the whole idea of the company.
- sopooneo 13y ago
  I thought somewhat of the opposite. They're not partners unless they have equity. And if he has a great deal of equity, and the company is valuable, his own salary may be less significant than buy-out or IPO money.
- wpietri 13y ago
  What's your evidence? Typically, people who are involved in decisions feel much more engaged in dealing with the results. My expectation is that if something happened to the company, his employees would be much more loyal. Certainly if I worked for him, I'd be willing to take some bad times with the good times. The one open-books company I visited had extremely loyal employees and great camaraderie. Causality is hard to untangle there, but it's not unreasonable that this is much smarter that the "Mine! It's all mine!" approach to employee relations that is a common alternative.
  - ghostdiver 13y ago
    at the end of the day for most of employees all that matters is how much money lands in their pocket if they wanted to be business partners they wouldn't become employees in first place
mililani 13y ago
I set my salary at 1 MILLION dollars.
- deleted 13y ago
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- jeanbebe 13y ago
  This is where Dr. Evil's colleagues snicker and he counters his demands with "100 BILLION Dollars", right? Seems a bit much to have people set their own salary. What happens if you have an engineer who decides their worth $190k when in reality they're worth $100k at best? I prefer the idea of providing other benefits like flexibility to work from anywhere and a sane vacation policy (take as much or as little as you want, but make sure your shit gets done).
  - aphelion 13y ago
    What happens? They get fired. I'm all for workplace policies that give a greater amount of discretion to employees as to how, when, and where to work. But "set your own salary" is a bit like "set your own hours". Your decision ends up being highly constrained by existing norms, and by the fear of being terminated if you fail to choose the answer intended by management.
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sdas7 13y ago
Hmmm, this is a neat idea. But salaries tend to be sticky downward. What happens if your revenue drops back down to standard levels, such that the newly selected salary is no longer sustainable? Perhaps a democratically selected bonus would be a safer option.
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fela 13y ago
Maybe the median would be better than the mean? Any number lower than the median and more then 50% of the employees would want it higher, any number bigger and more than 50% would want it lower. It also protects from strategic voting: if you use the mean a person could strategically give a higher value that his ideal result, if he things the others will on average vote too low.
- waqf 13y ago
  Agreed. It protects from strategic voting (or incompetence or malice) of a small number of participants, because it's a robust statistic: https://en.wikipedia.org/wiki/Robust_statistics#Examples https://en.wikipedia.org/wiki/Robust_statistics#Examples.
OldSchool 13y ago
Hmm, this outcome should be interesting. As a rational person it's natural to gravitate toward purely objective.. well anything. Generally people on the receiving side don't seem to handle this well; everyone gets bent out of shape because they think they have a special case. Seriously I never quite understood why the whole world is full of conflict and claims and counter-claims until I became a parent of small children. Then it made sense.
- 300bps 13y ago
  Hmm, this outcome should be interesting. Probably a headline similar to the following some time in 2014. Unbelievable Mistakes I Made in My Last Startup (figure54.com) 139 points by ry0ohki 5 hours ago | flag | 78 comments
  - bornhuetter 13y ago
    I think this is the first time I've laughed out loud when reading a HN comment. I have a suspicion that you're right.
marcamillion 13y ago
Definitely interesting...but the obvious downside is the years when revenue goes down (if it ever does) are going to suck...HARD!!!!
- Morendil 13y ago
  And that doesn't happen elsewhere?
dhfromkorea 13y ago
You're not alone. Here's an early variant of such a policy. SEMCO, a Brazilian company run by Ricardo Semler, has since 1980s had the policy where people could set their own salaries. Some excerpts off his book on 37signals: http://37signals.com/svn/posts/945-excerpts-from-ricardo-semlers-book-maverick-the-success-behind-the-worlds-most-unusual-workplace http://37signals.com/svn/posts/945-excerpts-from-ricardo-sem... His book: http://www.amazon.com/Maverick-Success-Behind-Unusual-Workplace/dp/0446670553/ref=sr_1_1?ie=UTF8&qid=1377979232&sr=8-1&keywords=maverick+ricardo http://www.amazon.com/Maverick-Success-Behind-Unusual-Workpl...
hartator 13y ago
I really do like experiments, but I think humbly that's a terrible idea. It seems to me that's a way to flee decisions and responsibilities for the OP but it can also be unfair for good and talented people shy and introverted. (We have a lot of that in our industry!). It reminds me of John Galt, Ayn Rand character who flee a company just like that.
luke-stanley 13y ago
Holacracy have been voting on salaries and many other things for a while now. I'm surprised nobody has mentioned it yet.
HoochTHX 13y ago
This sounds like 20th Century Motors all over again.
dk8996 13y ago
Have you thought about linking the salary to the performance of the company. Other industries operate this way... I want our industry to operate this way as well.
croisillon 13y ago
- Welcome as a new addition to our company, btw here you can name your salary - Oh yeah? Wow! - Yes, please go ahead, for instance mine is Bob
deleted 13y ago
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jblok 13y ago
"What does it represent? Does it mean, given the opportunity, I'd lean low, and they'd lean high, in an effort to pull the numbers in a selfish direction? Maybe." Not maybe. Obviously. Obviously, no matter how close knit the team is, and how well you know everybody, people still love the almighty dollar, and if they can will get more of them for doing the same amount of work. The boss on the other hand, as much as he loves transparency and communication and won't admit to it, also loves the almighty dollar, and subconsciously leant low.

307 points by ry0ohki 13y ago

I really like that this is collaborative and anonymous. I could see as the company grows, bands and bonuses being set by popular vote. At the same time however, you have to pay market rates. If a good employee has an offer for 20% more than they are making, and they just had their first kid so they'd kind of could use more money, what do you do? On one hand, you give them a raise - which breaks the collaborative system. On the other, you don't give them a raise, and you lose a key contributer who was bringing in far more revenue than their salary. The fact is, your best employees are going to be constantly getting offers above what you pay them, and you need mechanisms in place to keep them. At the same time, transparency has to really be transparent if it's going to be a core value of the company - if I was told everyone was making $X but I found out that some of those people were making more, I'd be annoyed. So my question is, how do you solve this?

SatvikBeri 13y ago
You always have tradeoffs. Which tradeoffs make sense depend on the culture you want to foster, the size of your company, and probably a hundred other factors. Transparent criteria for salary mean that you avoid the politics associated with salary negotiations. And making even a single exception typically breaks that, meaning that now everyone at the company is incentivized to get higher-paying offers and bring to you, asking for more money. Ben Horowitz wrote a great post on this: http://bhorowitz.com/2010/08/23/how-to-minimize-politics-in-your-company/ http://bhorowitz.com/2010/08/23/how-to-minimize-politics-in-... Personally I would say that you should avoid ad-hoc raises. I really like the idea of matching salaries to titles and matching title changes to a bi-annual performance review (for companies over a certain size.) And it gets a lot of the advantages you want-transparent compensation, no incentives for politicking, ability to pay people differently, and the ability to adjust the pay for the role according to market rates. Edit: Fog Creek's compensation system is a good example. http://www.joelonsoftware.com/articles/fog0000000038.html http://www.joelonsoftware.com/articles/fog0000000038.html
- michaelt 13y ago
  Matching salaries to titles means your best-performing developers can't get a raise without becoming managers, or getting a raise for everyone in their title (i.e. a raise that's much more expensive for the company), or leaving the company. Seems like quite a pair of handcuffs to put on yourself.
  - SatvikBeri 13y ago
    Most places have more than one developer title. See e.g. the Fog Creek link.
flogic 13y ago
I think in this case you have 2 choices. One, you let that employee move on. Or 2, you have to re-enter the group salary discussion. Being dishonest in your transparency would quite probably do irreparable harm to the culture.
thomaslangston 13y ago
One option is to be small and have a tight grouping of potential. Another option is to reward those employees with non-cash rewards. Finally if their contribution is easily measurable, a bonus or commission system tied to those metrics could be transparent and perceived as fair.
thedufer 13y ago
Where I work, we have a similar system of transparent salaries. There is a scale, but it is not very granular (the rule of thumb is that if most people couldn't guess a given employee's salary level, they're in the wrong one) and dependent on skills and industry experience. There is a good description here: http://www.joelonsoftware.com/articles/fog0000000038.html http://www.joelonsoftware.com/articles/fog0000000038.html (SatvikBeri also linked to this article). That is still relevant except for a few points - we no longer give stock options and reviews are annual instead of biannual. > If a good employee has an offer for 20% more than they are making... We let them leave. That said, it doesn't happen often (I don't know of a time it did). Our salaries (and annual bonuses) are generous, and any differences are more than made up for by various other perks. That said, we do lose new hires to bigger offers. If this happens too often, the entire pay scale gets moved up to reflect market changes and/or inflation.
seandougall 13y ago
> So my question is, how do you solve this? I think I can offer some insight on that, because I'm Figure 53's employee #2 (after Chris). I live near San Francisco, where with some effort I could quite possibly find a job that paid 20% more than I'm making with Figure 53 if I wanted to. And my first child will be born in the next 3 weeks! Oh, I also bought a house in June, for extra measure. :-) Would a 20% raise be enough to draw me away from Figure 53 to work for one of the many startups around here? Hell no. A 200% raise wouldn't be enough. Some of the many reasons why: - I'm passionate about our products, but even more so about the art that gets made with them. I'm a musician who learned to code in order to make the tools that I wanted to use, and now I get paid to make those tools, and help other people use them. Whether it's a high school play or the Olympics, it's really freaking cool to see what your customers create with your work. - Family is important to me, and working from home (and not on a 9-5) means that I'll be able to spend time with my daughter even after I come back from paternity leave. Chris is of a similar sensibility, so I never have to do any convincing on that score. - I don't have to worry about whether the company's going to be around next month, because I know our money is being managed conservatively. We're in it for the long haul, which our customers also appreciate. In short, Chris solves the issue of employee retention by making Figure 53 compete in many more important arenas than salary, from the more banal things like job stability to the more intangible things that go into quality of life. That's not to say that we aren't being compensated appropriately for what we do -- Chris has made it clear he's all ears if any of us ever feels we're being short-changed. But otherwise, if I went to him and said, "Hey, Schmooblr LLC is offering me 20% more, pay up or I walk", that would be a sure sign that I was not a great fit for the company in the first place.

andrewljohnson 13y ago

Disappointed by the lack of any numbes at all. No revenue, salaries, funding numbers... Expect to learn nothing from this article, and you won't be disappointed. While we're at it though, letting employees set their own salaries is stupid. It seems like a short term gimmick, absolutely plagued with problems as a company grows. I don't even believe it's true - you'd end up leading people to the number you require, and it's like declaring the organization is flat, then leading it with subtle manipulation and hidden cliques. In a weird paradox, startup CEOs love to avoid leadership, blog about it, and say it's a hip new approach.

count 13y ago
Is it stupid? It's working for his company, and he says it's a good fit for now, and doesn't know if it'll keep working or work for anybody else. Have you ever tried it? Can you point to scholarship where it was tried and failed? And the 'subtle manipulation and hidden cliques' is how human reality works - a flat organization structure just allows that to be the natural environment, rather than trying to force that natural human nature onto a strange arbitrary structure. You only get one set of politics and handicaps to fight, instead of 2 counterposed sets. And finally, making decisions by fiat or decree is not leadership. Read literally anything about leadership, stretching back centuries of human thought on the subject, and you're realize how off the mark you are. He LEAD the company to the voting process, he LEAD the company on deciding how to develop/deliver/market (successfully, apparently). He's definitely a leader.
adbachman 13y ago
Preface: I work at Figure 53, nearing three years. We're an LLC (so he's owner, not CEO), not a startup, not funded, profitable for five years, and we only have five full time employees. I think the set of principles we've been operating under have been working pretty well and I believe Chris to be a genuine person, but I'm biased by being personally involved with this particular story. It might also be important to note that while he didn't give the numbers in the story, we all who voted got to see the numbers before and after (he's never hidden them from us) and the effect the new salaries have on our bottom line. I can see how it could go wrong given employees trending towards unhappy/defensive and a boss trending towards dishonest, but that would be an awful situation to be in no matter what kind of gimmicks the bosses introduce.

derefr 13y ago

I'd be careful with this: this "democratic" budgeting has a similar feeling to "democratic" scheduling--that situation where you tell people to work "whatever hours they like." Everyone sees everyone else putting in extra hours "for the good of the team", and so you get a team slowly whipping itself into a death-march no one actually wants or needs, and resenting anyone who tries to just stick to the (healthy!) 9-to-5. Similarly, in this situation, I'd strongly bet on there being a ratchet effect, where salaries are voted down in tough times, but not voted back up in good times.

kintamanimatt 13y ago
That's easily solvable. Make the instruction, "Work whatever hours you like with a cap of x hours. Cap cannot be exceeded unless exceptional circumstances happen."
- andrewljohnson 13y ago
  Except some employees work long hours and love it. Those are often your best guys.
  - jebblue 13y ago
    For how long? When do they burn out? What happens when they burn out? What happens to the team, project, product, company, customers, their families?
  - richardlblair 13y ago
    Those aren't necessarily your best guys. Those guys might have to work more because they are spending too much time messing around, and not being productive. Personally I like to give it as much as a can for a solid, honest, 8 hours and call it a day. This way I can give it my all everyday, and still get the R&R I require.
    - StavrosK 13y ago
      I don't think there's much correlation between how much someone works and how good they are. I like to think I'm pretty good, and I work 8 hours a day, and some of my coworkers are also great and work more than that. I generally value my work/life balance a lot and really don't like exceeding 8 hours a day/40 hours a week (and can feel my productivity drop after roughly those amounts of continuous work), but this is probably mostly a personal matter. I don't let other people's working longer hours than me affect me, though, because I know that my total productivity would decrease if I worked longer hours. If that's not the case for other people, or if they like work so much that they want to do more of it, or if they are bored in the evenings/weekends and want to dabble in something, that's great for them. I think the factor that helps is that I don't have management that will say "yeah, but X worked 60 hours a week and you didn't", but I'm pretty up-front about that anyway, and just stand my ground. All that having been said, I do find the US work ethic a bit crazy. Working crazy hours isn't good, and the amount of hours worked per week isn't usually proportional to productivity.

count 13y ago

I wonder what kind of scale or 'type' of organization this would work with. It's effectively a re-worked version of what partnerships (law/CPA/etc) do for the partners themselves (vote on how much of the profit to take, vs. paying employee bonuses/etc.). My gut assumption is that this will work up until the point where you have more than 2 'layers' of employees, or in any organization where all of the players involved are not highly skilled individual contributors (what would your secretary or janitor vote their salary to be, in an office of coders/etc?).

ronaldx 13y ago

This is a curious idea but I don't know if this solves any existing problem. The motivation of the employees is to choose the red dot (employees' choice) not so high that you have to overrule their choice, but otherwise higher than the blue dot (employer's preference) and the white dot (current salary). Looks like they were successful this time :) This would be more interesting article if employees were willing to reduce their own salary in lean times, or to relinquish a raise in good times. I think a low red dot would illustrate a healthy company where employees have great buy-in to the success of the company - to the point that they are willing to protect the company's cashflow at their own expense - but this technique is going to create that situation. I'd be interested to come back to this experiment in 5 years time, let's say. Good luck!

thomaslangston 13y ago
I'm not sure it was intended to solve a problem, but I think it does provide benefits of increased employee autonomy and mental investment. That may move the needle on employee hiring, retention, or performance. Or it may just make the owner happy, specifically in the example the author appeared to value shared ownership as a goal in itself. The author also appeared to appreciate the vote on pay as a metric to determine how the employees viewed the state of the company (i.e. how big the communication gap was between himself and the employees given the company's promotion of internal transparency).

rdl 13y ago

I intellectually really like these experiments, but one of the things virtually every startup advisor tells you is "only innovate when and where you must" -- basic things like how you do accounting, offices, etc. should be standard, so you don't screw them up, so you don't think about them too much, etc. Big companies with spare resources can afford to experiment on non-core things, and a 0.1% improvement in A/R efficiency would be material to GE, but not to a $150k/yr revenue startup. There is an argument that hiring is one of the "core" things for startups, and it is hard to do, so innovation might be warranted. Something like this experiment in setting salaries is only good if it makes recruiting/retaining/utilizing more effective. If you're doing it for any other reason, you probably have the wrong priorities. (The other part of this, paying everyone the same, actually does make a lot of sense in early stage startups, too.) I think bringing people into the organization is probably harder than retaining them, though. (at least for the first year or two) I'd personally be more inclined to experiment with "set your own referral bonus" rather than "set your own salary". (I think in SFBA right now, for engineers, that number should be USD 20k. USD 10k might be justifiable. In a lot of cases, people like gifts more than the equivalent amount of money, so maybe USD 10k + USD 10k in travel/gifts/etc. Charity donations might also be valued more than money in some cases.)

loceng 13y ago
Not sure how you measure the qualitative value of empowering your whole company, and allowing a collaborative decision to occur. It would be interesting to see all the other dots though - and how much communication between people there was before voting.
fnordfnordfnord 13y ago
> -- basic things like how you do accounting, offices, etc. should be standard, I fired a company once that was paying me quite well, and where I liked my co-workers and liked my job very well, just because they wouldn't make some changes to these simple things. They were stuck in a very rigid office culture mode where everyone had to dress the part, keep certain hours, park in a certain place, etc. I'm not the only good employee they chased away like that either. Unlike me, some of the others went to work for competitors, or formed companies that competed with them.

Bjoern 13y ago

Doesn't this open model proposed by Joel Spolsky make much more sense? http://www.joelonsoftware.com/articles/fog0000000038.html http://www.joelonsoftware.com/articles/fog0000000038.html

philliphaydon 13y ago
No, anything he has to say is not really worth reading now-a-days.

anonymouz 13y ago

The second graph is a perfect example for a shiny but utterly useless graph. I get that he doesn't want to share the exact figures, but without at least putting a zero point somewhere there is no sense of proportion at all.

jonesetc 13y ago
I felt the same. To me it looked like his original idea was way off from what they voted because of the lack of scale.
Chris_Ashworth 13y ago
Fair point, I may revise the graph if I have time in the coming week.

brianberns 13y ago

Wait, so every employee at the company makes exactly the same salary?

Morendil 13y ago
Question seconded. The OP strongly implies that, and if it's not the case then the description of the process is oversimplified.
walshemj 13y ago
Some hardcore worker coops do this though when I worked for a well known coop in the uk they had moved away from a purely flat model.
PeterisP 13y ago
As the article states - yes, but it's 5 semi-equal quality employees so not a big deal. Of course, if you would add, say, 10 minimum wage product packers / call desk operators to the mix then it would/should be different.
Chris_Ashworth 13y ago
Correct. (At the moment.) (We're not saying we have to keep it that way forever, and don't expect to.)

delinka 13y ago

I am reminded of CD Baby's employee profit sharing initiative: the summary is that employees asked for a profit sharing program, and the owner said "set it up" and they pretty much took all the money. I suppose the lesson is that the owner/CEO should be involved and observing these decisions.

Jasber 13y ago
For anyone else that's curious about this: https://news.ycombinator.com/item?id=342134 https://news.ycombinator.com/item?id=342134

releod 13y ago

Looks like the OP is not Chris Ashworth. I would also be curious to see some actual numbers behind this topic. Especially the number of employees + founders, and the skill sets of that combined team.

Chris_Ashworth 13y ago
1 founder, less than 10 employees: http://figure53.com/company/ http://figure53.com/company/

acjohnson55 13y ago

I have to say that I admire the author's attempt to rethink the employer-employee, capitalist-labor dynamics. As someone who once spent all my time working on a startup I owned (and jealously guarded that ownership stake), I often wondered whether these dynamics are really even just. Are we just perpetuating the issues of class division and privilege? Sure, company owners typically take bigger risks in a startup than paid employees, but often, it seems to be the case that most people who take the plunge have safety nets, alternatives, and upfront capital that represent significant privilege over the norm. Perhaps, relatively speaking, its just as risky for the employee who takes a paid job that may not exist in matter of months. In our society, for people in which the startup thing really works out, our system could make you a multibillionaire. You could literally have one thousand times the wealth of someone who is a multimillionaire. Or a million times the wealth of someone whose managed to squirrel away a little bit of cash from the two jobs they work. It takes some serious stones and principles as an owner to deviate from a system that's designed to enrich you if everything goes to plan. I hope it works out.

sthommes 13y ago

At a very early stage but well-funded startup, where everyone is relatively equal in age, capability or experience, I think the idea of everyone making the same 'monthly nut' money, like $100K per annum could be appealing. In the Bay Area, I actually think $100K after taxes/medical/401K deductions would be reasonable, high side. Cash/Stock bonuses could then be variable based on contribution. Equality, transparency and trust would be key

robomartin 13y ago

OK, I'll be the grown-up in the room. Are you fucking kidding me? No, really. OK, maybe, just maybe, if you have a very small homogeneous team and all of you are hippies this could make sense. Outside of that scenario it has disaster written all over it. This is just being a lazy CEO and not wanting to make decisions. Part of your job as a CEO is to understand such things the ebbs and flows of the business and ensure that it can survive even potentially deadly (financially speaking) scenarios. Do people vote themselves a pay reduction during bad times? Good luck with that one. Do all employees understand and plan for future acquisitions, investments and expenditures? Of course not. Sometimes you have to horde cash to get ready to make an investment, launch an initiative or hire more people. It is my experience that few people in a typical organization truly understand the financial dynamics of a business. People tend to see a two million dollar sale as two million dollars and not as the risk it can represent and the timeline to making a profit. Sometimes only the CEO has a true mental image of reality. Here's an example out of my own life. True story. I closed a $2.5 million dollar sale. This is for a hardware product. We are to be paid in four $625K installments, with the fourth one being against delivery. Walked away from the meeting with a PO and a $625K check. Fantastic, right? No. I was actually very concerned. This was early 2009. The economy was in bad shape. Banks were not lending. Everyone was bleeding money in one way or another. Most people would see a $2.5M sale as a huge win. I saw it as a potential mine field. Of course I was happy to have won the business. The reality of a CEO is to have a larger mental map from which to operate. This larger mental map told me that, while this was a nice win any number of things could go wrong and hurt us. Here's a reality in the electronics manufacturing business: Lead times can be horrible. It isn't unusual to have to wait twelve to twenty weeks for components. In addition to that, a lot of orders are tagged with the "NCNR" acronym: Non-Cancellable, Non-Returnable. In other words: You can't back away from an order. What does this mean when you need to deliver $2.5 million in product in four months. Well, it means you have to write a huge pile of purchase orders as soon as possible. The profit margin on this sale, if everything went perfectly, was approximately 25%. There are two ways to see this. The immature/adolescent way to see it is: "Man, you are going to make $625K!". Reality means "We have to spend $1.875 million to get this done. The latter is where the minefield lives. Employees are not in tune with these realities. They want a reliable paycheck every week and they want security. And, yes, they want to make as much money as possible. None of this is meant to be pejorative, it's just a reality. So, what happened? Well, within a week of receiving that first $625K I find myself writing nearly $1.5 million dollars in purchase orders. I had to. If I did not pull the trigger right away we could not deliver on time. Most of the PO's were for NCNR items. The next twelve months would send me to the hospital at least once from the stress I had to endure. The bank that was financing this deal for my customer decided to pull back. Our second installment didn't arrive for several months. When it did, it bounced. In the meantime the warehouse was filling-up with components we had to pay for. I had to use a combination of all of my credit cards as well as the full available equity in my home to pay salaries, bills and keep the business afloat. I did not fire anyone. It was a nightmare of unthinkable proportions. The proverbial kiss of death. At least one person actually died as a result of this business transaction. No, not in my company. The CEO of an associated company had a massive stroke and heart attack. The stress was just too much for him to handle and he could not take a break to look after his health. Sad. The story is far more complex than the short version above and far more nuanced, don't try to dissect it because you don't have enough information. I am simply using a simplified version as an example of business reality. It's a contact sport and sometimes you get bloody. During this time most of my employees were not aware of the mess I was juggling. Why not? Are you kidding me? The easiest way to destroy a company is from within. People want sausage, they don't want to see it made. Most employees at a multidisciplinary business don't have enough information to understand what's going on. You'd have to spend a ridiculous amount of time educating everyone in order to ensure that they get it. That's an irresponsible misuse of time. Your testing technician needs to be in the shop testing boards, not looking over balance sheets. Same applies to your shipping clerks, receptionist, marketing manager and graphic designer. So, yeah, I am coming off a bit harsh on this one. And rightly so. I think this CEO isn't a CEO at all. He wants to be buddies with his presumably homogeneous team. This decision is bad on many fronts. It sets up a bad situation. You will have to veto or flat-out take this "right" away at some point and, when you do, it will be hell. The other item is this idea of the CEO choosing to get paid the same or less than everyone else. OK, well, five buddies start a business together, fine, that makes sense. In most other situations this makes no sense whatsoever. Most businesses outside the reality distortion field that is the SCV/Venture-Capital world are self-funded efforts with huge financial and time investments from the CEO/Owner. A lot of them require slaving away in your garage for years before you can scale. There is almost no way any employee can match the level of investment, effort or sacrifice this class of CEO put into the business before the first employee was hired. No way. CEO pay and employee pay have no correlation whatsoever. One is responsible for a very narrow domain. The other is responsible for everything, often at a personal level. Pay your employees fairly, treat them well, be generous about vacations, be considerate, help them if they run into tough times (sick kid, parent, financial problem, etc.), pay for conferences and training courses, take them out on morale building trips and, if finances allow, be generous with bonuses and your recognition of their contribution to the enterprise. You are running a business, not a hippie commune.

jtc331 13y ago

So what you're saying is that you read Atlas Shrugged and decided to put Rand's conception of the worst possible way to run a company into actual practice?

innguest 13y ago
I think what he's saying is he read this [1] instead and then decided to put it in practice... again. [1] http://www.amazon.com/Maverick-Success-Behind-Unusual-Workplace/dp/0446670553 http://www.amazon.com/Maverick-Success-Behind-Unusual-Workpl...
wiml 13y ago
I don't think taking business advice from Ayn Rand novels is a particularly smart thing to do.

chiph 13y ago

Sales are up, so everyone gets raises. What happens when sales decline? By giving everyone an increase in salary, you're committing to pay that amount for the foreseeable future. If you can't ... then layoffs will happen. So what if you used a salary + bonus structure? The problem is that firms have been abusing this for years, and employees are wise to it now. "Bonus? Never seen anyone pay on it, so doesn't matter."

Ellahn 13y ago
Without the numbers, you're supposing too much. From reading, I believe he had too much money in the bank, and too much getting in. So, yeah, we can't keep this stored forever, since the cart's still going up, and we have a lot to spare, let's raaise salaries to something we can keep in our current situation, possibly still storing a little. If he was dumb enough to just raise to infinite and beyond (The sky is the limit!), I don't believe he would have been so successful until now.

dysruption 13y ago

Hasn't anyone read Atlas Shrugged?

thomaslangston 13y ago
I have. The correlation to the novel is limited however in our example. We're not talking about industrial complexes full of employees with vastly different market rates; we're discussing a 5 person team. To abusively stretch a definition, "Communist" policies like this seem to have some success in very limited scope, such as family households. The other comments indicate it is apparent to everyone that as presented such a system would not scale to a larger organization. Such policies could be used as inspiration or a baseline to build scalable compensation plans that recognize individuals (or teams) that provide varying market value.

lettergram 13y ago

I believe the author is right, this would not be right for every company. However, for small companies with a diverse skill set it is likely warranted or at least fair that everyone is paid the same. I also like the idea of letting the employees vote, because it gives them (A) more connection, emotionally and financially to the companies success (B) enables employees to imagine their self-worth which in turn makes them strive to be better. One comment I must make is that I do not believe this will work in the long term. I am guessing when the company goes onto hard times there would likely be a unionization to force to keep from a pay cut (which is bad). However, there are cases where because everyone is in it together they are willing to not be paid for a period of time. An example of this would be an interesting conversation I had with a founding member of Molex (they make connectors in every computer pretty much in the world http://en.wikipedia.org/wiki/Molex http://en.wikipedia.org/wiki/Molex) who claimed that the owner came in one day and said there was no way to pay any of them, but if they stuck with him they would have a job for life and the pay would be based on company profits. The old man I was talking to was the janitor from 1940 and was still the janitor in 2005 and was one of the highest paid in the company (ironic huh!). Anyways, the point is even a billion dollar corporation starts off this way and it seems reasonable enough and good enough to get loyal and hard working employees. There will be a time for change, but for now it is an interesting experiment and will likely work.

Chris_Ashworth 13y ago
We've discussed the long term, and we all agree: it's not something that will stay like this forever. In the long term I don't think it would be fair to maintain a perfectly flat pay structure; we won't always hire people with the same set of skills or experience or responsibilities. I don't expect to keep this system forever, but it's a good fit for us at this particular moment in time. I expect it will change as we change.

StandardFuture 13y ago

>The fun (and terrifying) thing about running a company is that you're allowed to do... anything. When you stop and think about it, that is one really powerful statement. Which must be why it's so easy to mess up running a company, because channeling that power is no easy thing to do. It takes a lot of self-control and even more control in general. I think a lot of hackers/startups underestimate this by thinking that because they can control machines then that automatically implies that they can handle a petty company.

goofygrin 13y ago

This is retarded. The owner has employees. Not partners. He is carrying all the risk. Slow pay? He pays. Personal guarantee needed? His house is on the line. Needs cash to hire the next employee or to float more payroll while the work ramps up? Ya its his cash. He's effectively made everyone an equal partner with unequal risks and responsibilities.

kybernetikos 13y ago
I wouldn't make the point quite like you have, but yes. Employees lose a lot less than the owner if the company is run into the ground because it's paying the employees too much. That's not to say that that is what is happening in this situation - I don't know, but while I love the transparency aspect, I would not expect the 'allow employees to choose their salary' to reliably create a good outcome for the company. (Having said that, allowing management to set salary secretly doesn't always work great either.) I expect that it only stands a chance of working well if your employees are genuinely bought in to the whole idea of the company.
sopooneo 13y ago
I thought somewhat of the opposite. They're not partners unless they have equity. And if he has a great deal of equity, and the company is valuable, his own salary may be less significant than buy-out or IPO money.
wpietri 13y ago
What's your evidence? Typically, people who are involved in decisions feel much more engaged in dealing with the results. My expectation is that if something happened to the company, his employees would be much more loyal. Certainly if I worked for him, I'd be willing to take some bad times with the good times. The one open-books company I visited had extremely loyal employees and great camaraderie. Causality is hard to untangle there, but it's not unreasonable that this is much smarter that the "Mine! It's all mine!" approach to employee relations that is a common alternative.
- ghostdiver 13y ago
  at the end of the day for most of employees all that matters is how much money lands in their pocket if they wanted to be business partners they wouldn't become employees in first place

mililani 13y ago

I set my salary at 1 MILLION dollars.

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jeanbebe 13y ago
This is where Dr. Evil's colleagues snicker and he counters his demands with "100 BILLION Dollars", right? Seems a bit much to have people set their own salary. What happens if you have an engineer who decides their worth $190k when in reality they're worth $100k at best? I prefer the idea of providing other benefits like flexibility to work from anywhere and a sane vacation policy (take as much or as little as you want, but make sure your shit gets done).
- aphelion 13y ago
  What happens? They get fired. I'm all for workplace policies that give a greater amount of discretion to employees as to how, when, and where to work. But "set your own salary" is a bit like "set your own hours". Your decision ends up being highly constrained by existing norms, and by the fear of being terminated if you fail to choose the answer intended by management.

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sdas7 13y ago

Hmmm, this is a neat idea. But salaries tend to be sticky downward. What happens if your revenue drops back down to standard levels, such that the newly selected salary is no longer sustainable? Perhaps a democratically selected bonus would be a safer option.

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fela 13y ago

Maybe the median would be better than the mean? Any number lower than the median and more then 50% of the employees would want it higher, any number bigger and more than 50% would want it lower. It also protects from strategic voting: if you use the mean a person could strategically give a higher value that his ideal result, if he things the others will on average vote too low.

waqf 13y ago
Agreed. It protects from strategic voting (or incompetence or malice) of a small number of participants, because it's a robust statistic: https://en.wikipedia.org/wiki/Robust_statistics#Examples https://en.wikipedia.org/wiki/Robust_statistics#Examples.

OldSchool 13y ago

Hmm, this outcome should be interesting. As a rational person it's natural to gravitate toward purely objective.. well anything. Generally people on the receiving side don't seem to handle this well; everyone gets bent out of shape because they think they have a special case. Seriously I never quite understood why the whole world is full of conflict and claims and counter-claims until I became a parent of small children. Then it made sense.

300bps 13y ago
Hmm, this outcome should be interesting. Probably a headline similar to the following some time in 2014. Unbelievable Mistakes I Made in My Last Startup (figure54.com) 139 points by ry0ohki 5 hours ago | flag | 78 comments
- bornhuetter 13y ago
  I think this is the first time I've laughed out loud when reading a HN comment. I have a suspicion that you're right.

marcamillion 13y ago

Definitely interesting...but the obvious downside is the years when revenue goes down (if it ever does) are going to suck...HARD!!!!

Morendil 13y ago
And that doesn't happen elsewhere?

dhfromkorea 13y ago

You're not alone. Here's an early variant of such a policy. SEMCO, a Brazilian company run by Ricardo Semler, has since 1980s had the policy where people could set their own salaries. Some excerpts off his book on 37signals: http://37signals.com/svn/posts/945-excerpts-from-ricardo-semlers-book-maverick-the-success-behind-the-worlds-most-unusual-workplace http://37signals.com/svn/posts/945-excerpts-from-ricardo-sem... His book: http://www.amazon.com/Maverick-Success-Behind-Unusual-Workplace/dp/0446670553/ref=sr_1_1?ie=UTF8&qid=1377979232&sr=8-1&keywords=maverick+ricardo http://www.amazon.com/Maverick-Success-Behind-Unusual-Workpl...

hartator 13y ago

I really do like experiments, but I think humbly that's a terrible idea. It seems to me that's a way to flee decisions and responsibilities for the OP but it can also be unfair for good and talented people shy and introverted. (We have a lot of that in our industry!). It reminds me of John Galt, Ayn Rand character who flee a company just like that.

luke-stanley 13y ago

Holacracy have been voting on salaries and many other things for a while now. I'm surprised nobody has mentioned it yet.

HoochTHX 13y ago

This sounds like 20th Century Motors all over again.

dk8996 13y ago

Have you thought about linking the salary to the performance of the company. Other industries operate this way... I want our industry to operate this way as well.

croisillon 13y ago

- Welcome as a new addition to our company, btw here you can name your salary - Oh yeah? Wow! - Yes, please go ahead, for instance mine is Bob

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jblok 13y ago

"What does it represent? Does it mean, given the opportunity, I'd lean low, and they'd lean high, in an effort to pull the numbers in a selfish direction? Maybe." Not maybe. Obviously. Obviously, no matter how close knit the team is, and how well you know everybody, people still love the almighty dollar, and if they can will get more of them for doing the same amount of work. The boss on the other hand, as much as he loves transparency and communication and won't admit to it, also loves the almighty dollar, and subconsciously leant low.