First Principle of Compensation
At Gray Scalable, we help a lot of companies set up a rational compensation structure and set their pay to market. It’s a foundational product to us, because this can then help companies with so many other things - like career development, hiring the best talent, etc.
But one of the biggest benefits is communications - that is, it enables the company to talk to its employees confidently and knowledgeably about their pay. As a great HBS study demonstrated, the communication about pay can matter more than the actual pay itself.
Our first principle about compensation is that while you should never be totally transparent with your employees about everyone’s pay, you should act as if you are (except in the simplest of workplace populations or union environments, where it may actually be possible or necessary to have very strict and uniform comp structure). Every compensation decision you make, from new hire offers to annual increases to bonus payments - should be a decision you could reasonably defend if suddenly the curtain were pulled back and the whole team knew about that decision.
This enables you to be proactive about comp decisions and conversations, and it challenges you to ensure you’re treating everyone fairly. It’s also a good defense against all the potential pitfalls of NOT having a defensible process - like employees asking each other about pay and drawing their own conclusions, or having to respond regularly to counter-offers.
This is a key ingredient of organizational health, and it requires a rational compensation structure as a starting point.
written by Charlie Gray, President of Gray Scalable