HOW HARD COULD IT BE?
the field you’re working in. No work done
while you were still in school counts, and
certain types of rote, menial work can
never add up to more than a year of experience. If you worked as a receptionist for
six years, for example, you aren’t credited
with six years of experience; I give you
credit for one year.
Scope is pretty easy, too. Are you primarily helping someone else do his or her
job? Do you have your own area of responsibility? Or are you running a whole product? We are able to define the scope of
most jobs pretty objectively.
Quantifying skill is a little bit harder,
but we still find it possible to define a fairly
objective continuum from a newbie programmer (“Is learning the basic principles
of software engineering; works under
close supervision; not expected to write
the salaries we have at each level are exactly
where we want them to be.
Because everyone at the same level gets
the same salary—no fudging—we sometimes run into difficulty. One problem
with our system reveals itself when we’re
pursuing an employee who wants to
negotiate for a higher salary. Sometimes
this occurs when we find a great person
who is currently being paid a salary that,
in our view, is way above market. And
sometimes this occurs when a potential
hire just expects a reasonable amount of
back-and-forth over salary because almost
every other employer he has ever worked
for maintains ambiguous salary ranges
and there is always room to get paid better
if you negotiate well. We usually address
these situations by guaranteeing the
recruit a larger first-year bonus than he
Because everyone at the same
level gets the same salary—no
fudging—we sometimes run
production code”) to an expert programmer (“Has consistently had major success
during participation in all aspects of small
and large projects and has been essential
to those projects’ successes”).
Once we defined our terms, we created
a little chart that assigns a level based on an
employee’s experience, skill, and scope (a
section of it appears on the previous page,
and the whole thing is posted at
joelonsoft-ware.com/articles/ladder.html). Then, we
created another chart that lists the base
salaries for each level, and that’s how we
figure out how much an employee makes.
Once a year, my management team sits
down, reviews every employee’s work, and
recalculates every employee’s level. Then
we look at competitive market salaries
using online tools such as Salary.com and
Glassdoor.com, and we consider our own
knowledge of the job market from the
past year of recruiting and make sure that
would normally get. Here’s the thing: Fog
Creek is extremely profitable, and we have
a generous profit-sharing plan, so the
“guaranteed first-year bonus” is almost
always less than the employee’s profit-sharing bonus would have been anyway.
Our system was put to the test over the
past eight years when the labor market
was tight. It’s easy to see why: Suppose you
hire 100 yak drivers at $10 an hour, but
then the Tibetan economy heats up, and
you have trouble finding more yak drivers.
The market rate might rise to $15 an hour.
The weak-kneed thing to do is to hire new
employees at $15 and hope that the senior
people don’t discover that the rookies are
making more money than they are.
This is technically called salary inversion—if you’re the kind of person who
likes to use self-important HR jargon. Salary inversion can lead to strife within an
organization. It can also completely warp
the relationships among managers, HR,
and employees. This may seem ridiculous
and sound apocryphal, but I actually once
heard that managers at a major corporation told their key employees to quit and
reapply for their old jobs, because the
bureaucracy had made it nearly impossible to give them raises that reflected the
competitive job market. At Fog Creek, we
decided that the right thing to do when
the labor market tightens is to give raises
to everybody at the same level. This move
can be painful and expensive, but the
alternative is worse. I don’t know about
you, but I’m scared of pitchforks.
I can’t guarantee that our system would
hold up if margins were to erode, but I’m
pretty sure that employees would be willing to accept slightly lower salaries as long
as the system were transparent and fair,
and it were clear what you needed to do to
move up the ladder.
At the same time, if you hear a lot of
griping about salaries, you shouldn’t look
just at your system for paying people. One
thing I’ve learned from experience is that
happy, motivated employees who are
doing work they love and feel they are
being treated as adults don’t gripe about
money unless their pay is egregiously
unfair. If you hear a lot of complaints
about salaries, I suspect that’s probably a
manifestation of a much bigger disease:
Your employees aren’t deriving enough
personal satisfaction from their work, or
they are miserable for other reasons.
It takes a lot of salary to make up for a
cruel boss or a prisonlike workplace. And
rather than adjusting pay, you might
choose to focus on some nonmonetary
ways to make employees happy. Happy
employees make better products and provide better customer service and will make
your company successful and profitable.
And success allows you to pay workers
better. It’s a virtuous circle, and it has
worked for Fog Creek. Let me know if it
works for you.
Joel Spolsky is the co-founder and CEO of Fog
Creek Software and the host of the popular blog
Joel on Software. For an archive of his columns,
go to www. inc.com/keyword/spolsky.