Decide on your salary, or not…

Practice what you preach. As the Happy Melly One (HMO) team we’ve applied our own Management 3.0 tools, ideas, and practices. One of our practices is the salary formula.

A few years ago, when Jurgen Appelo was still the Emperor-God-Overlord of the team, we decided to implement a salary formula. After some debate, where the team discussed if they should take location, country, family size, experience, etc… into account the team decided on a very simple formula.

The maximum salary you can make is fixed for everyone and based on your Commitment Level (CL). If you work one day a week for HMO, you are on a CL 1. If you work five days a week for HMO, you are on CL5. Your CL is between 1 and 5. Furthermore, we have a fixed salary per CL. For example, 1 CL is equal to 100 euro.

The other part of our salary is merit money, a monthly bonus system based on appreciation. You can read more about that here.

We liked this approach. It is simple, fair, and 100 percent transparent. As Chad said, he can tell his friends that everyone on the team makes the same money. How cool is that?

Times Change

At the end of 2017, we had some discussions about our salaries. We were paying everyone equally so for example, our Financial Queen, Tahira, makes the same money as our Web-Craftsman Hannu, or our Illustrator Chad, or me the Chief Empowerment Officer. We don’t take into account location, experience, or anything else. Is this fair? Is everyone equally important?

We also wondered if we would be able to find new team members with the current salaries being as low as they were.

We work with freelancers and some us would like to spend some more time on our work for HMO/M30. However, because the salary is not that high, it’s a financial challenge. So the question remains, should we pay some people more than other people in order to make sure that some people can spend more time on HMO?

What to do? We starting looking around us, and I also looked at our sister company, Agility Scales. How are they approaching salaries? Their approach is that you decide your own salary. Yep, take a few minutes to think about that. Wouldn’t that be great? Decide on your own salary. Great summer holiday here we come! Team members deciding on their own salaries! I loved the approach! Why make it complex, you just decide how much you make.

It turns out this approach is not unique; there are more organizations who use this approach. For example Morning Star and Gore.

You decide

When I proposed this to the team, there was silence. The silence where you think that the video is frozen.

I explained the idea to the team. You write a salary essay with a maximum of two pages. In the essay, explain what salary you would like, and of course why. The why can be related to your location, your role, your experience, etc… Whatever you think is relevant to your salary should be included. When you have your essay ready, you discuss this with the team in a virtual face-to-face meeting. People can ask questions, ask for clarifications and they can agree or disagree. Based on the feedback you maybe need to review your salary essay. You can read my salary essay here.

Deciding on your own salary is not just shouting out a random number. With great power comes great responsibility, so you definitely need to describe the why.

For this approach to work, you’ll require full transparency and a team that dares to challenge each other. A team that feels safe, to be honest with each other and a team that is capable of giving each other feedback.

We decided to try this approach. All team members wrote their salary essays.

Firstly, everyone had to determine what kind of work he or she does. Sounds easy no? But how would you compare our Zookeeper to other jobs? How do you compare the Guardian of Content, or Facilitator’s Guardian to other roles?

Secondly, we had to find benchmarking data. For example, our Social Media Master is located in South-Sudan. Trust me, there are not that many websites that show data about how much a Social Media Master in South-Sudan can make. They have serious other problems over there.

Thirdly, when you work as a Financial Queen in India for an international team, do you compare your salary to people who do the same in India for local teams or do you use data from organizations in the U.S or do you use data from organizations from Europe?

Fourthly, how do calculate your salary when you have the role of Chief Empowerment Officer and Guardian of Content? Do you take the average?

Finally, we have the merit money bonus system where we give peer-to-peer recognition using bonus points. Do you take this into account when you look at your new salary? Do we keep this the same or do we change the bonus system?

To summarize it one word it is complex.

What did it bring us?

Nothing; Or did it?

In the last meeting where we discussed the process of salary essays, we asked ourselves as a team: What should we do next? We had three options:

  1. Keep everything the same
  2. Use the new salaries as proposed in the salary essays
  3. Keep salaries equal and give everyone a raise of 20 percent

We voted, and the team voted number three. We said no to raises of 35 percent or more… seriously some people said no!

Even our Financial Queen said we could afford to pay the new salaries. Minor detail, but important :). Some us would get a raise of 50 percent or more. Not sure what I did wrong but in the end, me as a CEO would make the least amount of money. I was, by the way, the only person who voted for the new approach.

Isn’t that surprising? So was everything we did for nothing? Was it a waste of time? Totally not! It was one of the best experiments we did in the last year. We learned a lot.

Let me explain.

First of all, everyone did some research about his or her role. We found out that some people in this world make a lot of money doing the same things that we do. That was a surprise, and some of those people are probably overpaid, but it did show that we should increase our salaries.

We realized HMO is a special team and we have some  great perks:

  • We have two in-person retreats every year, where we gather as a team. We have a great merit money system, a possible 20 percent bonus every month.
  • We don’t check on our team members, you can work from anywhere at any time. We don’t care where you work or at which time you work.
  • We have great colleagues!

Also, the flexibility is great, if you have less time for HMO next month because of other projects, that’s no problem. Just lower your CL, and also the other way around. You need to spend more time on HMO, just raise your CL. We trust each other 100 percent. Our salaries are maybe lower than what you can make with other companies, but where do you get this kind of freedom? It is something you sometimes take for granted, but by doing this experiment, the value became very clear for us again.

It turns out that we can (still) trust each other. Nobody came up with an exceptional, unrealistic salary request. Everyone was realistic and explained why he or she wanted to make the salary they proposed. It all made sense.

Why did we as a team then decide for just a raise?

The team realized they value fairness above everything. We are a flat team, everyone is the same, no hierarchies, no differences, we value everyone making the same money. We don’t want to have the feeling that other team members make more money because they are more important. We need everyone in the team to grow Happy Melly and Management 3.0. We need our Financial Queen, our Zoo Keeper, our Illustrator, our Social Media Master, our Web-Craftsman Developer, Facilitator’s Guardian and our CEO. You can write a book or song as an individual, but you need a team to make Happy Melly and Management 3.0 great!

Final Words

I know it was a long read, but it is hard to share this experience in only a few words.

If you can, try to run the experiment in your organization. It will give you so much insight.

We ran the experiment and we learned so much about ourselves and our team. It was a great experience! I am proud to be part of this great team!

Team, you rock!

This post was first published on Happy Melly One, click here.

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