Lots of companies will tell you that their people make them different. I get it — because we’re one of them. All of our other differentiators are a product of our employees, so having a compelling employment narrative is critical to attracting high-end talent that might otherwise be drawn to bigger brand-name firms.
Back in 2013, the prospect of hiring our first full-time employee was stressful. As founders, we all knew each other, and this employee was going to be someone we didn’t know. We felt responsible for and to that person. We also knew that it would take time to train him or her and that we’d have to offer competitive compensation to attract the type of talent we wanted. That’s when we began formulating the compensation policy that we still use today.
In short, we offer a competitive base salary with $10,000 raises guaranteed for each of the first five years for developers and each of the first seven years for customer-facing roles. Developers’ salaries start higher — at $74,000 per year — while our CRM coaches start at $54,000. By the end of seven years, these essential employees are at the same compensation level.
Obviously, we’re transparent about compensation. If you make it through our training, you know you’re going to have a job, you know what you’ll make, and you never have to wonder when or if your next raise is coming.
Is this a good thing? We think so, and since implementing the policy, only three employees have left Less Annoying CRM. We’ve also found it easier to find and interview candidates for open positions. In a labor market as tight as this one, companies looking for top talent often have to get creative to stand out, yet only 17% of private companies practice pay transparency (Source: Institute for Women’s Policy Research report, 2017).
By offering competitive, transparent compensation, we not only stand out from other firms for future candidates, but also boost productivity among new hires and current employees. Here’s why:
1. Transparency creates a cohesive workforce. When employees feel left in the dark, they lose trust in their managers and co-workers. Perhaps that’s why 90% of workers think it’s important to work for a company that prioritizes transparency (Source: Glassdoor survey, 2016). If employees see the work landscape as a zero-sum game, they’re incentivized to work against each other, rather than with each other. That’s a recipe for disaster.
With a transparent compensation policy, we’re able to remove those harmful incentives and create an inclusive culture that people want to be a part of. This also helps us more clearly describe our compensation policy to potential hires. The top thing job seekers find dissatisfying in hiring processes is a lack of information about compensation and benefits (Source: Glassdoor survey, 2018). The more information you can offer upfront, the more likely potential hires are to trust your company.
2. Transparency minimizes distractions. Our policy works only because we’re extremely careful when it comes to recruiting and hiring. Even with this policy in place, if one or two new hires fail to pull their weight, we see a drop in productivity across the board. So far, we’ve been able to avoid that situation.
Instead, we have employees who aren’t overwhelmed by uncertainty regarding their next raise and who don’t have to wonder whether they’re being paid less than their colleagues. One study found that when employees know their colleagues’ salaries, they’re more likely to ask for help when they need it, leading to higher job performance overall (Source: Journal of Business and Psychology study, 2016).
With a transparent compensation policy, people don’t get jealous of one another over perceived unfair treatment. They don’t have to worry that their work is being taken for granted — nor do they ever have to deal with the stress of preparing a case for a raise.
All of that makes it easier for everyone at the company to focus on the present. When everyone at work is dialed in on his or her tasks, it makes for happier employees, happier customers, and a better product.
3. Transparency cuts down on leadership politics. In the corporate world, managers are often viewed as human shields, separating the larger workforce from C-suite politics. A transparent compensation policy can help with those shielding efforts, ensuring that the most important signal of quality remains the work itself.
Managers also stand to get more out of such a policy. They won’t have to run interference for employees or serve as a liaison between those who are unhappy with their pay and the executives focused on running a profitable business.
That’s a plus for job seekers at all levels, too. When they can see a clear and transparent compensation policy, they will know exactly what they need to do to reach the next level. They’ll know that the objective quality of their work — rather than the subjective politics or opinions of the C-suite — will always determine their pay.
In the modern corporate world, leaders often hesitate to be transparent with employees. But by removing ambiguity over compensation, you allow the members of your workforce to keep their collective focus fixed firmly on the work in front of them. Moreover, you attract people who want to focus on work, and those are precisely the kind of people you want.
Alex Haimann is a partner and head of business development at Less Annoying CRM, a simple CRM built from the ground up for small businesses. Thousands of small businesses use LACRM to manage contacts, track leads, and stay on top of follow-ups. Alex ensures LACRM continues to grow by engaging customers and finding new opportunities for mutually beneficial partnerships. Follow Alex on Twitter at @alexhaimann. If you would like to know more about our compensation policy, reach out at firstname.lastname@example.org.