ASK ME ANYTHING - Self set salaries
ASK ME ANYTHING:
For almost 4 weeks now our new website is up and running. We feel together we are building a real community to make work more fun! We could not wish for more. Now we are adding an extra topic to our forum. AMA aka Ask Me Anything.
So why not kick off with one of our own stories we get a lot of questions about. Four months ago after an internship of one year, Pim and Joost offered me a job at Corporate Rebels. In true rebel style, they did not tell me what I was going to earn and this was also not a negotiation between us. No, it was up to me to decide what I should earn. So-called self-set salary.
Quite a challenge but very rewarding!
ASK ME ANYTHING in the comments below 👇🏼
How could you see this working during the recruitment stage, especially in larger organisations?
For instance, I notice a role online without a salary attached to it – Do I propose my salary before interviewing? Am I told what the starting salary will be, and then after a certain amount of time I can choose it?
I love ideas like this, and think it's great. Just wondering how you think the process could adapt for larger organisations (say hundreds of team members).
Good one. Not sure to be honest. At Corporate Rebels, we decided to start with a negotiated salary (with our last hire, who starts next week) and after a certain period we make the move to self-set salaries. As you can see from Ellen's comments, a good understanding of culture, financials, roles and responsibilies, etc. is required for someone to make a good judgement. Once that's there, we can move forward on this.
Preferably, I'd already work like this at the very start. Not sure how other companies with self-set salaries do that. Anybody here who can share experiences?
That being said, I know for a fact it can be done at scale. Look at Morning Star for example (with 4000+ employees). They use a 'salary committee' to benchmark salaries and act as an advisor for people in the process. Or Finext and Smarkets (both 120+ employees) use the advice process in which everyone sets their own salary. Not sure how they go about it during recruitment.
In absence of a traditional hierarchy an alternative is to be found to compensate employees. The "self-setting" of a salary is not a goal in itself, however. It can result in stress, dissatisfaction, and of course in committees, the need to make business cases, peer-reviews, protocols and rules.
To arrive at a compensation scheme which is transparent and which doesn't siphons resources or generates work, the desired outcome of this process is to be defined first.
This desired outcome is also to be defined within the environment in which it is to be achieved.
In organisations the following tends to hold:
* The organisation has transparent desired outcomes it wants to achieve.
* The organisation actively works towards a culture in support of utilising everyone’s skills and talents (or has it already in place).
* The organisation aims to compensate employees based on the value they bring towards achieving the organisation’s desired outcomes.
Then there is the desired outcome itself, which determines how the compensation scheme will be designed. Elements playing a role may be the following:
* Competition in the market place (the compensation should be enough to be able to attract the required expertise to achieve the desired outcomes).
* An appraisal of someone’s “value” to the organisation (in terms of performing a task and his/her contribution to the culture)
* An appraisal of the organisation’s achievements (ultimately everyone is contributing to the organisation’s performance)
* The employee, in this process, arrives at an understanding of his/her contribution/value to the organisation (and what it is the organisation actually values)
In Ellen's case it seems she was asked to "wing it", but of course she already had a good understanding of the organisation, and her colleagues already had a good understanding of what she would bring, both in terms of cultural-fit and in dedication/skills/talents. She was provided with plenty of essential information, including "information" (e.g., a feel for the culture) she had gained during the months she worked there. She then did a lot of work to arrive at a salary of which she knew the bandwidth, and which she could substantiate (which is why I believe it is somewhat confusing to call it a "self-set" salary and I think a "self-substantiated" salary is more fitting). This is NOT scalable.
For new entries you can go the way of creating a committee and benchmarks and business cases and whatever, but, again, creating transparency should be the organising principle.
You may not be able to avoid some "decision making" in determining someone's salary when they are new employees. But you can arrive at a transparent procedure as to how someone can co-determine (self-substantiate) his/her salary after e.g. several months of work.
You can thus begin with a starting-salary, and perhaps pick one of several possible starting salaries based on some predetermined criteria (criteria which themselves are substantiated by the company), and begin there.
A first few months will allow the person to understand the culture and obtain information, and, vice versa, it allows colleagues to assess someone's contribution to the culture itself. All of which can be transparently scored (as it is done at Freitag).
At the end of the day "self-setting" is not a goal in itself, it is about arriving at the organisation's desired outcome where compensations are concerned. To do so you need to follow guidelines to avoid "decisions" being made or creating committees and rules and protocols and discussions.
As far as I am concerned the "holy grail" is a compensation system which:
1. takes the overall organisational performance into account,
2. provides “equal compensation for equal value,”
3. which thus is both transparent and objective,
4. with the ability to resolve any issue which may arise based on guiding principles.
I have used the examples of Smarkets and Freitag to explain such a process (and why Freitag's approach is aligned with it, but Smarkets' approach isn't).
The steps and principles — which apply anywhere in the context of "future of work" as they apply in all instances where expertise is to be optimally utilised to arrive at a desired outcome (overcoming hierarchical decision making, rules/protocols, etc.) — can be found here: https://decisionfreesolutions.com/wp-content/uploads/2019/02/DFS-The-approach-of-DFS.pdf
The article about arriving at a compensation scheme here:
PS: I get notification emails for some threads, and not for others (even though I always tick the box). So I missed your earlier question about scalability.
I don't understand why you believe Ellen's salary is not self-set? Yes, it's self-substantiated, but also set by herself. She makes the final decision, she calls our accountant to implement it. What is not self-set about that?
And of course self-set salaries are not a goal in itself. Fairness, balancing, taking ownership, etc. are. Self-set salaries is one of the many (tough) ways to move in that direction.
(I saw that Pim had the same question).
It goes without saying that you "set" your salary, and so you can, of course, call it a self-set salary.
My point is that you didn't just throw a number out, or simply base on what you, personally, think would be a nice salary for you. That would also be a "self-set" salary, but one which is not substantiated to be "equal compensation for equal value" (which, in the context of the organisation of Corporate Rebels, may be assumed to be something to discover for yourself). In fact, it could be a salary you would set for yourself in absence of *any* connection with your work, your colleagues, the culture, and the organisational performance.
But the salary *was* set in a context, a context you both investigated and were familiar with. And you *did* take a lot of available information into account. On top of that it appears safe to assume you also learned quite a bit about what your salary represents (to you, but also to others).
For this reason I believe a "self-substantiated salary" is a more befitting label, a better description of what you did.
But... the exercise itself is what is of interest, the label... not so much. I personally do think that trying to be as precise with words as possible has substantial benefits, but only up to a point. Perhaps I have reached that point in this discussion.
Most of us know monopolies are bad. “They have no incentive to deliver better products or to get more efficient.” And if a monopoly can do whatever it likes, the victim is likely to be the customer. If it exists outside an organization, measures can be taken to end that. Within organizations, creating monopolies seems standard practice, but why!?
“It was like being with a parent that didn’t really want us”, says CEO of GE Appliances, Kevin Nolan. He explained: “The one hope everyone had was that Haier bought us because they wanted us, and we were curious to find out what that would mean”. 4 years later, we visited to find out how GEA was doing. Getting to talk to them was harder than we thought: “Our managers and executives are currently working on the assembly lines.” They are doing what!?
There are many examples of self-management on the Corporate Rebels Bucket List, all of which have very few layers of management, if any, and they are mostly highly successful. So this raises the question “If this is such a good way of organising work, why isn’t everyone doing it?”.