This got downvoted, and the tone is a bit harsh.. but it does speak a bit of truth.
What happens to the guy in open salary co who is legit 50% better than everyone else? Do his peers vote to give him 50% more money? Or does it settle on sort of a union style pay scale, where everyone with the same # of years of work makes the same money (which is great for the worst performances, and terrible for the best performers)
I didn't down vote, but the comment would be better if it were expanded with some details about why he thinks people who are good at their jobs should avoid open salary workplaces. I would think nearly all employees benefit from open salaries. For most companies, the salary information asymmetry is an effective way to keep the salaries of high performers DOWN. If you don't know that the mediocre guy who sits next to you makes $40K more than you, you're less likely to complain or look elsewhere.
The people who have the most to lose from open salaries are the dopes who somehow are making top-of-market salaries.
> I didn't down vote, but the comment would be better if it were expanded with some details about why he thinks people who are good at their jobs should avoid open salary workplaces.
I've tried a handful of different ways to explain this (before backspacing out this comment box and trying again), but here's the best I can come up with:
You always have the ability to negotiate for higher pay. If you've spent much of your life in different workplaces, you'll probably know that people (generally) think they deserve raises for reasons other than those that make sense. Those can include:
* Poor personal money management
* Poor life decisions leading to more money needed
* Number of years spent with the company
* Number of hours worked each week
* How busy they appear to be
* How much they think they get done
* How much more work they think they do than they did last year
* How much more work they think they do than their peers
* and more
None of those things really matter, though. Factors that actually matter include:
* How much other employers will pay for your skillset
* How likely you are to leave
* How much it would cost to replace you
This is important because the people actually running the business have to understand this, but the rest of the employees don't. As a high performer, you'll be negotiating a raise based on those factors that actually matter and your boss (hopefully) understands that. You don't want to put him in a situation where he can (or has to) fall back on how the rest of the company will feel about your pay, because they don't necessarily weigh the correct factors in deciding whether or not you "deserve" it.
This is my experience too. This sort of open company (from appearances in the original article) is pushing the salary negotiation as part of broader openness. Once you have buy in with the broader financials the negotiation can take place within a consensus and many of the arguments about what someone personally believes can be brushed aside by the majority views and the actual financials. From my experience, people who really deliver things end up reaping a lot more because they can argue from what they are actually worth on the bottom line and their value as multipliers.
My response was relating to an open salary company in general, but the process in the article takes it even further by having the employees themselves play a significant role in the decision-making.
If I consider myself a high performer, I don't want to have to justify my request relative to others at the company, or what they received, or what they used to win over other people to vote to give them more money that isn't theirs. That's going to put me in a position where I need to win a popularity contest, be around a while (to comment positively on others' raises), or wait a few more months so I don't look pushy and selfish to the entire company.
...because none of that matters if I just do an interview elsewhere and get what I want!
Perhaps the people you think are dopes are actually high performers?
I certainly don't want my salary dictated by the personal prejudices of my coworkers, especially when so many of them have no real idea of how much market value they're creating. I'm sure many of them think I'm a "dope" but my results manage to convince employers that my demands are worth paying.
In theory if you are a top performer, you can go walk down the street for a raise. and keep going it until you can't get more raises.
Not that all top performers do this. Being good at a job has little relation to being good at getting paid a lot. But you can be both a top performer AND top paid, if you play the right cards.
> Can usually get close to ranges if you ask a few coworker friends and/or interview around.
Isn't that transparency, although in a very biased and limited form? Why would having more transparency reduce your leverage? It's easier to play the right cards when you know what cards are in play.
> Why would having more transparency reduce your leverage?
Because of jealousy.
There have to be a good 10-20 software companies with this Open Salary thing. From them, find one where for two people with the same # of years of experience, person A makes 2x what person B makes. From what I see, they all more or less settle on a (base pay) + (# of years * multiplier) + (maybe a location bonus) = Salary. I don't see variables in there for (he is awesome)
For a counter example, I can point you to wallstreet or finance in Chicago, and show you 100s of people where people at the same level make as much as a 2x pay difference.
> For a counter example, I can point you to wallstreet or finance in Chicago, and show you 100s of people where people at the same level make as much as a 2x pay difference.
If you think people in finance don't know what their peers are getting paid you are fooling yourself.
They are overall much more mature and transparent about pay than we are.
I agree with the maturity part, but not the transparency part.
If you told a trader their salary was going to be posted publicly, decided by the rest of the employees (including junior employees), and that they couldn't negotiate it then they'd laugh in your face.
Giving up the ability to negotiate your salary is giving up your whole leverage. It's a ruse played by smart entrepreneurs to sucker engineers into taking lower salaries and feeling good about it.
Currently "salary negotiation skill" is one of the primary drivers of one's salary, whether or not negotiation is a necessary skill for the actual job. In other words, you end up rewarding people who are good negotiators, not necessarily people who are good at their job. Of course you may coincidentally reward people good at their jobs if they happen to also be good at negotiating.
Give that up, and people who are good at their jobs but bad negotiators will tend to do better, and people who are not good at their jobs but good negotiators will tend to do worse. I'd be fine with that trade-off.
In practice people who are good at negotiating will just negotiate a different title. It happens all the time in tech.
Think of all the useless architects on much higher salaries.
As an ex-manager if I wanted to hire a mid level dev who was too expensive I would just hire them as a senior dev.
Edit: or even worse you lock people in based upon a rigid system like years of experience and end up like teaching where an amazing teacher who gets great results will get paid far less than a shitty teacher who has stopped trying simply because the shitty teacher has been around longer.
Ideally, we could have a magical box that you could feed the sum of all of an employee's achievements and out would pop their objectively-determined market-competitive title and salary. Things like negotiation and seniority and popularity contests and office politics and whether your manager likes you would have nothing to do with it. I'll concede we don't have such a box, so companies have to make due with a combination of these other imperfect systems. I argue that "individual negotiation skill" is a pretty terrible choice among those systems--unless your job role actually involves negotiation.
I think most people in finance have a good idea of what their peers are being paid and a good idea of what they need to do if they want to earn more. People are paid fairly objectively and managers are upfront about what they value (at least within a firm).
That doesn't mean employees know exact percentages or bonuses and it certainly doesn't mean they know total comp in $.
When I moved into software development my first manager was shocked that I wanted to plan exactly how to get to the senior level, what I would need to demonstrate, and what kind of pay they offer at the next level up.
He couldn't answer any of my questions and it was like I was the first person who had talked about concrete career goals with him.
I agree with your anecdotes, but I think it's not because tech is less transparent but because most developers have no mind for career or salary optimization and treat their jobs like games rather than business propositions.
I totally agree. I think we are just using the term transparent differently.
Telling people to go on a random walk for a few years and maybe they will move from mid to senior is the kind of transparency you get in tech.
Real transparency would be: If you deliver project X and can demonstrate you got Joe and Raj up to speed on Y then we will promote you/increase your salary/give you a big bonus/put you on the project you really want etc.
I agree with you too. I've never seen a job in tech where it was clear what it took to get to the next level (either salary-wise, responsibility-wise, move-into-management-wise, etc.). It's always hand-wavey "do better and who knows!" or "you'll be senior engineer after a few years!" type guidance. Sometimes I'm jealous of folks like salespeople who have clear metrics. Pull in $X in sales and your bonus is $Y. Bam! That would be awesome.
The simplest explanation of your finding is that salary differentials are endogenous to industry, not to salary transparency. Did you sample software companies without salary transparency? Did you differentiate between finance companies with and without salary transparency?
I'd argue that in companies where salaries are not transparent, there is also not a (he is awesome) variable. Salaries among the same title/level are dependent more on how good of a negotiator you are or how good your relationship is with your manager, than whether or not you are awesome.
EDIT: In theory they should be based on what the employee could get elsewhere in the market, but if that were always true there would be no job hopping.
I would think that if your writing code I can't maintain, but if you leave I have to maintain it or get fired, I have a strong incentive to pay you well. Remember all of these have a feedback component too. What I think it will help with is Bullshit. If person A takes a lot of credit has better access to higher ups and they're in the spotlight a lot, maybe that kind of opportunity should be spread around.
> I would think that if your writing code I can't maintain, but if you leave I have to maintain it or get fired, I have a strong incentive to pay you well.
If you're writing code I can't maintain, my preference is to pay you less. Writing code that is easier to maintain is one sign of a good developer.
I don't want to pay you more because its too painful to lose you. I want to pay you more because its wonderful to have you.
Why would having more transparency reduce your leverage?
You: "I've gone above and beyond, and produced $X of value. I'd like a raise of $0.1X please"
Boss: "If I did that, I'd have to give your 20 peers the same raise. You'll need to produce at least $20X value if you want a raise of $0.1X. I can give you a raise of $0.005X if you like"
I think a few people in this thread seem to be confusing salary transparency with "everyone makes the same salary". Don't think anyone is arguing for the latter.
>What happens to the guy in open salary co who is legit 50% better than everyone else?
The GP is right in that, that person doesn't have much choice but to move on.
I don't have experience with open salaries but I do have experience with collective agreements and seniority. They aren't meant to take into consideration the "super stars". That's not what they are meant to do. Seniority and collective agreements do suck if you're a "super star".
I don't think there's a system where everyone is a winner.
It depends on how you define winner. Does it really matter how much someone else earns as long as you're happy with your pay?
I have taken a lower paying job because of my preference for that job and workplace. Money is not my principal driver (nor is it most people's).
I also agree that an open pay system could encourage super stars to leave. I once hired a woman who earned almost 50% more than her peers because she was amazing (it's the one time I recall paying a premium for anyone). If her peers knew, it would have been a shit storm, especially her male boss (who earned well less than she did).
We are too obsessed about comparing ourselves to others. I would most probably pick a culture where there wasn't transparency because I don't think someone else's income is anyone else's business and the emphasis on money is unhealthy.
Is that "50 better than everyone else" measurable? If it is, then the higher salary along with the criteria and specific performance measures could be a good incentive for the rest of the employees to improve.
It's a false dichotomy. The reason is "legit 50% better" is not something we currently know how to measure.
So yes, it trends towards more coarse grained measures (years of work doesn't have to be one) at the expense of the "best" performers.
If you see lots of your best performers leaving for more money elsewhere you have 2 options, raise everyone up, or come up with better coarse grained measures.
I'm of the opinion that if you can come up with good objective measures for performance of software devs, you should immediately stop doing whatever made up business problem you are currently working on, and switch to judging software devs. You could literally charge whatever you want.
While union workers often have less salary disparity, their salaries also tend to be higher overall. The only downside to this is if the "best performers" derive value from their "worse performer" peers being paid less than them.
> While union workers often have less salary disparity, their salaries also tend to be higher overall. The only downside to this is if the "best performers" derive value from their "worse performer" peers being paid less than them.
Or if you're in your twenties or thirties and pretty good at something and want to be paid based on how valuable you are in the market instead of based on your number of years clocking in.
Your post reads like a very bleak argument against the minimum wage. Increasing the median should mean that those above the median also see an increase through economics. If the price something is $X then the price of a premium something is still going to be greater than $X.
Not really. Increasing the median by itself does not bring down the pay for top performers. The problem is decreasing variance, which does and fixed formula or transparent salaries are both designed to limit variance.
Personally, I'd never want to work somewhere where my salary is set by a formula of my "experience" level.
Sadly, this appears to be half of it. People are more interested in looking in other people's bowl to make sure they're being paid more, rather than seeing that others are making enough.
As long as there is a legitimate way to measure this '50% better' and the resultant value, and everyone else has an opportunity to perform at this level, reject it or concede they are unable I suspect few will have an issue.
On the other hand if its an arbitary, political or a self appointed measure I can imagine collegues could have a problem.
Sales is one area where measures are somewhat possible. For instance if a salesperson is consistently doing 2 million while collegues do 1 he or she is better in that quarter and is automatically compensated better because of commissions. Collegues far from having have a problem celebrate the achievements and aspire themselves. Similarly if someone closes a deal in half the time of the typical deal cycle then they could be considered to be better. They will close more revenue and get more commissions.
But it is important to point out its not the people but the performance being measured that is better and if you can do this as clinically in other fields compensation can be designed to automatically reward performance.
Generally if you're not a good performer you don't have any ability to negotiate irrespective of negotiation skill, and if you are a top performer, you don't need any negotiation acumen to get a raise if people actually think you might not stay.
What happens to the guy in open salary co who is legit 50% better than everyone else? Do his peers vote to give him 50% more money? Or does it settle on sort of a union style pay scale, where everyone with the same # of years of work makes the same money (which is great for the worst performances, and terrible for the best performers)