Compensation Philosophies We Love & Why, Part 1
Lessons learned from innovative companies practicing comp transparency
A compensation philosophy outlines the approach and reasoning a company uses while making compensation decisions.
In our latest ebook, How to Launch Your Compensation Strategy, we dedicated a whole chapter helping your company create its compensation philosophy.
Developing this critical asset helps your HR team, executives and managers clarify the “why” behind pay and creates a framework to assure consistency across the whole team.
When you provide the "why," people may not agree or be happy, but they aren't actively upset because they can understand the logic and perspective behind it.
In this case, everybody will agree with the outcomes of a compensation cycle (i.e. inevitably, someone will want more money/equity). The why is critical to helping employees feel like their compensation makes sense and the company has their best interests at heart.
Sadly, too many compensation philosophies are not successful or unified. Even if they employ sophisticated spreadsheets, they’re still hard to use or decode. It’s dangerous to have inconsistent applications of comp philosophy, i.e., blind budgeting, disgruntled employees, attrition, and so on.
And that got us wondering…
What if human resources professionals had a library of examples from which to gain inspiration? Might that help them craft the message that demonstrates transparency and fairness to their employees?
In this new series, we’re exploring a collection of publicly shared compensation philosophies we love and why. We’ve researched a cohort of company websites that transparently and publicly made their philosophies available.
Within this collection, we’ll be deconstructing standout passages, structures and language to give you inspiration for writing your own. We’ll also use each mini case study as a jumping off point for recommendations/questions to help you develop your philosophy and keep your team aligned with its total rewards vision.
A few caveats and assumptions before we continue:
- Comp philosophies aren't one size fits all. One philosophy won’t work at another company. Each organization crafts their own standard based on their values, goals, needs and preferences. Philosophy is not about right or wrong, but what matters to your team.
- Change is the only constant. Every company needs a compensation philosophy they adhere to, but also iterate over time. As companies evolve and teams grow, new goals and preferences emerge. The compensation philosophy that may have been perfect for one hundred employees won’t work for two hundred. Evolution isn’t optional. Be ready to adjust down the road.
- Balancing public and private. We’re not recommending for or against publishing your comp philosophy online. There are benefits and risks to doing so. If it’s employee friendly and enumerated, and has people’s best interests in mind, then it’s likely worth sharing. Whereas if the philosophy centers more around the company and its finances, then it may be less useful and interesting. The choice is yours.
- We’re not all knowing. Due to the sheer volume of customers we work with at Pave, we have access to companies of a range of size and stage and can synthesize and report what we are seeing most commonly. But while we talk through different practices or components of comp philosophies, helping our customers create and define this is not a formal part of our implementation. Our role is simply pointing them in the right direction and providing additional resources.
With that, let’s take a look at this first collection of compensation philosophies we love and why. We’ve found several inspiring companies who are leading the transparency charge and publishing theirs online, and want to learn from their example.
Glitch is a software company specializing in project management tools. Its products include project management and content management, and code review tools.
Pay transparency is a cornerstone of how Glitch treats employees. What’s awesome about their compensation philosophy is they use their own product to make the handbook. Anyone can modify and customize their own copy.
This inspiring Compensation Philosophy is part of a larger resource, which states:
All job listings include a salary range, and we share salary ranges by role internally so that no one has to worry that other folks are being paid differently for doing the same work.
We respect everyone's contributions toward our goals regardless of their role, so executive pay is capped at 5X the lowest salary.
Because we are committed to paying fairly and competitively, our compensation package utilizes market data aligned with comparable venture backed startups. This includes the technology industry, software companies, and comparably sized, high technology organizations. And because we are committed to transparency, we share with you the base salaries for each level, which are established by technology industry compensation market survey data.
This is music to Pave’s ears. Glitch is a case study of how data intelligence is becoming more and more important to people operations. If there’s one thing we’ve learned since our company was founded, spreadsheets are anything but real time. Data should be live and current to provide the most value.
Is your team using outdated compensation systems that only support pulling data from a manually generated report? Are you calibrating your data in real time to accommodate the fast changing labor market?
GitLab is the open core company that provides a DevOps platform that combines the ability to develop, secure, and operate software in a single application.
The GitLab team handbook is a wonderful resource. They post their central repository for how they run the company for all to see. According to the site, if printed, it consists of over 2,000 pages of text. Wow, clearly they embrace the value of being transparent with this handbook that is open to the world.
Here are some highlights from their Compensation Philosophy:
Our compensation model is open to data driven iterations.
We believe that it is healthy for the company when unhappy people leave.
We offer bonuses and incentives, but we don't offer ping pong tables or free lunches. We think it is more important to offer people flexibility and freedom.
GitLab makes compensation decisions thoughtfully and intentionally. These points reinforce the importance of driving retention by selling more than just salary. Notice the focus on wellbeing via flexibility and freedom. GitLab’s people ops team knows that the secret to happy employees is getting pay right.
Is your company using technology built to put people before process? Does your compensation philosophy remind employees that salary isn't the end of the story?
With these guidelines and examples, you should have a foundation to officialize your compensation philosophy and build a compelling total rewards program.
We're only scratching the surface here. Stay tuned for the next post in this series for lessons learned from innovative companies practicing comp transparency.
And if you're ready to start planning, communicating and benchmarking your compensation (without spreadsheets!) request a demo with Pave today.