A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.

I often field questions about compensation, stock allocation and bonuses that revolve around the idea of fairness.

There have been more calls since a rise in media attention to gender pay inequities, especially focused on tech. They look at what other countries are doing, such as a recent UK law, and wonder if similar things could happen here or if someday down the line they will have to do as Marc Benioff did.

Whether the subject starts with diversity or compensation, my callers fall in two distinct camps.

• Those looking for ways to bake fairness into their company’s DNA; and
• The ones who want to cloak current unfair actions in a veneer of acceptability.

(I have to admit that listening to the second group stumble around trying camouflage what they want to do is amusing, but definitely not funny.)

Of course, it’s easiest for founders just starting, since they have no historical staff or (hopefully) bad habits, but any size organization can do it if management is determined and has the grit to follow-through.

Here are some basics actions:

• Develop core values around fairness, diversity, transparency, etc., make both values and culture public on their site, and follow-through when recruiting.
• Salary and stock offers should be based on the value and effect of the position on the company’s success, as opposed to the person you are hiring.
• Before approving compensation compare it with similar people inside and out for fairness, especially if the candidate is a woman or minority.
• Talk to others, such as Gusto cofounder and CTO Edward Kim or the folks behind the Founders for Change coalition.

The most critical factor is a willingness to pass on hiring people when it’s obvious they are assuming it’s just talk or that you should make an exception for them because they are special.

As I’ve said in the past, “If you pay your people equally when you hire and promote there won’t be a pay gap for you to erase.”

Image credit: HikingArtist

Yesterday we considered the error companies make by basing offers on salary history, instead of future performance.

That may be about to end, at least in the outliers of Philadelphia and New York City.

In short, the law prevents employers from asking candidates about their current/previous compensation.

Candidates can volunteer the information, but can’t be asked for it by the company or any recruiting process, including third parties.

Doing so opens them up for lawsuits.

Ignoring implementation and legal hurdles, what does it really mean and why do I see it as such a positive?

Primarily because I don’t believe that either performance history or salary history has a damn thing to do with the value candidates bring to their next job.

Companies need to have a hiring range for each opportunity based on the impact that specific position should have on the company’s success.

The low end is based on average performance, while the high end is the result of an over achiever in the position.

The offer should be the highest number within the range based on the hiring manager’s evaluation of the candidate in light of two strong constants.

1. 98% of star performers become stars as a function of their management and the ecosystem in which they perform.
2. People who join for money will leave for more money.

Merit raises are then given based on that individual’s actual contribution to the company’s success, as opposed to some number from HR.

This puts most of the responsibility on the hiring manager — exactly where it belongs.

Image credit: gardener41

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.

Programmers in Silicon Valley are reeling.

What are they going to do?

No more clandestine recruiter calls from unicorn startups offering million dollar salaries, six figure sign-on bonuses, thousands of stock options and country club style perks.

And those graduating with CS degrees may find fewer startups bidding against each other for their services.

Not to mention layoffs. Layoff a programmer? Are you nuts?

Nope, that’s exactly what’s happening.

And, as an ex recruiter, all I can say is it’s about time.

Perhaps now candidate focus will return to the mission and the tech, instead of the dollars and bragging rights.

Because, in spite of the all the media coverage, there is a large number of programmers who don’t believe it will affect them — others, sure, but not them.

Of course, it’s hard when you’ve been the golden (mostly) boys and reality rears its ugly head.

But ask anyone in tech who has been around for awhile and they’ll tell you that change is constant and what goes up comes down — and eventually goes back up again.

Programmer jobs not excepted.

Image credit: HikingArtist

My friend Emily lives in Mountain View, CA.

In spite of all the stories about high rents and corporate bussing not much has been said about companies such as Prometheus Real Estate Group and its ilk that are responsible for much of the actual destruction of community in the name of progress and greed.

They do it by buying up properties, telling the tenants to move, and then doubling (or more) the rents.

Like other Peninsula landlords, Prometheus sets a baseline criteria for tenants to prove they earn more than three times the monthly rent. With that requirement, a household would have to earn more than $144,000 annually to be eligible to rent a $4,000-per-month unit, Scarboro pointed out.

Emily recently sent a letter to the City Council, which resulted in the story linked to above and a report on NBC Bay Area.

And here’s the letter that started it all (edited for length and clarity).

I have been a resident of Mountain View since 1999. Since I earn fewer than six figures I am a low – middle income professional by this City’s standards (and the word in the street is that the voice of folks like me carries little weight).

I am writing anyway because today I realized that if I am not for myself – who will be for me? Certainly not my current hometown.

I live on a private street with 24 town homes and most of us are low to middle income (by Silicon Valley standards). We are teachers, social workers, healthcare professionals, doctors (residents), beauticians, and more. We have patients, clients, customers and businesses in town. We are in our 30-70’s. Some of us have young children. Some are single Mom’s or just plain single. Several younger residents have disabilities. We are a diverse group by skin color, religion, culture, age and education representing what’s great about this City (or what used to be). Many of us were born here or have lived in Mountain View over 30 years. Some have lived on this street for 12 years or more. Our rents are not cheap. They range from $2500-3500 per month for our 1970’s style 2-3 bedrooms. We all pay our bills. Most of us love coming home and we have become a closely-knit community—which is increasingly rare in this town.

As you must already know, Prometheus Property Management’s latest takeover team has informed the 100+ residents on Forest Glen Street and at “Granada”, a nearby parcel with 14 townhomes (purchased at the same time) that we all need to pack up and “permanently evacuate” due to the new renovations allowing them to collect “considerable rent increases” “Feel free to apply as a new tenant but your rent must be no more than 30 percent of your monthly income or three times the new rental price.”

That’s requires a salary of $12,000 per month or more at their rental prices.

I used to love Mountain View. Not anymore.

What kind of a City sanctions new owners to displace over 100 residents and literally destroy a diverse neighborhood where everyone pulls their weight and contributes to their City in so many ways? You may consider the 3-6 months notice we were given to be a generous offer (they are not starting to renovate until mid summer) but how truly generous is this when it’s a known fact that there is limited decent housing and whatever housing exists has monthly income requirements that non-tech folks cannot meet? (According to the article, even many Googlers don’t earn that. –Miki)

Since the initial shock of forced displacement many of us have spent days looking at comparable sized apartments in Mountain View (and immediate surrounding areas) only to discover that Prometheus is not alone with their outrageous monthly income requirements at 3x the rent. We have found that most property management companies and individual landlords have the same requirements.

Being the great company they are, however, the Prometheus takeover team urged some of us to apply for apartments that are Below Market Rate (BMR). Funny thing is, “there is no BMR housing in Mountain View and the list has been closed since December” according to the office that manages it.

This is the new Mountain View at its best demonstrating how to ineffectively follow its own guidelines. Preserving and enhancing quality of life for Mountain View residents is only for those with very low income or the top 10%.

A BALANCED City would require a new owner to increase rents and renovate for NEW tenants when current tenants move out. People are moving in and out all the time. There is no rent control. No one is going to stick around forever. Some just want their children to finish their HS senior year with the kids they grew up with.

A FAIR City would have policies in place that keep companies like Prometheus from disenfranchising long time residents who at the very least work in this city. Most of us would happily exist with a rent increase even with our old grouty tiles, stained Formica and fake marble counters and sinks just to be able to continue to more easily drive to work, keep our doctors and run our businesses.

Tell me — how can this once great City of Mountain View look the other way and through sanctioning Prometheus’s business practices- force people with disabilities, in their 60’s or with kids in school to abandon their homes and neighborhood suffering, in some cases, irreparable financial loss and emotional distress. This can’t be legal.

[signed] Emily White Mountain View, CA

New York City and surrounding boroughs instituted rent control decades ago and the city is anything but destroyed; municipals governments work closely with housing organizations to make it work.

Of course, in a country where greed is enshrined in our culture, corruption is legalized in the form of lobbyists and the Supreme Court voted to put for sale signs on our elections, Prometheus’ actions are completely legal — and even applauded in certain circles.

What exactly do people mean when they say they want to be paid fairly?

Generally speaking, people define “fair” relative to themselves and those around them.

Developers working in a small company don’t compare their salaries to the developers at Google or even to their bosses.

The comparison they do typically has two steps.

• First, they compare themselves to their peers, i.e., similar job, background, title, company, industry and location.
• Second, they compare their salary with the salaries of those they see as peers.

The comparison is possible because, no matter what company policy says, compensation is never really secret.

As long as salary differences are based on factual points, as opposed to charm, politics, or managerial whim, people will believe they’re being treated fairly.

Because they are.

Flickr image credit: Rennett Stowe

WalMart is moving to improve your shopping experience.

No, not lower prices or expanded inventory.

Certainly not more women and minorities in management roles.

But soon, all ‘associates’ will greet you wearing collared shirts and khaki bottoms.

That’s right. Walmart wants to implement a dress code—but not pay for it.

The annual cost is probably around $50, which is a lot considering the pay.

Richard Reynoso, a Wal-Mart employee in Duarte, Calif., representing a campaign called Organization United for Respect at Walmart said in a letter to the company’s management: “I’m getting paid only about $800-$900 a month. The sad truth is that I do not have $50 lying around the house to spend on new uniform clothes just because Wal-Mart suddenly decided to change its policy.”

If pushed the action is likely to generate additional class action lawsuits, not to mention fan public outrage and generate a significant backlash.

But that isn’t what troubles me.

In the 21^st Century our largest employers are the likes of Walmart and McDonald’s.

They pay $8 to $12 an hour and would pay less if they could get away with it.

Businesses on and off-line are working to improve your shopping experience, but most are unwilling to do what Henry Ford did 100 years ago.

Pay people enough that they can afford to consume.

(For more information see previous posts No Help Wanted and Workforce USA)

Flickr image credit: rychlepozicky.com

Many founders talk about the desire to build truly open cultures.

Then they start adding exceptions and caveats, especially when it comes to compensation—whether dollars or stock.

Sharing compensation information is usually discouraged and discussing stock options or salary may even be considered a firing offense.

While there are startups opting for openness, what happens over time?

Based on Whole Foods nearly 30-year trial salary openness can work.

Whole Foods co-CEO John Mackey introduced the policy in 1986, just six years after he co-founded the company. In the book, he explains that his initial goal was to help employees understand why some people were paid more than others. If workers understood what types of performance and achievement earned certain people more money, he figured, perhaps they would be more motivated and successful, too.

It takes solid planning and a culture with a real commitment to transparency and developing people over time to make it work.

By making it’s financials, including profitability, available to all it employees, so they could see not just what everyone was paid, but where else the money went, Whole Foods created a true feeling of ownership along with the knowledge that promotion was available and the support to make it happen.

The company’s openness even drew recognition from the Federal Government.

In fact, in the late 1990s the widespread availability of so much detailed financial data led the SEC to classify all of the company’s 6,500 employees as “insiders,”

Building openness into your culture requires support and full buy-in from your senior staff.

And that means being willing to pass on people who have the right skills, but not the right attitude.

Flickr image credit: Paul Downey

I’ve been planning to do a varied look at compensation, but I didn’t realize that idea started with something I read in January and here it is June. I reviewed all the comp articles I saved and thought I’d share the more unusual ones.

There were actually two January articles within a day of each other.

The first looked at who is instrumental in formulating those fat Wall Street bonuses.

But as one of the nation’s foremost financial compensation specialists, Mr. Johnson is among a small group of behind-the-scenes information brokers who help determine how Wall Street firms distribute billions of dollars to their workers.

The other was a Wharton look at the effect of excessive frugality on companies’ long-term health. My main reaction reading it was “ya think!?”

When workers feel that “the company is doing fine, but somehow I’m doing worse, at some point there has to be some dissatisfaction with that. It’s not sustainable,” suggests Wharton management professor Adam Cobb, who studies labor, worker benefits and income inequality. “I think there’s a general feeling of: This system is rigged and not in my favor.”

Shortly thereafter Dice published their salary survey for tech salaries

After two straight years of wages remaining nearly flat, tech professionals on average garnered salary increases of more than 2%…

A reminder that the jobs of the truly rich aren’t like ours comes from Rupert Murdoch who got a huge raise, in spite of legal bills from the ongoing hacking scandal being nearly a billion dollars in February; considering the continuing revelations they’ve probably surpassed that by now.

In Europe, the CEO of German startup Wooga is building a culture sans bonuses.

“I don’t believe in them,” says Jens Begemann, the 35-year-old co-founder and chief executive officer of Wooga. “If people are not motivated, you may need bonuses to make sure they work. But I don’t think that’s the right incentive.”

It used to be that people gave up some salary for the opportunity to work on bleeding edge products in companies with little-to-no structure, like-minded people and the chance to hit the jackpot through stock options—but no more.

Going to work for a start-up used to be a gamble and a sacrifice. You’d have to work longer hours for a lot less money than you would at a publicly held company. (…)To compete for talent these days, start-ups can’t skimp too much in salary negotiations.

There is much written about the rising wrath of shareholders with regards to CEO pay, but little written about a potent subgroup—shareholders who are also employees.

One potentially powerful class of shareholders — employees — seems to be rousing, too. And, to the degree that employee-shareholders band together to have their say on the boss’s pay, they can be a formidable force.

Finally, Apple’s Tim Cook raised the bar for all highly compensated CEOs Thursday; not because of a higher paycheck or by taking a symbolic $1 annual salary, but by refusing part of what he is owed.

In a regulatory filing Thursday, Cook stated that he would forgo around $75 million in dividend payments he otherwise would have revived for the 1.125 million stock awards is set to get over the next several years.

Flickr image credit: pedroelcarvalho

Northern California startup land is once again the Golden State for new grads—especially those with a strong sense of entitlement.

And I do mean golden.

Lattice Engines, a small San Mateo startup, where she makes “near the top” of the company’s $80,000 to $130,000 range for an entry level product manager, plus equity.

Notice that the young woman is not a techie, so her salary isn’t pay for (supposedly) hard to find programming skills.

Granted I’m no longer in the front lines of hiring, but I’m still going to stick my neck out and say that no new grad is worth that kind of money—not even programmers.

Why?

Because there is so much more to working than what was learned in class. Stuff like

• you may not know as much as you think, let alone everything;
• experience matters;
• understanding that while screwing up your own work is bad it can wreck the project and damage not just your team, but even the company;
• not only being present, but also productive five days a week, 12 months a year;
• being engaged every day all day—no cramming just before evaluations;
• no spring or winter break or summer vacation (it’s a different rhythm); and
• many other mundane things

In other words, it’s a different world, with different rules and different measures.

Further, new research is showing that entitlement kills innovation and for a new grad to believe they are worth a six figure salary plus equity compensation package is definitely entitlement.

I’m not saying that they aren’t assets or that they won’t contribute significantly, just that it wouldn’t hurt if they proved themselves first.

Can you imagine the impact on their productivity and creativity if their annual raise is meager, let alone justifying that salary if they change jobs?

There is a world of difference in the skills of someone with one year of experience, let alone five or more.

The problem is that by the time that truth is learned they are no longer entry level.

Flickr image credit: Jeff Wilcox

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

You may run a startup, but that doesn’t negate the value of a new study (includes link to the full study) by Unum and Monster.com that says culture is more important than compensation.

Number one on candidates’ list was a company “that truly cares about the well-being of its employees.”

The next three are

1.  A challenging and fulfilling position, which 84 percent of respondents identified as very important.

For the person attracted to the startup world this is a given, but it requires good interviewing skills to ensure that the attraction is real and not a product of media-driven startup fever.

2.  Job security, rated very important by 82 percent.

Many denizens of the startup world will scoff and stop reading at the words “job security,” but there is such a thing in startups. Startup job security is a function of a clear vision backed by knowledge of the target market; good business planning as opposed to shooting from the hip; strong financial controls from the beginning; good hiring practices, instead of “try it and dump if you don’t like it.”

3.  An attractive benefits package, which 74 percent of those surveyed rated very important.

Benefits are different strokes for different folks; for those in the startup world ‘benefits’ translates most frequently to equity, but that doesn’t eliminate the value and need for health insurance; people engage more fully when they aren’t worried about their families.

And salary seems to still be in fifth place just as it was 30 years ago.

• An attractive benefits package and an ethical, transparent culture were more likely to be viewed as very important in attracting and retaining staff than were a high starting salary and job security.
• Being a company that cares about the well-being of its staff was twice as likely to be viewed as very important in attracting and retaining staff as providing a high base salary.

Like it of not, benefits of any kind are concrete proof of caring and how those benefits are distributed is a reflection of an ethical, transparent culture—or not.

Option Sanity™ is integral to an ethical, transparent culture.

Come visit Option Sanity for an easy-to-understand, simple-to-implement stock process.  It’s so easy a CEO can do it.

Warning.
Do not attempt to use Option Sanity™ without a strong commitment to business planning, financial controls, honesty, ethics, and “doing the right thing.” Use only as directed.
Users of Option Sanity may experience sudden increases in team cohesion and worker satisfaction. In cases where team productivity, retention and company success is greater than typical, expect media interest and invitations as keynote speaker.

Image credit: Bun in a Can Productions