People have written books on this stuff. There's an entire field of research on this subject and I think tech people discount it for being "too MBA".
One of the most important findings is that pay generally will never motivate employees, but it will reduce their incentive to leave. Generally most job factors affect one of two separate but related scales: motivation to stay and reluctance to leave. Entirely non-surprising that devs are the ones who left because by hard capping their pay you are reducing their reluctance to go work somewhere else with higher pay.
> Entirely non-surprising that devs are the ones who left because by hard capping their pay you are reducing their reluctance to go work somewhere else with higher pay.
The surprising part is that their dev retention (article notes small sample size) of ~3 years matches Google at 3.1 years and surpasses Uber, Dropbox, Tesla, Facebook and Airbnb. [1] That suggests that the culture created by the one-salary experiment increases the motivation to stay enough to offset the incentive to leave.
If their base salary is decent, then it might not be surprising at all. Determining whether an individual stays in a particular job involves multiple weighted variables. To give an example, once an individual has a base level of financial security, salary could easily become less important than time spent with loved ones. But there are some people who will give the maximum weighting to money no matter what, and companies which optimize for this variable will always need to outcompete all other companies on salary to retain employees. In this case, it's no surprise that their retention rates are relatively low. Looking at the article that you referenced, I notice that the companies with the highest retention rates aren't the ones with reputations as having the highest salaries.
Well, maybe. Or it shows that they hired people who were relatively comp insensitive, possibly due to being unable to command higher wages elsewhere. Hard to know.
Depends how senior the devs in question were and how competitive their interviewing abilities were. Junior devs who don't interview well are easier to retain for example.
Also, top companies have a problem because they are top companies. Working there is a signal to other employers that you're top talent as vetted by a top company. That increases the values of offers thrown at you and eventually one may be enough to pry you out.
iwantmyname says they've had ~20 employees. You can't compare a company like that to Google, Uber, Tesla, etc, who've got multiple orders of magnitude more employees.
20 employees is down in the range where noise dominates. I’m not sure exactly how many employees are required for statistical significance, but it has to be in the hundreds.
Totally depends on the effect size and the threshold at which you're evaluating statistical significance. If their churn were 10x higher than Google's, 20 employees over 10 years would probably be enough to confirm the difference at a high level of confidence. But if their "true" long-run churn is "only", say, 10% higher than FAANG and friends, you would need a much larger sample to identify that.
N.B.: Even a 10% increase in employee churn is expensive in general, and even more so when your recruiters make as much as your senior engineers.
I guess it depends on how much of the culture is generated by that point. It could be that the culture could be good _despite_ this, or some other angle.
I imagine that this policy is a consequence of some good internal culture
> One of the most important findings is that pay generally will never motivate employees, but it will reduce their incentive to leave.
Having talked to a crowd of senior people who were leaving their jobs recently, I think there's a lot to be said about money as a 3rd factor when switching jobs further down in your career.
Raising someone pay to match only works when the other factors for their departure are going to be addressed (and there, I've had people tell me "Deciding to leave was very hard and changing it back is even harder").
However, motivating people to perform at their best is entirely independent of that - most of the good people I worked with merely wanted to make an impact and receive the help they need in doing that.
Pay is one of those things, because money enables people - when someone is having a new baby & a salary bump helps her with daycare needs, can be a win-win.
Motivation to stay is being directly excited by the work you’re doing or the thing you’re building. You want to work where you are. If another opportunity comes along you probably wouldn’t consider it.
Resistance to leaving means you’re at a pleasant place to work, the money is good, and you like your job, but you’re not super excited about the thing you’re building. If another opportunity came along you might jump if it’s something you really want to do (this is harder if your current pay is high and job is pleasant).
Think about someone who works at an non-profit NGO versus someone who works an 80 hour week at an investment bank. The NGO worker might only be making $30k/year but he stays because he really cares about his work. The investment banker might hate his job and hate the long hours but stay because of the high salary he'd be unlikely to match elsewhere. The NGO worker has high motivation and low reluctance, the i-banker has the opposite.
I think motivation to stay is the positive. Like you genuinely like going to your job.
Reluctance to leave is that even if you don't like your job, leaving is even more painful, maybe due to the loss of salary, or because the interview process is too much of a hassle, or other opportunities are just as bad if not worse, etc.
I can see that. A business is in business to make money. If we’re making money and the executives are getting bonuses and raises and I don’t get raises, I’m out. And if you tell me I’m not getting a raise because we’re “family” Im gonna puke on ya on the way out.
Right now I'm struggling with whether or not to leave. I'm currently at a well-known company, and I'm uncharacteristically happy because my WLB is the best it's been in my career.
However, I'm getting a bit bored and I also know I could make at least $50,000 a year more if I leave. Hell, even the new engineers joining my company at the same level are making more than I am.
But the culture and pay at my company is just good enough such that staying isn't a horrible decision. And I don't want to start studying dynamic programming again for my interviews (I've never used it except in interview environments, so I keep forgetting and losing the ability to quickly answer questions).
So yes, I could make a nice amount more (plus large sign on bonus) but WLB is good enough to keep me, at least for another year. I pick up my kids every day at school and I love it, it's worth the money for now.
The first bullet point of the top comment from 5 years ago begins "As the company grows,...". The company has N=20 employees now. How many did they have 5 years ago? N is extremely low for making any generalizations, and it certainly isn't growing like a startup (in the sense Paul Graham uses the term).
I wonder how much of the perfect retention for non-developers is because of "gold-plated handcuffs"? It would obviously be nice to make X% of the market rate for your field for X >> 100, but it would not be nice to have to take a (1 - 100/X)% pay cut if you want to leave the company for whatever reason. Lots of people can't afford to take a substantial pay cut because they align their recurring expenses, particularly housing, with their salary.
Also, it's interesting to consider how much this would force "bullshit jobs" to be automated, either internally or through SaaS offerings. Note that "bullshit" != "traditionally low-paying" - customer support roles, which are crucial but traditionally low-paying, are the obvious counterexample.
Yeah, I have definitely noticed this... when I was younger, I felt a ton of freedom, knowing I could get another good job easily if the one I was in went south. As my career advanced and I kept making more money, I started to realize that there were fewer and fewer jobs available that could pay my salary.
The article says that the top 10 % for software developers in SF is $136,000 (and they state that this is low). I thought that the top 10% is around $200k of compensation? Am I wrong?
$136k base, other incentives are usually at least $25k. After a few years experience $180k - $200k base is more common. I’ve been offered that a few times and everyone I know makes more than $136k base after some experience
Base salary at the bigs starts around 150 +/- 10%. Total comp packages take your actual W2 income way higher, though (50% signing bonuses, regular old bonuses, RSU grants around 75% of base salary a year).
You are correct, $136k is barely above entry salary, $200k I would say is the higher end of average for senior+ devs, salary only, not including bonus or equity.
yeah although people want to know "how much do people make" or "how much are people paid"
they - and the sources they find on google - quickly conflate income, salary, compensation while also having wrong and old aggregated information for all of it
this works for most people's fields, doesn't work for tech.
I love iwantmyname's service. Super easy to use and been using it for years. One question I have is, does everyone have equal equity in the company there? And if not, does this not count as additional comp besides salary? Also, it would seem to me that this becomes less sustainable the larger your team gets.
Fascinating! Thanks so much to the company for writing this followup -- every year or so I've wondered how this company was doing and if the experiment was still going. It's heartening to learn that it is.
As an economist, you'd expect them to have trouble attracting highly skilled people seeking only wages.
On the other hand, also as an economist and from my own personal experience, there's a whole host of non-monetary benefits a flexible business can provide (which other businesses and corporates seem to balk at), and there's also the little talked about preference of some people wanting a negative correlation between pay and hours the job at the margin.
I've got my own stories. Issues I've had at previous employers include remote working, flexible hours, leave, intellectual property disputes over my own work, or non compete/ non publication issues.
When I left my previous job at banking, I actually interviewed for a lower paid position at uni of Melb. We got to the stage where we were all happy, only I said "I'll work for you if I can do 4 days a week, because I want to send time with my family and working on my own projects".
The bureaucracy said no.
I walked away and I'm back in a higher paying job again...(but with better hours and conditions than my previous ones).
Its always amazing to me the lengths businesses will go to in order to not hire the right staff...
In the Netherlands, if you have a child under 9 years old (it could be 8), your company is required, by law, to let you work 4 days a week if your want. It's actually really common with something like 28% of working men taking a "papadag" ("Daddy day" in English).
I wouldn't even consider a job that didn't allow me time to spend with my kids. Money is definitely not the primary driver for a lot of people.
I was thinking the same-- I wonder if they compensate the more market-desirable engineers by giving them more freedom / spare-time than support people get.
The article justifies the higher-than-market wage their support folks get, because it helps retention and their support people do a lot more than support. That's fair justification for paying over-market for support people, but it still doesn't seem like justification for a salary that's exactly the same.
And I agree that it's silly how companies won't offer 4-day or more-time-off as part of an employment agreement. I'd be seriously interested in a job that allowed me to take extra unpaid vacation time.
All I want is the ability to get compensated for benefits I decline, particularly the company health plan. I've never been able to negotiate this successfully.
All the more reason to negotiate for the thing that you care about (that my W-2 box 5 says $200K at the end of a full year) and not whether you'd get more because you skip a given benefit or less because we notice that you really hit those Friday donuts pretty hard.
IMO, it's more productive to negotiate for what than for why.
Often times $10k is the difference between me accepting job A vs job B. So it would be better for the potential employer to offer that flexibility.
I also have an "icky" moral feeling about being tied to my employer via something like healthcare. So all other things being equal I would choose the company that offers this option over one that doesn't.
Considering how benefits are usually financed by employers I doubt that you will ever be able to get this. It's not as simple as "oh we won't need to pay $10k for your BCBS? Well, sure, let's give it to you".
Employers usually pay insurance ("stop loss") instead of health plans.
> the average software developer in Wellington NZ makes NZ$64k. We pay more than that, but when you become a remote company, people start looking for the $134k USD
These are two different scales, so for help I will normalize them:
They can say all of the feel good stuff they want. I always have the same question - are there outside investors? If there are, by definition the entire purpose of the company is an exit strategy. Statistically, that exit strategy is to be acquired. As an employee without equity you should have no loyalty to the company above getting a check every two weeks and doing your best work during those two weeks.
The owners of the company are concerned with maximizing their returns - you should be also.
The “lifestyle businesses” are the only ones where I believe that there is any chance of the founders being truthful that they want to “have a different type of company.”
Investors rightly want to get returns on their investment. That doesn't mean that the goal of the company is an "exit strategy." It means that the company needs to work towards a way to pay the investors the return agreed upon. Getting acquired is one way to get the investors their returns, but it could also be an IPO or another larger investment.
On loyalty, this really comes down to treating people how you want to be treated. If you always go to the wall playing hardball with a company, generally they will do the same to you.
The company in question is a domain registrar competing mostly on good service. I'm sure it's a profitable niche, but it's not the kind of thing that's aiming for a giant IPO or is likely to attract acquisition interest from a FAANG.
While I’m somewhat sympathetic to your point in general about loyalty, I think you’ve missed the point by a lot. This is more than “feel good words”, this is a concrete set of actions about compensation that affects how much money gets paid to whom. In the world of business it doesn’t get much further from “feel good words” than that.
I would also advise caution about loyalty for equity. Bery few startup employees are paid enough on exit event—if it ever happens—to compensate for the time, stress, and loss of wages that they incurred over a non-startup job. Most people would be statistically better off not working for equity, and just accepting cash.
One of the most important findings is that pay generally will never motivate employees, but it will reduce their incentive to leave. Generally most job factors affect one of two separate but related scales: motivation to stay and reluctance to leave. Entirely non-surprising that devs are the ones who left because by hard capping their pay you are reducing their reluctance to go work somewhere else with higher pay.
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