One of the principles of the Cogent Consulting manifesto is that all financial information, including all salary information, is totally open. Of course, that's not so hard to deal with when there's only one or two of you at similar levels. Now, we have eight people working with Cogent, and the model is still holding strong. Come pay day, we send out a single email that has everyone's details in it.
Using this model from day one has actually been quite liberating. Financial conversations that are commonly quite taboo in Australia are totally open amongst Cogent employees. When anyone joins Cogent now, this model is one of the key points that I make to them before they start. Any potential staff have to be completely comfortable with all other staff knowing their income details. If they're not, Cogent is probably not the place for them.
Having said all of this, current Cogent staff members are all employed on a contract basis. Their rates are determined by the clients they work for, not by Cogent itself. Steve and I have decided recently to hire a permanent staff member, and of course, the same rules must apply to them. We're trying to be creative about structuring a package that is appealing to the high quality people we want to attract, but also gets us some reward for the financial risk we're taking.
It remains to be seen whether this model will work or not, but its an experiment we absolutely want to partake in. Building a company some other way isn't acceptable to us.
Comments
That's a fascinating approach. I'm all for openness but it comes with a whole heap of consequences. I'm sure you and Steve have covered these points off and I'd love to hear your thoughts.
How do you get past the usual envy that occurs when people get to know co-worker's income? Envy is a natural reaction for someone on hearing that they don't earn as much as someone they consider a peer.
The question "how much would make you happy?" is a perfectly good negotiating question in closed environments; hopefully leading to agreement on a figure that makes both parties happy. I'm guessing that, on gaining knowledge of other salaries, the happiness figure may rise upwards. Maybe the question would be changed to "how much would make you happy given that we have people who earn X and Y?" or "how much would make you happy no matter what anyone else is earning?" :)
Do you publish the team's salaries to prospective hires to ensure that they are happy with their own starting figure or is that too impractical?
Would you really not hire someone that wanted their salary to remain private? There is an alternative, people can discuss their salaries if they wish, others can keep their salary details private. Neither approach encouraged nor discouraged. What do you see to be the problems with this approach?
Posted by: Mike | June 3, 2007 11:04 PM
I used to work at a University and there was a web application where you could look up anyone's salary. It was state law that this data was public. So it scales to more than 8 people. The University has 10,000 or so employees state wide.
Posted by: John Smith | June 3, 2007 11:47 PM
>> How do you get past the usual envy that occurs?
So far, the levels are reasonably clear. People at similar levels are all earning the same, so envy hasn't kicked in yet. I've got some ideas about how to deal with it for permanent staff, but haven't tested them in action yet.
>> Would you really not hire someone that wanted their salary to remain private?
Yes. It's a constraint in my mind for now. Maybe some day someone will convince me otherwise, but I hope that day never comes.
Posted by: Marty Andrews | June 4, 2007 03:11 PM
Giving employees a choice on whether or not their salary is public knowledge within the company sounds like a good idea, but I suspect that as soon as one person exercises this right that's when it might get problematic. If I were working for Cogent, I'd be unhappy if there was an escape clause for salary disclosure.
As long as you are hiring intelligent people, you can discuss with people why they are at the level they are. This might actually encourage people to improve themselves to justify getting a higher salary. I'd hope that they weren't improving themselves _just_ to get the higher salary.
Also, something that you might be interested in that may help to support your decision to disclose salaries:
http://positivesharing.com/2006/08/why-secret-salaries-are-a-baaaaaad-idea
http://positivesharing.com/2007/05/secret-salaries-revisited/
Regards,
Doug
Posted by: Doug South | June 8, 2007 09:23 AM
I suspect that the way to get around the envy issue is to have an open system for rewards.
This requires a reasonable amount of structure:
1) A graded salary system (e.g. so much for 5 years Java, so much for team leading 8 people for at least 3 years, so much for current responsibility etc.)
2) An open bonus system so that people are paid bonus according to their measured performance against defined requirements.
3) Other schemes (e.g. shares) to be offered on a published scheme as well.
4) No other hidden perks (offices, car parks etc).
If anyone whines about the money -- point to the published reasons for the difference. This will show what they need to achieve to get the same reward.
Personally I think commissions are a bad idea BTW
This needs to be fully explained at the interview stage of course
The advantage of this extra work is that it also helps you manage the overall business better.
I used to work with a reasonable sized (100+) consultancy who followed this system and apparently it worked well. All details where posted on the wall for all to see.
Alec
Posted by: Alec Clews | July 11, 2007 08:00 AM