Toward Fair Pay – Evolving how we Evaluate & Compensate Employees

Atomic Object standup

Fair pay matters a lot. It’s important to our business that we attract and retain top talent, and it’s important to me personally. I care about the Atoms at Atomic; they’re my friends. For them, and for my own personal integrity, I want a fair and consistent value exchange for everyone at Atomic.

We recently modified our compensation evaluation process to a more routine—and hopefully more fair—system (judged by consistency).


This post is the fourth in a series about addressing unconscious bias and making Atomic a more rewarding place for everyone to work.

 

Our Initial Approach

Up to this point, raises at Atomic have happened one of three ways:

  1. Atomic gave everyone a flat percentage raise based on a macroeconomic shift that managers observed.
  2. A manager noticed that someone was deserving of a raise based on growth.
  3. Atoms who wanted a raise would make a case to their manager for that raise.

Although individual compensation information has always been private at Atomic, we’ve strived to have a consistent and fair compensation structure across all Atoms. That means compensating for experience and skill, not ability to self-advocate for a raise. It also means watching the actual pay data to avoid wage compression, and working hard to avoid any types of wage gaps between people with similar roles.

When we were smaller, had a single manager, and only a few people to keep track of, we were able to effectively implement this simple system.

Reflection Causes Evolution

Today, Atomic is dealing with two different labor markets (Grand Rapids and Ann Arbor), more Atoms on the team, more managers handling raises, and frankly, a more competitive market for top developers and designers.

This increased complexity caused us to reflect and ask ourselves some critical questions about our simple compensation system.

  • Are managers consistently noticing raise-worthy growth?
  • Are some managers giving raises too frequently?
  • Are some managers not giving raises frequently enough?
  • Are we behaving consistently when we evaluate raise cases?
  • Is our compensation on-market in both of our geographies?
  • Are some Atoms falling through the cracks?
  • Do we have Atoms who are unhappy with their level of compensation and deserving of a raise, but too shy to make a case?
  • Are we avoiding potential performance issues by not forcing managers to annually review everyone’s pay (i.e. creating a regular evaluation point)?

Our answers to these questions revealed that our existing system needed to change in order to best serve Atoms at our current company size.

Our Philosophy of Compensation

To address the needs of our compensation system, we reviewed our already established compensation philosophy:

  • Money is a weak motivator, but a powerful de-motivator. We want people to work at Atomic for many reasons, not just for pay.
  • Individual compensation is broader than salary, and it includes a host of generous benefits.
  • Our goal is to be market-competitive and leave some earnings for profit sharing.
  • Unfairness, real or perceived, is to be avoided.

One size doesn’t fit all for compensation philosophies. A company’s philosophy on compensation should be driven by the type of culture and standards that the organization desires to create. Therefore, different companies may choose different philosophies or strategies for compensation. For example, some may choose to underpay or overpay the market; others might decide to focus on direct pay and ignore benefits, etc.

Atomic’s philosophy implies a few key things about our company and the people that we employ:

  • Atoms need to enjoy coming to work. This means we need to have an environment that’s both enjoyable and fulfilling.
  • Our benefits need to be top-notch. We need to commit energy and resources to continually reviewing and tuning our benefits.
  • We don’t want anyone to stay at Atomic because of compensation or leave Atomic because of compensation.
  • Atoms need to understand our approach and trust the people who are managing the compensation system.
  • Our market-competitive compensation is based on the higher end of the market. Our philosophy doesn’t accommodate employees who aren’t outstanding.

Evolving the Process

Our founder Carl developed our philosophy and was able to effectively implement it with a smaller base of employees using our simple system.

After reviewing our existing philosophy, we recognized that it’s still an excellent philosophy for Atomic. We simply needed an updated implementation system.

Using our compensation philosophy as our guide, we developed a yearly compensation adjustment process. The process starts by evaluating the current market dynamics for pay. Next, using a combination of market data and managerial discretion, we adjust individual maker pay. Finally, we conduct a multi-manager data review step to ensure fairness.

The process works like this for each Atom:

  • Identify the market pay target for the Atom’s level of experience and geographical market.
  • Qualitatively identify if the Atom is performing below or above his or her peers for their level of experience. Use all dimensions of performance (consultant skills, technical skills, cultural and company contributions, etc.). It’s not an exact algorithm. Everyone doesn’t need to perfectly hit the target.
  • Sanity-check the number that was selected against the person’s peers. Normalize the salary data to compare peers in different geographical markets.
  • Question the decision: Are we being internally fair?

Our new process doesn’t limit someone from making a case at any time. It simply makes it less necessary, and more focused on truly extraordinary individual growth.

Better for Atoms, Better for Atomic

We just finished our first cycle of this process in December. I felt great about it. We had a consistent process between offices, I suspect we reduced maker anxiety around making a case for a raise, and the process allowed for a great opportunity to educate Atoms on our philosophy. It also created a nice opportunity to share some well deserved compliments with Atoms.