Once we started walking on the path of simplicity and openness, we realised it is quite easy to make some core business decisions, though the implementation might shake up a few things. Once we had done the Open Salaries the next test of our values was how to do we do salary revisions and what should be our overall compensation philosophy.
Initial thoughts – Well to be honest the answer initially was quite straight forward, open salaries is one thing but why should anyone else decide the salary hikes / revisions, this should be done by the founders. First of all we should decide what’s the budget for salary revision based on business plan and then give the hikes as we deem fit. But again we decided not to take the usual course, we said why don’t we involve everyone in the company in making this decision jointly. Well that was a huge ask, because now we were going on a journey where people were supposed to make decisions that are going to impact them, as well as the company and personal biases, ones attitude towards compensation was going to play a big role here.
Cautious Start – As we started on this journey, we did many things some good and some not so good, apart from discussing in groups on how we should do our salary hikes, we did a not so good activity of asking people what their need is in terms of compensation. To be honest, this opened a can of worms, endless debate on whether its need, value or want or anything else that we should be looking at etc. But to be fair, everyone in Sahaj participated in this exercise as well and people did write some numbers mentioning what they expected their salary to be on a shared google sheet. Though eventually we shelved the sheet but one thing it proved was, that people were ready to be open with each other as far as their expectations on salary is concerned. It was a good sign.
Getting it right the second time – After getting nowhere with the above exercise we decided to do something else. We approached it differently, we decided to do business planning together and then decide what budget we can afford for a salary hike. So we prepared an overall business plan, with as much information as possible, to do the overall budgeting for the coming year. We did a comprehensive business plan with revenues broken down, all cost broken down in as much as detail as possible, profit before tax etc. We did a marathon meeting with everyone and opened the business plan, obviously for some of us it was the first time we were looking at a business plan, so we spend a considerable amount of time explaining the plan to people. But the idea was to together decide how much money (in % terms) we can set aside for salary hike for the year. I must say I was impressed with the way people participated in this activity and made decisions. We did a what if scenario as well and looked at the impact of hike % on profit. Eventually, after looking at our cash reserves, our business model, our aspiration and investments, the team together came up with a number for salary hike. Yes, it was quite impressive to see a team of about 20 – 25 people making decisions like a CEO. In fact some of them were quite aggressive and said let’s not do any hike for the year as we should build cash for our future. Eventually, we ended the meeting with a decision on a hike % for the year. In the subsequent weeks, we also made a decision to divide the % hike in two brackets. One for people with a higher salary taking slightly lesser % and one with lower bracket taking slightly higher %.
After effects – As with any salary hike exercise, while largely people were ok with the approach, there were some interesting thoughts being floated. The question was asked while the open and equal hike is a good thing but then what’s the motivation for one to work harder in Sahaj? Why would one put in more effort? How are we encouraging high performance, innovation etc. or how are we taking care of people who may not want to go that extra mile in spite of being in a start up or who are not performing at the required levels. These were great questions and made us define clearly what we call as the continuous compensation review philosophy at Sahaj.
Overall Compensation philosophy – First, of all the idea of doing open hikes was to let everyone participate in a very important decision of the company and being transparent, again this is another step towards getting to a state where every member of Sahaj owns decision at an individual, as well as at company, level. Second, once we do a hike which is equal, it also creates an environment where only individual performance is not enough, but performance as a team and company is equally important. In crude terms, it also means that if someone is not performing at optimum levels, then it is not the responsibility of a chosen few to go and fix the problem but everyone and anyone is equally responsible, because, now at individualistic level my hike is dependant on not just my performance but at everyone else’s performance as well. So as a member of Sahaj, either I help the person get to the right levels or in worst case make a decision to ask the person to leave. That’s a very extreme view!
Continuous compensation review – Now to encourage an attitude of going that extra mile as and when needed and doing more than expected, or taking care of people who are punching much above their weight, we have an ongoing compensation review mechanism where every month we look at everyone’s salary and see if there are people who are performing way above the expectation and need to go through a salary revision exercise. If the answer is yes then we don’t wait for any yearly, quarterly thing to happen and just go ahead and revise the numbers from the following month itself. This is a fairly simple exercise and need not be driven by just a few people, anyone who feels their compensation should be revised is free to initiate the conversation and discuss the reasons. This also gives an opportunity to the individual to know what is expected of her / him in the company and why is one getting or not getting a revision and is a good mechanism to do bilateral expectation setting. Also open salaries necessitates that people’s performance / value-addition also has to be in open and this is a mechanism to achieve that.
Summary – So to sum it up, at Sahaj we have a compensation philosophy which on one hand has open and equal annual hikes, depending on what the company budget allows and on the other hand, has a continuous salary review based on the value that a person brings into the organization. The idea behind it is, to create a high performance culture where everyone is concerned about theirs as well as others performance.
We have implemented it this year and hopefully will have more to share as we move forward with it.
