Compensation: A Forward-Looking, Transparent Approach to Pay

Paying it forward

At most organizations, compensation is backward looking, meaning, that it is based on how adept you were at salary negotiations when you started at the company, on how well you’ve performed in the recent past, and on how well the company and economy may have recently been performing. When you are promoted into a new position, you receive a salary bump, although that too may be influenced by your current backward-looking salary.

With this backward-looking approach, inevitable salary inequities emerge, such as a long-term high performer being compensated less than someone who recently began in a comparable position, simply because the newcomer was a good negotiator while the long-termer’s pay increases may not have kept up with increasing market value. Such inequities are often much of the reason that the usual policy is to keep the compensation process and resulting salaries held secretly.

We’ve taken a different approach, based on principles of authenticity, deep trust and transparency.

“The compensation process, individual salaries, and criteria for salary changes are transparent to the entire company.”

Galwegian compensation is determined by the results that they have promised to provide in the future. The compensation process, individual salaries, and criteria for salary changes are transparent to the entire company.

How it works

It all starts when performers make offers to customers committing to produce a defined set of results. Customers use a transparent criteria set that we’ve developed in order to evaluate the level of those results, the criteria being based on characteristics of the results like their breadth of impact, risk, the credentials and experience required, the internal and/or external influence needed, and the amount of innovation required

We have a set of about 15 salary points, with each result level corresponding to one of these points. Every Galwegian is then paid according to the level of their future results. The salary points are broadly spread —generally $10K/year or more between them—so that it would take a significant change in results for you to incur a change in salary point. And “you” habitually is the right pronoun here, because you change your own salary point by working with your customer(s) to produce a different set of results than you did previously.

“Every Galwegian gets paid according to the level of their future results.”

Having some control over your salary point enables career advancement by increasing your offered result levels progressively as you become able to produce higher level results. You also could deliberately make a lower-level offer (for instance, if you wanted a set of results that reduced your travel load) without any negative stigma or the sense of having been demoted. The fact that it takes a significant change in results to change salary points lends some stability to compensation. That is to say that your salary doesn’t rapidly roller coaster up and down with the small changes in the offers you made.

Refining the process

There are many nuances to this approach, and we’ve refined it over the last decade to address things such as:

• How we normalize the mapping of levels across the company to salary points, since the result levels for, say, a research engineer role are fundamentally different than the result levels for an accountant role.
• How we adjust the dollar amount of a salary point to track the job market, while not compromising the fundamental requirement that salaries are based on the value provided by results.
• How we teach customers to make solid and consistent assessments about result levels, while recognizing that a certain amount of subjectivity is inevitable, and that assessments about the ability to produce future results are informed by performance towards previous results.
• How we assess the level of results for an incoming employee who has not yet engaged in making offers to customers.

In short, there’s a lot of detail and complexity to manage here, and what’s more, compensation is an inherently sensitive subject. Because we’re doing this transparently, we take a great deal of care to make sure that we’re doing it well.

“Compensation is based on the value of your results, not your value as an employee or person.”

In addition to the advantages we’ve already discussed, the availability of specific criteria for result levels help us to define professional development plans that will offer better  results.

Finally, compensation is based on the value of your results, not your value as an employee or person. This simple truth may be easily lost in other compensation approaches, but we make that truth explicitly clear.