As mentioned in my previous post, everyone at Lincoln Loop sets their own salary. It’s another radical divergance from the business norm that we borrowed from the book of Ricardo Semler.
Every six months, I meet with each of our developers to discuss their salary for the next six months. I stress that it is not a negotiation and that they should come ready to tell me what they want to be paid. In a couple of cases, I had to talk people up to the number they really want. We used to be more informal with the process, but we do better (read: give more raises) when we force everyone to have the discussion. I chalk those issues up to years of taboo around salary discussions.
Prior to the discussions, I prepare a profit and loss sheet for the previous six months (all our finances are open inside the company) so everyone can find a balance between the salary they want and the salary we can afford. After the discussions, I compile a Google Spreadsheet with everyone’s new salary (including mine) and some back-of-the-envelope projections of our financial health over the next six months. Once that is put together, it is open for everyone to review and make changes based on the salaries of their peers. The only change we’ve had so far after a review is one person actually lowering their salary.
The current standard deviation between our salaries is less than $5 and we’ve improved our profitablity since implementing this over a year ago.
Beyond the bottom line, the effects of this “policy” inside our company are far reaching. In most companies bosses retain power over employees with knowledge (of finances, of payroll, etc.) and holding the keys to the money. By making this information freely available, it empowers everyone in the company. There’s no feelings of “kiss up to the boss or you won’t get a raise.” Similarly, there’s no gossip about how much a co-worker makes and the associated malcontent that tends to accompany it.
Allowing everyone to set their own salary at Lincoln Loop has been an absolute success. I hope by sharing our experience, we can encourage other companies to take similar steps.