Salaries are at the front of people’s minds. In 2022 the UK saw the biggest drop in salaries since records began in 2000 (with inflation taken into account, average pay fell by 5.6%). So it’s natural that many people are questioning traditional approaches to compensation.
In my curiosity, I came across this blog post (plus part II and part III) from Whereby COO Jessica Zwaan, on her approach to creating an internally transparent and rigorous compensation framework. If you’re interested, you should definitely read Jessica’s original blog posts as they go into much more detail than I will here!
Basically, Whereby’s compensation framework:
Takes into account their organisational design principles - the kinds of teams they’re building, and where they are competing for talent
Fits to their company, requiring prior work around: which data sets they use to benchmark, the percentile they need to pay at to get the kind of talent they want, their levelling framework, where they will be competing geographically, and any potential discretionary adjustments they may be willing to make (based on most competitive skills etc.)
And boom! A salary calculator (feat. dummy data)
My own interest in Whereby’s approach isn’t a directive - every company has their own approach to salary, and many have existing structures that may make this model unsuitable. But I was very interested to hear about any approach that offers this much transparency, so reached out to Jessica for a chat.
Before, Whereby had been operating on what Jessica refers to as the ‘classic start-up model’, salary on a per-hire basis, with some data sources used for benchmarking. ‘The challenge for us was inconsistency - we had people doing the exact same job with different salary ranges, some people who had negotiated bonuses where no one else had. And then cross-jurisdictional issues, different salaries being paid across our globally distributed workforce.’
They were really keen to re-think pay, and approach it ‘less like market matching, and more like a strategic advantage. We needed a global salary approach. We have values around being ethically ambitious, and doing what is right for our people - we would never want to take advantage of emerging economies, or have large discrepancies in the kind of work people were doing in different jurisdictions.’
Now, all employees globally are paid either a US or UK salary, using the calculator. Reactions have been really positive, both internally and outside. ‘We have had candidates regularly tell us that they applied because of the transparency we have around compensation. We had a candidate who turned down a higher offer at another company because they could see at Whereby there was a clear path for their salary increase. Security isn’t necessarily just money, it’s also clarity on what the future holds.’
They had previously accounted for inflation with a 2% salary increase each year. It is now baked into the data sets they use, and salaries are updated yearly to represent that. It’s a potentially more difficult position to be in: ‘You can build a very thoughtful compensation framework internally, but if you’ve got a lot of external volatility it’s very difficult to put all those things together in a way that’s logical, and doesn’t result in somebody losing out. It’s a tricky thing, as a HR or Operational leader you don’t expect dollar - euro parity, cost of living crisis, like the type we’re seeing.’
Another interesting development has been around negotiation - the calculator allows for potential wiggle room within bands, but not much, and it has to be justified by hiring managers in-keeping with their principles, for example if the person has a different skill, more experience, or a clear track record of over-delivering. ‘Negotiation is a very bias-inducing factor - lots of people are uncomfortable with it and we do believe that removing them is a DEI tactic.’
So, for anyone standing on the precipice, and trying to think of a good way to approach compensation, what’s Jessica’s overall advice?
‘The number one thing is to take a commercial, first-principles mindset. Ask yourself: what is the problem I’m trying to solve? What is our company’s strategy? Have a clear understanding of how the business strategy connects with the hiring strategy. If you come into it with just the administrative mindset of ‘cleaning up pay’, it’s going to be very difficult to produce great work.’
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