Setting Your Colleague's Salary. Each Month. Using An App.

GuestBlogger
Written by in Practices
- 8 min read

Okay, let’s start it off strong: at Keytoe we are going to decide upon each other’s salary through an app.

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In this app, we can rate each other on a daily basis on one score only: how you feel about your colleagues. The score you receive, and the revenue and costs of the company for that month, determine your monthly salary, which fluctuates monthly.

We also think this is a bit Black Mirror-scary, so we are testing it, now, for three solid months. In the test period, salaries are only shown, but not paid.

Background

At Keytoe (45 colleagues strong), we decide upon each other’s salary as colleagues, and have done for almost 3 years. At year-end, colleagues on the ‘salary committee’ (which is open to all), set a salary budget.

They do this through the advice process, which means consulting with colleagues first. The budget depends on how well we did the last year. And we aim to raise existing salaries. When the budget is set, the committee allocates it according to performance.

Issues

But here’s the thing. People go up, but never down—even if they do worse than others who earn less. This perpetuates a kind of unfairness.

The second thing we questioned was a colleague who wanted two long vacations, but requested his salary not go down, because he felt it was unfair. We have unlimited holidays, so he shouldn’t had to ask. But, on the other hand, it’s good that he did, and probably more fair. Something didn’t seem right.

Lastly, why do we have employee contracts based on hours, or input, rather than output? So, if someone works 20 hours instead of 40, she will get half as much as a 40-hour person on the same income level. But, maybe the 20-hour colleague contributes more in less time.

The whole contract question was raised in a why-why-why session. The outcome? We should determine salaries on output—but how? Output is different for the various disciplines and roles we have. It’s really hard to compare. Then one colleague raised his hand, and asked: What about sentiment?

One score to rule them all

If people judged each other on how they felt their colleagues were doing, it would be as close to fair as we could get. We could compare people more easily. And, as it’s only one score to give, we could rate each other daily, and allow the salary to vary each month.

People could take long vacations, anticipating that sentiment would go down, and thus lower their salary. On the other hand, they would not feel like a fraud to their colleagues. And lastly, we could step away from the contract rates. They wouldn’t matter anymore. Thus, the idea for the app was born.

So how does this work

First, the salary budget is determined each month. It is based on a simple equation: revenue minus costs (like rent, beer, and a margin to keep as a reserve) becomes the salary budget, and is divided based on the ratings people get.

You open the app on your phone, click on the name of a colleague, and push a slider towards the left (worse) or right (better). You can add a comment as feedback. Then push send. You can do this for every colleague, or only the colleagues you know and work with (recommended). To make it less bureaucratic, your score is saved and used in the equation every day—unless you change it.

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The score, by the way, isn’t really a score. It’s based on a normal distribution (bell-curve). This means if I give a person an 8, another a 9, and a third a 10, then 9 is the mean. So 8 kind of sucks in this case, even though it’s a high number. So it’s not about the actual numbers, but on a comparison between colleagues.

All the normal distribution scores from different colleagues are collected each day, averaged out over the month, to give a final score for the month.

When your score matches the mean of 0.5 or 50%, your salary equals the average amount, calculated as salary budget divided by the number of colleagues. If you have a higher score you’ll get more. If you have a score of 0, you still get the base-rate of 600 euros a month.

Why 600 euros? Because a part-time worker receives a little more than that right now, and since we don’t look at input anymore with this app, we have to account for that. When the minimum is known, we also know the maximum possible salary. This is the difference between the average salary and 600 euros, added to the average salary. As the average salary changes each month, so will the maximum possible amount.

Everything in the app is transparent: salaries and scores. You can see how Lisa rated Jim even if you’re neither of them. Why? Transparency prevents people from giving unfair ratings.

Implications

We think that this system is going to be fairer, both for employees, and also for the company. Kind of amazing, but the company will make no more losses with this (unless revenue falls below office rent, which is just plain stupid), and the salary budget goes down when revenue does.

We also think colleagues will become more involved with the financials and sales. Their salary depends on them. Right now, while everything is transparent, these factors do not affect them much—so they don’t always notice. They can buy whatever they want, but do this carelessly, because there is no direct consequence.

We hope people will give each other feedback more regularly and talk more on how to improve. It’s not meant as a bullying weapon, but as a helpful tool.

We also think this gives you more freedom to adapt your work/life style. If you think you can get a pretty good salary by working for three days a week, that’s fine. You don’t need approval to change pace.

Things we are scared of

Of course we don’t want people getting into fights over this. And we don’t want people unable to pay their mortgage (or rent). We think salaries are going to be quite stable, only fluctuating with our fairly steady monthly revenue. We don’t want people to feel unsafe.

And we don’t want them to be demotivated. What I’m most scared about is the shift from intrinsic motivation (people liking their work because it’s fun), to extrinsic (doing it just for the rating and the money). If that happens, I’m pulling the plug myself.

Sentiment about the SentimentApp

All 45 colleagues are excited about this pilot. Everyone thinks it’s interesting. They are willing to try it. About continuing with it after the pilot phase, people are more sceptical. Right now, I think it’s 50-50. Some have even said that they will quit if it is pushed through.

We need, first, to decide about the decision-making process for actually using it. The advice process won’t fit here. It will probably be a democratic approach, possibly with a unanimous requirement. We’ll see.

Foundation

In the Netherlands, word is out that we are conducting this experiment. News stations are hovering, and sense a scoop. Hearing only the headlines, many people are already against it—and probably with good reason. I believe that in the vast majority of companies this shouldn’t be implemented at the moment. Why? Simply, it could be used in the wrong way.

You first need a company where people trust each other: a place where sharing private difficulties and supporting each other is the default setting; and a place where people are comfortable with openness. We encourage everyone at Keytoe to be themself.

My guess is people will be rated even lower if they are not being themselves. (I think people sense that kind of thing pretty easily). This creates a foundation for using the app. But even then, it’s still somewhat scary.

I’m curious to know if others in the Corporate Rebel community would opt for this app—or if they think it’s a bit too much. I’m positive, and very curious to see how this plays out. We’ll keep you posted.


Lennard Toma is an organizational psychologist who helped Keytoe change to a free form of organizing. He now started KeytoeY with one of the founders of Keytoe to help other companies change into organizations where people enjoy their work.

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Replies (8)

Patrick Verdonk

Patrick Verdonk

Hi Lennard, great experiment! Would love to hear if/how it will be taken beyond the pilot phase...

One question - Did you consider applying this to, for example, 50% of the salary? It may increase the sense of fairness and safety?

Cheers
Patrick

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Natasha

Natasha

Great effort to try something so bold! Please let us know how it goes. The risk I'd be worried about is that it could discourage divergent voices and risk-takers, who might be annoying or slightly off-base 80% of the time, yet have bold ideas that can move the company forward by leaps and bounds. Would such a heavy reliance on peer perception create a company of people-pleasers? Looking forward to hearing about how it goes!

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Natalie

Natalie

My thoughts exactly, Natasha. Amazing experiment - looking forward to reading the follow up post-trial!

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Lennard Toma

Lennard Toma

Hey Patrick, thanks for the compliment.
We will definitely let everybody know what's going to happen, why and how.

About your question: Yes. We actually have multiple options for implementing it. One of them could be that. The other one is that people may choose to go into the app (with the risks but also benefits of it) or not. Another one is that we keep it in the 'pilot phase' where it gives an indication of the fair salary, so our salary committee can make more fair decisions in the future. Or we erase the whole thing.

The downside of doing it for 50%, is that is looks more like a bonus. The other problem with it, is that the calculation is set up in a way that you need to account for people who only want to work for 2 days (so very limited output, but not necessarily), when we want to abolish the contract stuff with hours. When you do 50%, what will you base the other 50% on? On hours still? That undermines the whole getting rid of contracts with hours thing. So it would be a half measure.

But I agree: would give more sense of safety. Fairness, I don't know about that one in that scenario.

If you have more questions you can also hit me up on LinkedIn.

Ciao,
Lennard

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Lennard Toma

Lennard Toma

Hey Natasha,
Thanks. We're definitely gonna let you know.
And about the risk: What we notice in at Keytoe already is that risk taking is highly valued by other colleagues. People who dare to break some boundaries (which is part of our Keytoe WHY) are often the leaders who are followed. So I don't think this is going to be an issue that much. But we'll see.

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Jon Ingham, The Social Organiz

Jon Ingham, The Social Organiz

Really neat, but definitely shouldn't be 100%. That reminds me of the focus on competence based pay about 20 years ago when firms started paying people for their skills vs positions, time input etc. Yes, it helped them focus on learning but lots of very skilled people doens't necessary translate to performance. Same for lots of people trying hard to support each other. Yes, it should all add up, but at least some of their focus should be on the end result not just the means to achieve it. And to the extent that reward increases focus and doesn't just distract people to focus on the reward itself, the reward should echo this varied focus. I'd even suggest some of it should focus on time input, as otherwise some of the activities which may be important but won't result in outputs or get noticed by other people just won't get done. My other concern, even in a high trust culture, is that people will game the system. I'd always introduce a system of measurement like this for development and recognition before plugging it into assessment or especially, reward. But still, really neat! As Bjarte points out in the next post, traditional reward doesn't work. This doesn't quite get there either but it probably isn't any worse than what everyone does at the moment!

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Lennard Toma

Lennard Toma

Great comment. Thanks!

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