At five-year-old social media company Buffer, everyone from the person writing Buffer’s tweets to its CEO knows what the other is making — and so does anyone else who cares, because all of those salaries are posted on Buffer’s public blog.
The company, which was founded in 2010 and has no central office, embraces near total transparency among its 65 global employees, including the typically secretive topic of money.
Buffer’s radical decision to make its salaries public is unique.
While the idea of salary transparency has been a recent hot topic among management theorists and the career resource site Glassdoor shares user-submitted salary averages, there is no rush among companies to adopt the approach. Grocery giant Whole Foods and 40-person analytics company SumAll are among some of the few businesses that embrace transparent salaries.
The payoff, Buffer CEO and cofounder Joel Gascoigne told Business Insider, is that it gives employees one less thing to worry or gossip about and introduces a level of fairness. The catch is that salary transparency can only work for the kind of company that hires employees who are open to the idea of transparency.
Buffer started to disclose salaries about two years after launching. Cofounders Gascoigne and Leo Widrich decided to codify their corporate culture, and “Default to transparency” became the top value. Gascoigne said that since the beginning, “it felt great” anytime he and Widrich shared information with employees about things like revenue goals and cash flow, and so “we kept pushing the boundary.”
It’s worked out well so far. The company brought in $8 million in net revenue in 2015, is profitable, and is valued at $60 million.
What’s more, the salary transparency seems to have aided recruitment. When Buffer made its salaries and salary formula public in late 2013, job applications within a 30-day period increased over the previous 30 days by roughly 229%, from 1,263 to 2,886, Quartz reported.
Gascoigne said that internally, Buffer’s existing employees embraced the transition to salary transparency because they liked having a culture of transparency and because salaries were determined by a salary formula, which was also made public. The formula was developed by Widrich and Buffer software developer Colin Ross, who has a Ph.D. in computational mathematics.
Because the company is so upfront about the way it operates, Gascoigne said conflicts around compensation are rare. And the salary transparency hasn’t slowed hiring — in the last two years, Buffer has grown from 10 to 65 employees, doubling headcount in the second half of 2015.
However, it did eventually result in a decrease in applications from San Francisco and New York City, which Gascoigne attributed to the salary system’s inability to adjust to those markets, where the market value for certain positions had sharply increased.
In response, Buffer launched a new formula in late November:
The formula takes into account the market value of a certain job, where the employee is living, the employee’s experience level and time spent at the company, and the size of their family. It also offers the choice of taking either $10,000 or 30% more in stock equity.
The addition of dependents in the formula is new. Essentially, having a spouse and children results in a $3,000 salary bump per person, so a married parent of three would effectively earn $12,000 more per year than a single, childless employee if all other factors were equal.
Gascoigne said this choice was part of an effort to appreciate employees as people rather than just cogs in the machine. He said that while employees generally liked the addition, many of their blog readers criticised them for the choice, saying that equating an employee’s dependents with that person’s value to the company looked awkward and felt unfair. Gascoigne is weighing these critiques and said that the next iteration of the formula will probably leave it out, but that the same $3,000 per dependent will be allotted as a separate annual benefit.
Here’s a snapshot of what Buffer’s top-paid employees earn, according to the company’s blog:
When an employee joins Buffer, the salary offer is not open to negotiation for the sake of keeping the salary formula incorruptible, but Gascoigne said it is not a problem because the company attracts the type of person who is fully onboard with the company’s values and has already estimated their salary using the formula and numbers available online.
The obvious question then is what should employees do if they want a raise? While there is a “no negotiation” policy for both existing employees and new hires, some elements of the equation are flexible.
Salary committees similar to those used at online retailer Zappos are responsible for approving salaries, and employees can approach them to explain why their salary has become unfair. Employees can argue that an area’s market value for a role has increased, which would cause the team to re-evaluate the formula’s values, or explain why they believe their experience level has increased. However, Gascoigne said it happens rarely.
The salary formula is constantly evolving. Gascoigne expects to update the four elements of the “role” value in the equation either every quarter or every six months going forward. Other issues he is considering for future iterations are ways to lessen the subjectivity of how experience levels are determined, factoring in a country’s tax rate, and a better solution for the few employees who lack a fixed location.
As for overall transparency at Buffer, it’s only increasing. Anyone can visit Buffer’s blog to see the company’s equity breakdown, salaries, revenue, term sheets, diversity numbers, and the code its engineers use. Internally, no emails are kept confidential, and Gascoigne said that he will BCC the entire company on his interactions with investors, under the assumption that when someone does business with him or Widrich, they’re working with all of Buffer.
The company is pushing the envelope of what a private company can reveal both internally and publicly.
“It really helps with having great teamwork and less politics,” Gascoigne said. “Taking the extra step and making it public as well is extending that trust to a different set of people — to customers and blog readers and prospective team members.”
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