February 12, 2014
As more companies adopt transparent salary models, the rules of negotiation have turned upside down.
In some instances, negotiating a salary is off the table. Social sharing app Buffer posts all employee salaries on its website, along with the formula it uses to arrive there. Since prospective candidates know what to expect in terms of salary, the negotiation process becomes about whether they’d be a good cultural fit for the company.
“The negotiating process is very alien to us at Buffer—because there is no negotiating,” CEO Joel Gascoigne previously told Quartz. ”We have a really high focus on cultural fit to the point that if they didn’t know about the formula before they applied, they probably wouldn’t be a good fit.”
But in other companies, transparency doesn’t entirely preclude negotiations.
New York data analytics company SumAll makes salary data, equity holdings, and the company’s capitalization table available to every employee on joining.
“Usually the way it works is that the best negotiator, the person who’s always asking for more, gets paid more because the squeaky wheel usually gets the grease,” CEO Dane Atkinson says. “This is much better, it’s based on value.”
Every few months, the organization reviews compensation to evaluate any major gaps. And if people want to bring up a gap in salary or ask for a raise, they can do it at the developmental meetings they have with peers every three months. Whether they get a raise is based on peer feedback and internal analysis.
“Salary transparency corrects a lack of self awareness, most humans are blind to what we’re really worth at a company, having it transparent allows people to see the value of what you know (a colleague) is doing on a daily basis,” Atkinson says.
Peers determine your value and explain any salary gaps. That makes negotiations less about the power of persuasion, and more about integrating feedback and genuine productivity. This method is easier on negotiators because it’s based on concrete information, though it requires adjustment for people who simply enjoy negotiating.
At a typical company, negotiations are centered around annual performance reviews. Managers have more information and leveraging power, so many workers accept what’s offered without pushing back; large gaps emerge over time between most employees and those who are savvy and persistent. A transparent system removes the information asymmetry and the focus on a single meeting.
Generally, Atkinson says, people get raises about twice a year, with salaries growing as the company does.
Managers and peers have to justify gaps between individuals and departments, which is the most difficult part, Atkinson says. You know exactly what peers in your own department do but it’s harder to know exactly what someone in development is doing, or why she gets paid more.
“When its cross functional it can get a little difficult—it can create a bit more stress and takes a lot of knowledge sharing,” Atkinson says.
But for all that difficulty, it’s worked well for SumAll, which has grown rapidly since starting in 2011. Buffer saw a dramatic increase in the quantity and quality of applicants after publishing its salaries.
In this model, workers are more empowered—there’s no glossing over poor performance with glibness or personal relationships. When salary increases come, it’s because they’ve been earned.
Reprinted with permission from Quartz. The original story can be found here.
(Image via Melpomene/Shutterstock.com)
February 12, 2014