Earlier quoted context omitted.
> You aren't being paid based on what your labor is earning your company. I've managed P&L at multiple companies. Salaries are inevitably influenced by cash flow projections and revenues, and are absolutely aligned in multiple dimensions to revenues. > cost of living shouldn't matter and maybe pay everyone $110k No, they're going to pay whatever their margins can tolerate while competing for labor. If Google can mana…
>I've managed P&L at multiple companies. Salaries are inevitably influenced by cash flow projections and revenues, and are absolutely aligned in multiple dimensions to revenues. How mature were those companies? Did they have investors willing to accept extended periods of time without profit like many VC and Wall Street investors have come to accept from many tech companies? Did increases in cash flow or revenue lead…
Early stage to public, all VC-backed.
> Did increases in cash flow or revenue lead to across the board raises?
That doesn't happen anywhere, unless a board member recommends it or you have a very generous CEO (like Gravity Payments). Either an employee asks for a raise, or a manager fights for one using new hires/open req salaries as negotiating leverage. Turnover is part of life, and if no one is fighting for you then you're expected to fight for yourself.
> Or did cash flow and revenue exist purely as a cap on salaries?
G&A is a huge chunk of expenses for most companies, and after a few years of operating you'll have reasonable historical data combined with future financial projections to figure out where you want that G&A % to hover around. This is what determines salary caps, as your leadership team juggles figuring out whom they need to hire to hit those projections and how much they can pay in the given market to find the talent they need/want.
For an e-comm business that might be 30-35% of total expenses. For SaaS, could be as high as 70%.
So your leadership agrees on some growth plan, and the CEO hits the button on hiring X new heads with a combined Z salary cap. What ends up happening is that you max out Z by X-N new hires, and the CEO has to decide to spend more to reach X hires or tell teams to make due with the headcount they have while reminding them to "hire faster next time".
Over a long enough period of time, the executive and finance teams will implicitly agree on some tolerance that G&A needs to stay within, and the company will be managed and decisions will be made to make sure those commitments are made. We've probably all seen this as sudden hiring freezes or lay-offs, when either current results or projections show that some target isn't going to be met but that tweaking these other numbers (headcount, payroll) the company can keep the first number (costs as % of revenues) consistent.
Over an even longer period of times, those salary bands will ossify into comp levels like "SDE 5" or some-such and this becomes the aggregate in which salary is managed.
So for a company like Google that has its finances literally down to a science, which is already operating multi-year roadmaps with high salaries baked into every assumption and model and even the stock price, would not want to rock the boat of missing those targets by tweaking something that could cause more harm than good. It's not worth it to them.
Keep in mind that Google's margin are still healthy even after salaries have skyrocketed since they were discovered colluding with other companies to artificially keep salaries low.