Merit Increase in a self-managed group. Experiment 3: Salary Distribution

Like everything else we do in our office, we keep looking for ways to make recognition and salary increases as engaging as possible. On previous attempts (experiments 1 and experiment 2), the approach was more democratic, people would vote for the best workers and the ones with more votes were strongly considered by management for increases and promotions. This time we tried something fundamentally different. We wanted people to make a conscious decision and make it really count, regardless of whether everyone else was on the same page or not. So this is what we did:

Management gave us the total budget allocated for salary increases, we split it equally by the number of people involved in the exercise and we added just one rule: Your share isn’t for you, it’s for you to give away. How you do it, is entirely up to you, but know that whatever you do, it’ll happen. So you can decide to increase the salary of somebody and nobody will question it. All you have to do is to write an email with your decision and send it to management. The reasons of your decision are appreciated but optional.

multiple-hands-full-of-money

To help you understand the method, I will give you a concrete example. Imagine we are a group of 30 employees and there is a 60,000€ budget for increases (Note that we’re talking about annual salary increase, not one-off bonuses). Now, If we split it equally, you’d get 2000€, but again, those aren’t for you, those are for you to give away in whichever way you like. So you could decide to give it all to one person, or split it equally and give 69€ to each employee or decide to give 1000€ to Tina, 500€ to Julia, 300€ to Marta and 200€ to Oliver.

If somebody forgets to do it by the given deadline or doesn’t want to do it, we would split their share equally to the rest.

Once everyone submitted their distribution, your annual salary increase will simply be the total sum of the different amounts that other employees decided to give you. It could be 1000€, it could be nothing or it could be 2987€ who knows.

You may be thinking that this won’t work or that this can’t simply be done. Well, stop thinking, we did it and we still talk to one another.

 

Facts

Here some of the objective facts of our experiment:

  • 30 people were invited to use this system
  • People didn’t know each other’s salaries
  • Only two people didn’t want to participate
  • Only two people gave the full share to a single person. Any thoughts?
  • Only a few people shared their amount with less than 4 colleagues
  • Most people shared their amount with 12 people or more
  • Management didn’t ‘intervene’ and honoured the results as they were

 

Now, is this fair?

Let’s see. Of course, fairness is an extremely complex concept, here some thoughts that we exchanged after the fact:

  • People who received a total increase, inferior to the original share, felt like they underperformed or came out worse
  • A good number of people felt that not knowing everyone’s salary, prevented them to make the best decision. Others thought that they had no problem recognising top performers regardless of their salary.
  • Half of the people kept their share within their own team while the other half had no problem to send money elsewhere

balance

Our conclusion

Some people feel that bigger teams have a better chance to get more money, others feel that the popular types get more and others that more isolated people who are constantly travelling or working directly with clients would get less due to limited visibility. Maybe so, maybe not. We’re all human and are by nature subjective. We all share the feeling that everybody else will abuse the system, will be unfair and their decision will be influenced by lots of external factors while we, ourselves, will make a proper decision. See something wrong with that assumption?

Is this system perfect? It isn’t. Is the traditional manager-centric approach perfect? It is not. Do we need to keep improving the system next time around? Always.

The main difference between these two systems, and our great win, in my opinion, is that we all participate; and beyond the subjective fairness of the results, the fact that we are even discussing and experimenting with this is a huge cultural breakthrough.

On a personal note, I feel great about having the power of increasing the salary of somebody who under my own criteria deserves it. It’s an incredible feeling and I love working in a place like this one.

After a few rounds of experimenting with promotions, we learned a thing or two about it. Wanna see what we did next? Check out the Merit Increase in a self-managed group. Experiment 4: Star Awards

 

 

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