Self Set Pay And Culture Of Empowerment
The Culture Of Empowerment
Self-set pay means that individuals are responsible for setting their own remuneration l, typically within parameters set by the company which employs them. GrantTree, a company which I started, requires for people to complete six months’ worth of monthly self-assessment and follow particular, external feedback driven processes when setting their pay. This type of setup is both challenging, because of the degree of responsibility it requires, but equals business transparency.
There are numerous links between self-set pay and team empowerment. Firstly, this type of remuneration setup places the individual in a position of strength. It treats them like the adult they are, deeming them capable of correctly identifying their value in the workplace (and in the job market in general). This means a lot of responsibility but if your people are already making important decisions on behalf of the company, why shouldn’t they be in charge of evaluating their own performance and input too?
Consequently, self-set pay empowers people to be able to gauge how much they are worth wherever they choose to work in the future. This is a transferable skill that is super important and useful in any workplace. And so, once a person has worked for you, they will be able to argue for appropriate and fair pay wherever they go.
Setting your own pay, at least at GrantTree, entails understanding the broader business perspective and how your salary fits within different budgets and the overall company spend. Because of this, it empowers those selecting their salary to learn about budgeting and cash-flows. This skill set is something typically reserved for entrepreneurs. It will most certainly empower your people when it comes to understanding the financial and strategic dynamics of a business. Perhaps it could even give them the confidence to start their own companies one day.
On top of the above, setting their salary with peer-to-peer feedback mechanisms in place empowers people by putting them in charge of actively seeking feedback from their peers. This is definitely a skill that’s not as widely trained in business environments as it should be. Strong teams everywhere thrive on being able to deliver and receive feedback, particularly in the context of improvement feedback.
Lastly, making people responsible for decisions concerning their pay also puts them in charge of defining exactly what their job is and where it is going. In other words, it puts them in charge of curating their career progression other than leaving it to someone else in the company (such as a manager). Because of this they are going to be more engaged in their job and likely have a more positive impact.
There are numerous ways in which setting their own pay empowers people. The important thing to consider is that implementing this fundamentally shifts the usual power balance where the company decides how much its employees are worth and tells them with little (if any) opportunity to influence the judegment. With self-set pay the people are actually - and finally - in control of their time and resources. They are fully trusted and typically ready to return that trust through their commitment to the role and to the business as a whole.
Pros and cons of self-set pay and transparent financials
On the face of it both internal transparency of the company’s financials and individuals setting their own pay seem to have a lot of advantages. While this is true, there are also challenges connected to both practices. Here is a brief list of pros and cons connected to self set pay and transparent financials which may help you make a decision whether to look at implementing them in your own business.
Advantages.
Empowerment of your people to understand the financial dynamics of the organization. This will become true particularly if you introduce some form of financial education accessible to all.
No toxic political dynamics arising from selective and limited access to financial information. No water cooler conversations about who is being paid what or who recently got a promotion because of political advantage.
More fairness and equality around pay and promotions. Eliminated (or, in the least optimistic case scenario, reduced) gender and the socioeconomic pay gap.
Setting people’s pay is no longer the responsibility of the founder (or MD). Having selected their salary themselves people realise how much effort goes into the process into deciding on fair remuneration. They are also less likely to complain about what they are paid!
As nothing is hidden everyone has the potential to feel more ownership of the business. People care more about how money is being spent and feel more protective about the business in general.
Financial transparency and self-set pay uplift your values as a business and the whole company culture. It becomes a call for more integrity, mature, thought-through decisions and an increased sense of responsibility. People who are treated like adults behave like adults.
Transparent financials and self-set pay becomes flagship of your company culture, something you can talk about. It’s unlikely your competitors will follow suit and so your cultural innovations are going to become a strong competitive advantage. Get ready to be interviewed by the press and asked about your culture by fellow founders over and over again.
Challenges
Possible anxiety about fluctuations in your company’s cash flow which is now exposed to the eyes of everyone in the company, including those who have never run their own business.
A need to create supporting structures around self-set pay to help your people make an informed decision, driven by a thorough and fair assessment of their own performance and the job market dynamics. The support available needs to encompass peer-to-peer feedback which also needs appropriate systems built around it to be helpful and effective.
In the case of self-set pay - strain on the individual making this responsible decision in the knowledge that the result of it will be transparent to the rest of the organisation. Also, reduced billable time given individuals are now responsible for engaging in the payment process and all it involves - from researching the job market to collecting feedback from peers.
You may have to face uncomfortable conversations about your company’s financials as a founder, as people learn how the money is spent in your business. Likewise, your people need to be prepared for difficult conversations with their peers concerning their pay which they had made a decision on.
Conflicts, for example, to do with performance, will rise to the surface much quicker in a transparent environment (which is not necessarily a bad thing!). All the buried deep tensions will need to be addressed and resolved.
You can’t put a financial plaster on things any more by, for example, paying somebody more in order to stay in their job instead of leaving.
You need to up your standards in terms of your personal behavior and integrity in relation to the company’s financials (e.g. what expenses you charge to the company). Otherwise, you risk setting a poor example for the rest of the team.