Some 20 months ago we decided to turn salaries at Lunar Logic transparent. We documented the process: why, when and how we did that. The most interesting part of the story, though, is how it all played out. Obviously, we couldn’t have known it all up front.
The core of our approach to transparent salaries is that it’s not only about transparency but also about control. When we made our payroll transparent we also introduced a collaborative method to change our salaries, a.k.a. give ourselves raises.
Let me start by sharing a few facts that show what happened since the change. We’ve had 43 salary discussions, but almost a half of them (21) were automatically triggered. The latter happens when someone joins Lunar and we need to set their salary, or when a probation period is about to finish, or we offer employment to our interns.
Interestingly enough, there has been only one occasion when someone proposed a raise for themselves. All other threads were started for someone else.
Participation in salary discussions has been healthy. It is a very rare case when less than one-third of the company speaks up. Before you think it’s hell lot of discussion remember, we are a small organization. Right, now there are 25 of us. It still means, that typically we can expect 8-12 people to share their views on a proposed raise.
These are dry facts, though. The most interesting thing is how our attitude and behaviors evolved through that time.
When I set myself to write this article I started with reading through the original posts about the change, which I linked at the very beginning. What struck me while reading the old pieces was how weird it feels to read how much of “I” was in the story. Understandably so. After all, it was mostly my initiative and facilitation to drive the change. However, by now it’s not “my” process anymore. It’s ours. Anything that happens with it is because of “us”, not “me”. Thus the weirdness.
This means, that salary process is simply one of the things that we use naturally, and it isn’t perceived as a change that’s been imposed on us. In fact, when we were summarizing the year 2015 many of us mentioned that making salaries transparent was a major achievement. Despite the initial fears of some, we’re doing great. Two years ago, I made a remark that “transparent salaries, once in place aren’t much of a problem.” It seems I nailed it.
We obviously made mistakes. After initial reluctance to use the new tool, there has been a time which we call “raise spree”. We’ve been discussing multiple raises at the same time and getting pretty damn generous. That triggered discussions about the general financial situation of the company and about consequences of different types of decisions. As a result, we raised our awareness and got more careful with raises.
We’ve had our disputes how we speak up in salary threads. We started with a premise that we want to be respectful. That’s not enough, though. Sometimes we may be respectful, factual and correct even, but it doesn’t make a useful argument for a raise. A simple fact that I’m good at, say, sailing doesn’t create an instant value to the organization.
Probably the most difficult lesson we learned was when during four months we gave one of our developers a raise and then we let him go. In both discussions, we had collective agreement what we wanted to do. Clearly, we made a big mistake either with one or with the other. The plus side is that we learned a ton.
The process itself also evolved. What was initially designed as a process to change existing salaries was adopted to decide salaries for new hires. Then we started using it to decide whether we want to offer a job after an internship. We introduced a deadline for the end of discussions to provide a constraint how much time there is to speak up. Some heuristics have been developed to guide us through the final decision making. My favorite one is about options. When voices are distributed across few different salary levels we typically go with the lowest as it provides us with most options for future. We can always start another salary thread for that person soon (and it happened a couple times), while it wouldn’t work the other way around.
The meta-outcome, which is something that we initially aimed for, is there too. People are getting more involved in running the company and understanding the big picture. They are becoming more and more autonomous in their decisions, even when significant money is involved. I think it is a fair statement that our payroll has become fairer too.
I’m also happy about change for one selfish reason. I never learned to like, or even have neutral feelings towards, discussions about raises with people from my teams. Several hundred of these discussions definitely increased my skill at them, but my attitude didn’t really get better. And suddenly, I’m not one of the two parties in negotiations. If I perceive myself a party, I’m one of twenty-five. And not any more important than either of the rest. I guess, for almost every manager out there, it would be the same as it was for me: a huge relief. And we got better outcomes too. That’s a double win.
However, absolutely the best emergent behavior that was triggered by open salaries is how we share feedback with each other. The pattern is simple enough that it should have been obvious, yet I had no idea.
When we start a salary thread for someone and I have an opinion I will share it soon (typically a deadline for speaking up is around a week). However, to keep it respectful, before I write down my opinion in a discussion thread I will go talk to the person who is about to get a raise to share my feedback. After all, I don’t want them to be surprised, especially whenever I have some critique to offer. Suddenly, whenever we’re discussing somebody’s salary that person gets a ton of feedback.
That’s not all, though. If I have a critique to offer about something that is a few months old, I can hear in return something along the lines of “Hey, I wasn’t aware of that. Why didn’t you tell me earlier? I could have worked on that.” Now, I don’t know when we’ll be discussing a raise for that person, as anyone can start a salary thread at anytime. This means that I’m actually incentivized to share feedback instantly.
That’s exactly what we’d love to achieve. And that’s exactly what we started doing to a huge extent. Despite the fact that for long, long time at Lunar we were definitely above average when it came to sharing feedback, I wasn’t happy. I wanted to see more peer-to-peer feedback. Despite different experiment I wasn’t happy until we changed how we manage our payroll.
This is the best part of having transparent salaries. In retrospect, I’d go for open salaries purely for that reason: much more high quality peer-to-peer feedback.
By now barely anyone could imagine, let alone change back to, Lunar Logic without transparent salaries. Even if the transition was a tad bit tricky it paid off big time.