February 05, 2014, 6:00 AM —
Image credit: flickr/Andrew Magill
In December, Buffer, a startup that's created an app for social sharing, made quite a buzz by announcing that they were moving to open salaries. That is, they published the salaries of every employee (currently 15 people and growing) as well as the formula they've devised for determining employee pay. Turns out that Buffer's policy of "radical transparency" has paid off, at least so far, with a significant increase in the number and quality of job applicants.
Buffer's move to open salaries was a natural step for a company that lists "Default to Transparency" as the second of its 9 core values. They were already being open with their revenues, the amount of equity they gave to investors and even with their internal emails. So, if any company was going to go open salary, it would be Buffer.
The formula that Buffer uses to determine salaries is based on four components: job type (e.g., engineer, designer), seniority, experience and location (Buffer is a distributed company so people in San Francisco get paid more than someone in Manila). Employees also get to choose between more equity or a higher salary. Before being hired full time, new employees work freelance for 2 months, being paid using the same formula (without the option to receive equity).
The location adjustments are based on Numbeo. I asked Buffer about how they chose the base salaries for different job types and Chief Happiness Officer Carolyn Kopprasch told me that they initially looked at AngelList and "took a look at what some of the similar jobs were being paid and also just brainstormed what felt right for us."
At the end of January, Buffer CEO Joel Gascoigne said in an interview with Quartz that, in the first month after they announced their open salaries, job applicants had more than doubled over the previous month and that the quality of applicants had also improved. "We've never been able to find great people this quickly in the past," he told Quartz.
I find this all very fascinating. So far, so good, it seems. Of course, I can't help but think about all the ways this could go haywire, particularly over time as the company grows. What to do, for example, if someone gets a higher offer elsewhere? Gascoigne told Quartz that it hasn't happened yet but if/when it does, "...I would be happy to say good luck and thank you. I wouldn't try to negotiate."
I asked Buffer's Kopprasch if they had plans to reevaluate the formula and its parameters at regular intervals, to which she said that, currently, they deal with it when they need to. "At the moment we don't have any formal plan to reevaluate, as it has happened quite naturally lately," she told me. "When we realized, for example, that we didn't have any salary changes for a ‘senior' role which we felt we needed, we added that in."
My sense is that, over time, an open salary approach really could get messy and be hard to stick to. They might eventually have to negotiate to hire someone they really want or to keep someone they really like. At that point they would be faced with either adjusting everyone's salaries (or, at least, those with the same job type) or introducing more and more specific job types, experience levels or even new salary parameters to keep everyone happy. I can picture it working with 50 people, at least for a while, but not so much with 500, at least not for very long.
Even though I'm a little skeptical, I'm also very intrigued to see how it plays out. Who knows? Maybe they're on to something and someday all of our salaries will be public information.
Read more of Phil Johnson's #Tech blog and follow the latest IT news at ITworld. Follow Phil on Twitter at @itwphiljohnson. For the latest IT news, analysis and how-tos, follow ITworld on Twitter and Facebook.