B (1:58)

So I'm thinking like Spartacus Spurlin. That. That feels pretty great, right? If I didn't want to go quite out as far under that limb, maybe Spencer. Spencer Spurlin. There's something. There's something there. But I like Spartacus better. The other option is to go kind of rhymey, so I could be Merlin Spurlin, which is maybe My, my favorite. So that's, that's what I'm going to be putting on my birth certificate.

A (2:23)

If I had the choice, Merlin Spurlin is the best. That's the best. That's so funny. Sam, quick follow up. What's the nickname for Spartacus?

B (2:35)

Sparty.

A (2:36)

Sparty. Okay. Yeah, cool.

B (2:39)

Sparty Sperlin.

A (2:40)

Uh huh. Great. I love it.

B (2:43)

So what do you got?

A (2:46)

Unlike usual, I have a serious name. So as one might imagine as a person born in the 70s, before non gendered names were cool, Rodney was a real like blessing and a curse growing up. I have real mixed feelings, but now I have come to like having an unusual name. And when we were still talking about kids, one of the names that I was very drawn to was the first name, Smith, which is my mom's maiden name. I have like no attachment to my last name and my dad's side of the family. So it was always weird that I kept this last name. And so I always thought the name Smith would be nice. It doesn't go particularly well with my last name but, but I could change that too. Maybe I could just have a single name and it could just be Smith. No last name, like share.

B (3:33)

So usually, usually when people are just one single name, it's like a, like a, I don't know, I feel like it's a name that kind of stands on like Madonna or something.

A (3:42)

Yeah, yeah.

B (3:42)

But you're going the other direction. The most generic possible name. But you will own that for all Smiths going.

A (3:48)

That's right. I love it because there's. Yeah, I'll be the only one. I will speak for all of us. That was hilarious, Sam. Spartacus Merlin. I love it.

B (3:56)

Thank you.

A (3:57)

We are going to dive in to talk about compensation. So if you didn't listen to part one, now would be a chance to go and listen to us chat about comp. Last time we talked about sort of the mechanics of incentives, how they get determined, some of the human psychology. This time we're going to talk a little bit more about what to do, how to design it, how to think about this. One of the things that I asked you about in preparing for this is like some principles. Because what I don't think anybody does is really think about like what they're designing for. So how do we think about comp principles and give us some to consider.

B (4:37)

Yeah. So I sat down and did some thinking about my experience at the ready, thinking about other organizations that I've consulted with where I was aware of comp stuff. Also Just, you know, interesting case studies in this world. There there are a handful of organization that will write about what they're doing compensation wise. And we've had some folks on this podcast when you and Aaron kind of talking about. About comp. So here are some potential principles that I think are worth considering and maybe we can add to this list, take stuff off of it, just use it as a starting point for what a well designed compensation system could.

A (5:12)

Can we go one by one?

B (5:14)

Yeah, absolutely. Do you want me to like hit all five right off the bat or just like go one at a time and like dig into it?

A (5:19)

Let's do one at a time.

B (5:20)

All right. Here's my first one. And it almost feels like so obvious as to not need to be stated. But I'm going to state it anyway. Dignity. So sufficiency before optimization. Kind of the principle here would be something like, you know, no one who works here should be in chronic financial stress because of how we pay them. And as I think about the conversation we had in the last episode, I think there is a somewhat unstated assumption that we're, we have been kind of mostly talking about like we relatively well paid white collar jobs.

A (5:50)

That's right.

B (5:51)

Because those tend to be our clients and those are what we are. And there are lots of organizations who employ folks who are not in white collar jobs and are not well paid. And I think any compensation system where somebody who works full time for your organization is under chronic financial stress, not because of their own bad decisions, but just because of how they are paid is a broken compensation system.

A (6:17)

I love this. I mean, just as a first principle of like, if you can't pay your employees a living wage, you don't have a real company.

B (6:25)

Yeah.

A (6:26)

That feels to me like it should be like acceptable as a truth. And yet what we know is that hourly workers in particular are regularly put in situations where they have to have two to three jobs, no medical insurance, insane commutes, like live with chronic instability. I'm just like, you don't have a real company. You don't have a real company if you have to take such severe advantage of people in order to function.

B (6:58)

Yeah. And I would add to that if you're sitting here thinking like, well, I run a nonprofit and I'm not trying to be a real company and you can't pay like, well, then you don't have a real sustainable organization.

A (7:08)

Same thing.

B (7:09)

Like if you're. It's the same nonprofit has to kind of rely on the fact that you essentially convince people to to essentially to tap into the purpose of what you're doing in order to, like, pretend that it's okay they're not getting paid enough, then you're. You're a bad person.

A (7:24)

I agree with you. I do not appreciate the, like, we trade basic human needs for mission. Yeah, fuck that. Fuck that mission. That's insane. And that's like. Yeah, I have a real problem with that thing. Okay, great. I love it. Sufficiency before optimization. That is a great first principle. Imagine the world if just that one existed.

B (7:48)

Yeah, totally. All right, let's. Let's hit some. Some other ones. So equity people with similar responsibilities and impact in similar context should be paid similarly, and we proactively correct for systemic bias is my take at equity here.

A (8:04)

I will take this a step further. Both at the ready and at the consultancy I worked at beforehand, we had a leveling system and everyone at the same level got paid the same amount of money.

B (8:15)

Yep.

A (8:16)

Now, you can argue about the leveling, you can argue about all of it, but very few companies even start with the idea past, like, sort of the entry level, that you're just like, if you are this level, if you. It is this dollar amount. And I think that's a really elegant way of getting through a lot of the mishigas that we've talked about in part one.

B (8:36)

Totally. And I was going to bring that up actually in the next principle, but it fits here as well. I mean, I think the thing that is probably not controversial to people who enjoy this podcast and the way we talk about work, but maybe if, you know, you were passed this episode by someone and you don't know who we are, this idea here that markets are not neutral, that they encode racism, sexism, and all the other isms, I don't think you and I find particularly controversial. So when those manifest in inequity in a. In a compensation system, we try to be aware of that and rectify.

A (9:14)

Yeah, and this is where, you know, we've talked in the past about, like, the way in which Jedi work should not be something that's separate, but should be a principle in the os. This is a great example. Like, if the second design principle for compensation is equity, you are going to create a compensation system that is more equitable than if you try to do something over here that's separate. I love this. I think, like, the way toward increased equity and compensation is simplicity, and it is transparency. And I think it's great. I love it.

B (9:49)

Yeah. And I think with all of these too, you know, these are not binaries. Like yes or no. Like there are things to strive toward. It's not like, oh, we have an equitable or an inequitable system. Like we're always kind of going up and down on that continuum, often unconsciously. So I think, you know, another example of if this is a principle that you really care about, well, then you're regularly kind of running pay equity analyses across your organization to like, see if things have started to skew. Because we are dealing with complexity, because we are dealing with markets that are not neutral. Like things can just start to shift over time without anybody realizing it and taking active action to fix that when you perceive it is part of this.

A (10:33)

I think that's right. I love it.

B (10:35)

All right, number three, clarity. So legible, not mystical. Our compensation system should be simple and explainable. People don't have to like every outcome, but they should be able to understand why.

A (10:47)

I think this is great. I think for the people whose palms are sweating right now. The other thing I will tell you is like when you play the comp game this way you attract the kind of people who want to play this game, which is not everybody, but it's the people you want. You actually want the people who are like, I'd prefer something that is dignified, that takes care of everyone's needs, not just mine, that is equitable, that doesn't preference my privileged identities that is clear. So that I am not in a position to manipulate in the back and horse trade for my own interests. You will turn off and turn away a huge swath of the population and you don't want those people anyway. These kinds of rules will attract the kind of people who, who will make a great company and a great culture and be collectively oriented. And we know from all the research on earth that those are the companies that perform.

B (11:50)

Yeah, totally. I think, and this is one, even if you don't like super buy into some of this, I think even in that case, clarity is a very useful one because what it's going to do is eliminate or at least bring into the foreground the conversations and the stories people are telling about compensation, which you can actually do something with. Whereas if it's completely opaque, what's going on compensation wise, that shit, all of it gets driven into the midnight zone. And when shit is only in the midnight zone, it burbles around and creates all sorts of problems in your organization. So even if you don't give a shit about any of this, if you have a clear compensation system, I think you're going to see A lot less kind of organizational indigestion.

A (12:35)

And to refer to, like, the thing we talked about in part one, which is that people use comp as a proxy for understanding their value and their performance. This is where you can be really honest with people and you can tell them hard truths, actually, so they don't do that. So, like, I have done a lot of this in my career where it's like, this job gets paid this amount because it's worth that amount and because that's how much it would cost us to replace it. This job gets paid less than that amount because it's not worth the same amount. It doesn't mean you're not worth the same amount as a human. It means the job that you can do isn't worth as much to us as that job.

B (13:19)

Yeah.

A (13:19)

Do with that what you will. And the number of arguments I've had with people who are like, but I did this in my previous life, but I know how to do this thing, and blah, blah. And I'm like, you should go to a company that will pay you for that. It's not this one.

B (13:34)

Yeah.

A (13:35)

That is not an easy conversation. But it's a better quality of conversation to have than what usually happens, which is like, hand, wavy, vague, nothing.

B (13:45)

Yeah, well, and it's why also, you should stop talking about your organization as a family, because.

A (13:52)

Oh, my God.

B (13:53)

Because it's a lot harder if you're. If you're having this whole family conversation.

A (13:57)

Go find a family that values you.

B (13:59)

Yeah. And we're laughing about it because I think we've pretty. We like the ready has steered away from that pretty well. And we're all pretty sure clued into why it's fucked up to talk about organizations as families, but there's a lot of people out there who are still using that language and think that it's a good thing and it's. It's fine when everything is going along great, but as soon as you start to have compensation conversations, and we're doing that in the shared assumption that we are a family, like, that is some traumatic shit.

A (14:25)

Yeah. I think both you and I, Sam, like, we find a lot of meaning in what we do. We. We care very deeply about what we do. And also, this is a job. Like, you guys are not my family. I have a family. We are in a transactional relationship that fundamentally is about making money in exchange for services. That's it. We can do a bunch of cool shit culturally and we can like each other. We can have a fucking blast. But fundamentally, if we weren't getting paid to, we wouldn't be doing any of that. And I just think being clear eyed about that and being open about that cuts through a lot of the tension that people experience around comp where they're like, how dare they replace me with someone cheaper who can do my work? And I'm like, why wouldn't that happen? That just makes sense. Like there's a lot around clarity of like what we pay for, simple rules, people not necessarily liking it, but fully understanding it that I think is missed nine times out of ten.

B (15:33)

Totally. And I think I would, I would put like one like additional little bit of clarification on there because that last bit, it kind of hit me, I was like, oh, that's like particularly cold. Like if we could hire someone for less than you. But I think what we're not actively doing, at least I did not see us do at the ready while I was there, is like going around and like trying to hire people at the absolute bottom that we could possib, possibly hire them for. Because we value the context and the expertise that you gain from like being inside of the ready. Like you are a more valuable having been at the ready for a little while than someone who's totally, totally new. And you can still believe that and everything you say is still true. This is a transaction. We respect each other, but we're doing this in a transactional way, adhering to values and principles that we care about.

A (16:25)

I think that's exactly it.

B (16:26)

All right, here's another one. Collective alignment. So this is the idea that money should nudge people toward collective success, not Hunger Games.

A (16:38)

I mean there's just so precious little that you can actually do alone in a complex system that's going to like have any significant impact. Yeah, the world is a big and noisy place. And to have an impact on the market in any way is, is almost always going to require some mosaic of talent that is inherently cross functional and diverse in nature. And so the sooner you can get people into the mindset of like winning as a team. And to your point before, about like we've all been part of the shitty group project. Feeling like the accountability to a group, but also never do you see higher peer accountability than when there are peer rewards. It's the time that people really start to be like, you're not carrying water and I'm not good getting paid the same amount as you because you're not doing your part. Like, yeah, that's what every leader wants. Every leader wants there to be pure accountability. So it's not all top down. And this is such a integral way of starting to make that shift.

B (17:44)

Yeah. And I don't know if this clarification is needed, but I'll say it anyway. Even if you spend a lot of your time working by yourself, you're still embedded in a system where that work that you're doing kind of individually, that individual work only has value because it is connected to others individual work. So let's set aside the idea that we can perfectly sort of define who is providing what value on an individual basis, because that's just an exercise in futility. And if, and if your organization is doing that, it's probably creating a lot of bureaucracy and a lot of unnecessary process to try to make that case for the individual. For the individual. Yeah.

A (18:24)

Yeah. And I, you know, it's harder to game incentives as a team than it is as an individual. And I think you and I have both read a million case studies about, like, perverse incentives and the way that people do really weird stuff. One of my favorites is that a client that I had a long time ago had this like, NPS metric that they were trying to hit, and they were really holding it up as the unifying metric. And they had their call center people be given spot bonuses based on this particular metric. And so the call center people started saying on help desk calls, basically, like, I need you to stay on after this and give me five stars or I won't get X amount of money. And like, telling their whole story to like, this is one extreme example. But it gets weird and people get very creative when it's like, push the button, get the pellet. People figure out how to push the button in ways that you do not want them to.

B (19:26)

Yeah. Believe it or not, we are smarter than pigeons. And we will, we will do that.

A (19:31)

We will figure it out. Yeah, that's right.

B (19:34)

Last one I had participation and transparency. So the idea here, people should be able to see the rules of the game and have some voice in shaping or challenging them. How does that hit you?

A (19:45)

What does that look like in practice? Because I'm trying to imagine at a company that's larger than the ready, how to give people a voice in shaping the game.

B (19:56)

I think that is the least important part of this principle in a large organization. I think most folks in huge organizations are probably relatively okay with the idea. Like, there are certain things that are happening in this organization that I just can't really do a whole lot about. But I think even in those sorts of environments, I could envision you know, some various mechanisms, you know, ama's ways you could submit feedback on things around, like, how comp is actually going or your experience with comp. I would imagine, like a good HR teams in these large organizations are kind of keeping their ear to the ground around how are people feeling about how compared to works here. And if you see the, you know, potential changes, small or large, happening based on things that you are contributing, I think that is generally a good thing. And obviously in a smaller organization, you know, if I think about kind of how comp at the ready worked, there was a huge amount of voice in how that system was set up and giving feedback on it. So there's a lot of variability here that I think is useful.

A (21:02)

I don't even see a lot of engagement surveys that really dig into comp and like, yeah, comp, fairness, perception of comp. I think to your point, even just the data from folks of like, these are the principles. These are things we're trying to do. How well are we doing them? Not do you like your comp? Not are you going to stay because of comp, but, like, if this is what we're aiming for, is this how you're receiving it? Like, that would be really interesting data, I think.

B (21:30)

Totally, yeah. And I've seen some comp questions that have always just felt like, way too blunt or like, way like, I don't know, I don't understand how the answers to this question are actually going to help us design anything. So I think it does require some, like, careful thought about specificity around the comp system that you want feedback on and not just the generic, like, how do you feel about comp? Or like, how do you, like, are you getting. Are you. Yeah, exactly. Like, are we going to be surprised by the data that comes back from that? Like, that's not helpful. Like, let's assume that generally people would enjoy more compensation. What other questions might be useful for us to ask to understand how it's actually going?

A (22:09)

I love that I have two that I would add. Not that I think people need seven. I think we're just giving people fodder for choosing one is as a design principle, as simple as you can stand.

B (22:23)

Yeah.

A (22:24)

You know, like, one of the things I was thinking about in researching this episode and also just like some conversations that I had while I was away last week, the number of compensation types or vehicles, especially not even at the executive level, like just in large companies has gotten, like, very, very, very complicated. And so the fact that there are these different kinds of equity and these different kinds of options and these different kinds of benefits. And, like, now there's HSAs and FSAs and deferred comp. And, like, it's like too many things. It's like a whole other job to manage your financial portfolio as related to this company. And I don't think that companies actually see the ROI that they're looking for. I'm like, how dumb ass easy can you make your compensation? So that principle number two, we don't have to talk about it, like, make comp invisible, make it transparent, but make it be so secondary because it's sufficient and understandable. Like, those would be my two ads, which are related to things that you have, but maybe slightly different.

B (23:34)

Yeah, no, I definitely agree with both of those.

A (23:38)

All right, Sam, anything else on principles before we shift to a couple of ideas for folks?

B (23:45)

No. I mean, I think if you're curious about these, we obviously kind of ran through them at a high level. I did go back through the catalog and pulled out a few episodes where I know there are deeper conversations about comp. So if you go all the way back to episode six, you and Aaron talk to Joel from Buffer, which is a very interesting company that has done a lot around transparency with pay. So there's a lot of stuff to find Online there. Episode 89 with Nikki Kaufman of Camp, episode 36 with Nathan Barry of ConvertKit, and episode 84 with David Buckmaster where you guys talk about PayPal and Gravity Payments. All those episodes are probably worth a deeper dive. If this has got your brain going

A (24:24)

a little bit, those are great. And all folks who have done their own kind of compensation architecture in various contexts, for real. A lot of what we're talking about is theoretical and design oriented, but those are all leaders who have put interesting shit into practice.

B (24:41)

Yep. Rodney, do you have any ideas for how people can start to make some progress on their compensation systems?

A (24:50)

Yes. Okay, so we talked a lot about team rewards, both in part one and in terms of principles. One of the things that I have seen organizations do very rarely, and they're always like, pretty edgy companies, but I think it's really cool, is if there is a pot of money to be shared by the team, like, whether that's like, let's call it profit sharing, let's say that, like, there's a pool of profit and you've carved off this amount for the founding team, and then you are going to carve up the rest of it. I think that it is really interesting to have group rewards distributed by the group through some kind of anonymous ranking or allocation or survey or something like that. I know groups and I know consultants who have facilitated this transparently and verbally. I don't think that's reasonable actually. And I think that a lot of people who carry marginalized identities are not going to show up and advocate for their own compensation. And so what you end up with is a bunch of like privileged loudmouth people like me being like, I deserve the most. That's not how to do this. I think that what you should do, if you want to be serious, is have the group have a fully cloaked way of allocating the dollars and, and see how that turns out and distribute the group pot that way.

B (26:16)

Yeah, I like that a lot. One of my ideas is going back to your simplification idea. I would just start with, you know, if you're sitting in an organization and you have some sort of role in compensation, I'm guessing it's probably more complicated than you would like it to be. So let's start with the whole effort of seeing how we can simplify this. And I think one kind of area to aim at is see if you can get rid of the role of individual negotiation. To your point about loudmouths with kind of non minority identities being really good sometimes at negotiating. In almost every case study that I have looked at from interesting organizations who kind of feel good about their compensation, they are all united in this where, like, there is no more individual negotiation. There are roles that are paid the same no matter where you come in at. And I think the cool thing about that is that the work you have to do to create a system like that is generally useful in your organization. Like getting clear about what it looks like to get better here, what growth looks like, what we expect of various levels of various roles, all of that is super useful to the folks who already work in your organization. And you get to use that for hiring and for compensation. Like it's worth doing. You'll get a lot of juice out of that relatively significant squeeze.

A (27:36)

I love this. And having worked at a large company where it was just like counter offers were. I mean, I was in HR and it was just like such a fact of life. My like, fundamental feeling about this is like, it's like if you're married to a person and you've gone through the work of contacting a divorce lawyer and drawing up papers, and then you come to your spouse and you're like, talk me out of this. It's too fucking late. It's too late. If somebody is coming to you and they're like, here is a counteroffer. I went through a full interview process and negotiated this in order to paint you into the corner. Like, the relationship is already really borked. Let them go. Like, let them be. They don't want to be with you anymore. Also talk about like perverse incentives like that just like creates a bunch of behavior that is not going to be very helpful to your organization.

B (28:31)

Yeah, totally. All right, what else you got?

A (28:33)

Related but total counterpoint. This is advice to the individual. When you're feeling away about your compensation and when you're feeling undervalued and squirrely. Go interview. I can't tell you how many people at the ready over the years I've been like, go, go see. Go see what's out there. Because it's really easy when you're inside a company and you take a lot of things for granted and you start to feel the hedonistic treadmill to be like, I should be getting more. And I'm like, if money is the most important thing, we probably don't pay the most that you can make on earth. Go see. And I have fallen into this myself. I have gone through more than one interview process in the last five years where someone has approached me with compensation. That's 2x what I make here to do the thought experiment and to reinforce me, enforce for myself the trade offs that I am choosing. Yeah, you had a comment like in a card somewhere else that was about sort of the stories that we tell ourselves and the stories we tell about comp. It's really easy to get yourself all ginned up about what you deserve and what you're not getting a blah, blah, blah. I find for myself the best antidote to that is to be in contact with reality and be like, actually, I don't want to choose something different. And if I do want to choose something different, I'm going to do that cleanly and not try to like manipulate my own company into meeting that need.

B (30:05)

Yeah, yeah, I love that.

A (30:06)

All right, what else you got, Sam?

B (30:08)

I got one more. I think I've already said this either in part one or part two, so I'll keep it tight. But I do think a lot of the compensation swirl that can emerge in an organization is when folks really don't understand how it plays with the larger system, especially the larger financial social system. And I think a lot of times even in really large organizations is that people just want to like be heard about stuff and especially feelings that come up around compensation. So I think there's often More that can be done to give people places to learn more about why compensation is the way it is. Bonus points if you've already done a bunch of work to clarify and simplify it. Like, this is probably part of your change process that you'll want to do anyway. But giving people a place where they can give feedback, ask questions, understand how the rest of the finances work, I just think that's a valuable thing that often, again, kind of like with my previous point, is useful for compensation, but it's also just useful more broadly in how an organization works.

A (31:10)

Totally. Like, it's just a good muscle to develop. I think that's super smart. Again, it's funny that we're doing, like, the two sides of everything. I feel like every individual who has a job that is meeting their basic needs. I'm not talking to those of you who are working the night shift. You just do what you need to

B (31:29)

do, get through it.

A (31:30)

For the rest of you, which is most of the people who listen to this podcast, do your own work to know what enough is and then continue doing that work so you don't get yourself torqued. It is our responsibility as individuals living in late stage capitalism who have been socialized in a really individualistic, maximization, mercenary shitty way to be our own hedge against the way that we've been socialized. And the only way to play that game is to do your own work and to be like, what is the standard of living that I'm comfortable with? Does increasing that standard of living materially matter to me? Or could I be happy living at a level that is, like, sustainable indefinitely? The leaders, especially the leaders that I know, but like, really anybody who's sort of past the financial security threshold who do that work are the best at their jobs and they're the happiest in life because they're the people who are like, I'm good. Yeah, I'm good. And they can show up to do great work and be satisfied by the work they're doing without always having an eye on, like, but when do I get a yacht?

B (32:52)

Yeah. And you can be ambitious without. You can. You can do what you just described and still be an incredibly ambitious person.

A (32:59)

Totally. But it's like, what if you could be ambitious about doing something great regardless of bank account, the dollars that are attendant. It's just a much more. I think it's just a much more satisfying way to live.

B (33:14)

Agreed. As you all know, we're always looking for new topics for the show. So if you have an organizational pattern that you're having trouble changing. Shoot us a note@podcasttheready.com this show is

A (33:24)

engineered by Taylor Marvin and produced by the wonderful Jack Van Amberg. At Work with READY is created by the ready, where we help organizations around the world change the way they work. Thank you so much for listening.

B (33:35)

It.