Talking About Money

Posting your company salaries does a few things:

1) It promotes mediocrity. 2) Creates a political cesspool. 3) Ties the hands of hiring team.

1 - Excellent people want to go places where they can make more. When excellent people learn about public salary postings the first thing they will worry about is the perception of other employees. I suspect they will just avoid conflict and work somewhere else. Really think about the current open salary systems: state governments, federal systems (cia, fbi..), school teachers, college systems, military..

2 - Will you help the "next" person above your salary grade? Why? Your goal is to be higher than he/she - so this promotes extremely bad behavior. This is how yahoo is setup. People will be trained to create little moats to protect power, inflate budgets, hide data, hurt other employees.

3 - Really want that new hire? Well, now you have no negotiation power. If you pay this employee salary X. Anyone who gets less than X (Call this Y) will be pushed down in the employee chain. So now, instead you want to minimize Y. Sublimity, you will hire less and less capable people to avoid conflict with the current team.

>> Basically, what the other side is saying is that yes, negotiating is a skill, but the reason why our economy works so efficiently is that we instituted division of labor.

Understood, but division of labor is largely gray and only really gets divided when you move up the income chain (ie, the wealthier you are, the more things you can pay others to do to free up your time). Why learn how to make your bed or drive a car since technically you could pay other people to do those things for you? Professional athletes, musicians, and actors pay agents to negotiate their deals for them because they have much more at stake and it makes sense to bring on somebody who is an expert in contracts for specialized fields since its almost certainly a net win for both parties (talent and agent).

Unfortunately, engineering doesn't really pay enough to warrant bringing on an agent to negotiate on your behalf. So people can choose to wish that complete transparency existed and that we all make the same amount at each level of ability, or they can choose to accept that the job market is just that- a market. If you accept a salary of a certain rate and on certain terms, you are selling your services at an agreed-upon price. Just because somebody else asked for more and got it, doesn't change the fact that you were happy enough with the amount you agreed to work for and got it.

So really what we are talking about is wanting happiness with the amount you are paid regardless of whether it is enough to meet your personal needs. If the next person is making 10% more than you, then suddenly you are unhappy. There was a famous psychological experiment that actually verified this same thing- that people would generally be happier to make less money so long as somebody else in the same position isn't making more. That is not a net win for employees. In fact, those who can negotiate up their pay are probably helping the entire field of employees in that domain, since even if you are the bottom 50% of wage-earners in a high-paying field you are doing better than if everyone's pay remained stagnant at a lower level.

One wonders why the incentives aren't aligned. I.e. the value of the recruiter to the employer is finding a higher paying job, so the compensation should reflect that. E.g. 10% + 50% of the pay increase.

Some starting points:

http://www.kalzumeus.com/greatest-hits/

http://www.hyperink.com/Sell-More-Software-Website-Conversio...

I don't think they should. There are few circumstances in which any employee is genuinely going to have a major impact on the company's success, and in those circumstances it's appropriate to offer equity. If you're employee number 2, it's probably appropriate. If you're an EVP with total P&L and strategic control of a major business unit, it's probably appropriate. Generally, it isn't.

There's no reason for the owners of the company to give up any economic interest to people who can't directly influence outcomes. There are too many things that have to go right between a rank-and-file employee doing something right/well and their equity being valuable to them: the entire chain of command, whether the company has the resources to execute well, whether the company's suppliers and partners come through, whether the sales force is compensated properly, whether fads and trends in the market are favourable, macroeconomic conditions (both natural and man-made) and when all's said and done and the quarter's numbers come in, whether Wall Street analysts are in the mood to drive up the company's stock price (if the company is private, add in whether the investors want to go public and the market for IPOs). Conversely, the company can be lucky even if most of its employees are deadweight; you end up rewarding a lot of people for nothing, and those who actually did something will resent how much wealth was transferred to noncontributors. People aren't stupid; they know all this. Having equity doesn't make them feel more empowered, it makes them feel less so: it's just one more part of their economic lives they can't control. And for that reason, equity doesn't operate as an effective incentive, doesn't make people feel valued, and I would challenge anyone to prove that it improves outcomes for the company's owners.

With a few fairly obvious exceptions, the overwhelming majority of your employees are much more worried about (1) keeping their jobs and (2) bringing home more cash than about some pie in the sky payday that will almost certainly never come. If you want to reward someone for a job well done, give them a bonus or a raise. If you want your company to be seen as a great place to work, don't do layoffs; you're the capitalist, you take the risks. When things go well, you pay a market wage for labour and keep the rest; when things go badly, you should pay a market wage for labour and take the loss. You're the one making the decisions that led to things going badly; if you don't like taking the loss, make better decisions. If your employees wanted to live or die based on whether a company succeeds, they'd be founders. They're not; you are. Offering equity helps no one; it costs you money and control if things go well but, again with a few obvious exceptions, doesn't help you attract or retain better people. If you want to offer people something they'll appreciate, offer them a secure job for satisfactory performance and above-market pay for above-market work. Those who so desire can use that pay to buy their own stock or lotto tickets.