Why would you let your employees choose their own salaries?
An interviewwith Evgeny Shadchnev, CEO and co-founder of Markers Academy
Makers Academyis a truly fascinating start-up. Europe’s leading Web Developer bootcamp thatnot only teaches ‘the principles of software craftmanship’ but also supportsstudents to get their first programming job — and it’s a Culture Firstcompany. Makers Academy wasfounded by Evgeny Shadchnev and Rob Johnson when they met at Forward Labs. Aconversation between the two of them about learning programming led them to realisethat while computer science programs were good at drilling students withtheory, they were training people to become computer science professors insteadof programmers, and something had to be done. And so Makers Academy wasborn.
A few of theunique and fascinating things about Makers Academy:
· Everyone in the company sets theirown salary
· They don’t use targets in the salesteam and they don’t pay sales commissions or bonuses
· Insteadof interviewing candidates, they ask potential employees to interview them.
· They pay candidates to come and work for thecompany for a day as part of the interview process
· Making the decision final to hire a new teammember is the team’s responsibility
I spoke withEvgeny Shadchnev, the CEO and co-founder of Makers Academy about the culturethat he and his team have developed and his biggest learnings over the last twoyears. We started off by discussing one area of difference that I findfascinating – all employees from the CEOdown, decide their own salaries. I first came across employees settingtheir own salaries whilereading Ricardo Semler’s brilliant book, The Seven Day Weekend:Changing The Way Work Works. Since then, a number of companies like Buffer,Squaremouth, SumAll and WholeFoods have shown that making previouslyconfidential information like salaries available to employees can counterintuitivelydrive up engagement and positively impact a company’s culture.
Evgeny wroteabout this in a company blog post:
‘Traditionally,the salary and subsequent raises are negotiated between the employee and therepresentative of the company or set according to a predefined formula thatleaves little room for negotiation.
This processis adversarial in nature. It is based on the assumption that the employee isacting in a selfish way, trying to maximise their own personal gain at theexpense of the company.
This setupencourages employees to push for a highest possible salary in most cases, whileencouraging managers to push back as they expect the employees to inflate theirsalary expectations. In most companies the salary negotiation doesn’t encourage either party to be particularlyopen and honest, which is the foundation for building the trust betweencolleagues.
So, at MakersAcademy we decided to self-set our salaries. We believe that every person isbest positioned to make a qualified decision on their own salary.’
How does theprocess of setting your own salary work in practice?
We initiallystarted by having completely open discussions with the entire team aboutindividual salaries. We realized that this wasn’t an ideal format, so wedecided to change that process to having the initial conversations in private,where an individual will have one-to-one conversations with other members ofthe team about their salary and then share the final outcome with the entire team.The process is as follows: you are expected to write an essay describing yourrole, what you’ve been doing for the past year, and what you’ve done well andnot so well. You outline any change in compensation you’d like and why, how itcompares to the external market (this is one of the key data points) and howyour proposed salary relates to any equity you have in the company. Each teammember is expected to do this on an annual basis, around the anniversary ofwhen they joined us. If there’s a salary gap between you and a colleague, orbetween you and the market, it’s down to you to reflect on why and, if you wantan increase, to make your case for that. Self-setting salaries is not aboutasking permission; it’s about getting feedback. The goal isn’t to get others toapprove your salary, but to get feedback on what you’re doing, the impact ithas had, and to understand how you and your work are perceived by yourcolleagues. Everyone in the company does it, including me.
How does it work for new joiners?
We negotiate it in the usual way, and we’re open about the offer(or a salary range) we’re likely to make from the beginning. Sometimes there’sa normal back-and-forth negotiation but its range is usually limited since thesalaries are open internally. A frank discussion with future colleagues abouttheir roles and salaries is often part of the process.
What have youdone as a company to define your company values?
In Septemberlast year I thought it would be a good idea to ask an external consultant tohelp us produce a company handbook, and while it was produced on timeand within budget, and although the consultant did speak to the team, itturned out that the team weren’t deeply involved in the process, and the endproduct wasn’t exactly what we were looking for. We went back to the drawingboard and redesigned the project from scratch, putting one person in the team inthe driving seat of the process. Her job is to make sure that we end up with acoherent draft of the handbook.
In order toproduce that draft, she has been talking to everyone in the team in individualinterviews and group workshops through a continuous process of writing, gettingfeedback from the team, editing and rewriting. We don’t expect everyone tocontribute to every part of the process, but at the same time we want to avoidpresenting the team with a finished product without their input, so we’recreating it in a collaborative way.
We see thehandbook as a living document and in that sense will never be completed. Whatwe’ve done is a pretty solid draft right now and we’re hoping to get it onlinebefore Spring 2018 — although we’re not committing to a hard deadline becausethe quality matters more than meeting an arbitrary date.
The handbook iscomposed of two parts: firstly, our philosophy, which we’ll make public, andsecondly information on how to handle practical matters such as how to invoicethe company or the onboarding process. It makes sense to share some of itpublicly because when we ask our job applicants why they’re applying to workwith us, more often than not they cite our culture. When we ask them how theylearned about it, they point to our blog posts where we explain things such asself-setting salaries or other company processes.
For me, definingand baking in the company values isn’t a one-off process. I expect our valuesto continue to evolve as the company evolves. The values that we had when wewere a team of five are not the same as the values we had when we weretwenty-five. We want toget to more specific values and actual examples of how to implement thosevalues from our working practices and these will need to be updated as thecompany evolves, otherwise the values and their meaning to the company willbecome stale.
How do youinterview to ensure culture fit?
One of the firstquestions I ask in every interview whatever the position, is ‘Why do you wantto join Makers Academy?’ This question often becomes the most important one inthe interview process as I try to understand how the person thinks aboutthemselves, their world, their objectives and what matters to them — and cruciallyhow that connects with our values and objectives. My primary focus is ontrying to make sure that the company and candidate are aligned at the level ofvalues because if there is a mismatch, then however talented or brilliant thecandidate is, fitting in with our culture will be difficult or even impossible.In other words, before we even get to the discussion on skill set, wetry to make sure that they and we, are aligned on why it’s important to do whatwe do at Makers Academy.
Can you giveme a recent example of one of your values in action inside the company?
I will use recruitingfor our careers team as an example, in combination with one of the values thatwe really care about, which is the quality of the experience we offer ourstudents. Our careersteam is responsible for placing our students into jobs after they havecompleted the Makers Academy course. Typically, in other companies the careersteam role would be heavily focused on targets and revenue. As I mentioned, wecare deeply about the quality of our student experience, so a primaryaim for us is to get all ourdevelopers into a job they will genuinely love. Therefore, a good fit for ourcareers team is someone who cares more about solving the problem of getting anamazing job for our developers, than maximising our revenues and theirpotential commission. Take the example, which has happened numerous times, wherea developer on the course wants to get a job in a company outside of ournetwork of hiring partners. We will invest the time in helping them to preparefor the interview and get the job, even though we won’t be paid for thisplacement. In the short-term Makers Academy will lose revenue, but over thelong-term, we’ll have done the right thing for the student, who may go on torecommend us to their friends and network.
Taking this onestep further - in order to be able to focus on offering a quality experience toour students, we decided as a team not to incentivise our sales people withcommissions. This aligned everyone on the same goal, which results in us doingthe right thing for our students and we believe, in the long-run, for the business.This actually makes hiring for the career team easier. If during therecruitment process we come across a potential sales candidate who is driven bymoney, we know that they are probably not going to thrive at Makers Academy. Wehire sales people who care about other things than sales commissions and makingmoney as their primary focus.
How do you achieve that?
We are really tryingto establish what the person gets a kick out of during the interview process — arethey excited by the idea of placing developers in rewarding and fulfilling jobswhere they can make a significant difference to someone’s life? Or are theymore interested in receiving some sort of financial reward at the end of the quarter?Don’t get me wrong: there’s nothing wrong with a commission structure or beingmotivated by money and I’m also not saying that the way we do things is any betterthan other ways. I’m just trying to make sure we are aligned on the job that needsto be done in the first place and whya candidate may want to do that job. This means that most of the people on ourcareers team don’t come from traditional sales backgrounds. They almost alwayshave relevant experience, such as a track record of helping people to getamazing jobs, or helping people to be successful, or helping companies to hireamazing talent.
What sort of knock on effects does this have?
This sets usapart from the rest of the market. When we talk to our hiring partners aboutwhy they work with us, they tell us, ‘You’re a source of talent but you’re nota recruiter. You are not here to sell to me. You’re here to solve my problems.’And when our careers team go in to meet our hiring partners, they’re very proudto tell them, ‘Look we’re not on commission, we’re not salespeople, we’re nottrying to close the deal as soon as possible. We want to solve the problem, andif we do that well, we help you, we help our developers and we’ll build along-term relationship.’ There’s much less sales pressure on our hiringpartners. We don’t do exploding offers, we’re notpounding the phones and doing hundreds of calls a day. We try to do a genuinelygood job in solving their problems, and our hiring partners really appreciatethat.
Deeply caringabout your students’ success is one value. What other examples can you share?
Another of ourcore values is trust. We hire people and trust them to do whatever they thinkis right to move the business forward. In practice it means that they’ve gotcontrol over their daily practices, working hours, what they do, how they do itand so on. Our team members are trusted to come up with the right way of doingtheir jobs and the job spec they were hired against is really a list of thingsthat are important to us. Our expectation is that the person we hired is goingto find the best way to make that happen.
An example ofthis was when we partnered with a charity organisation during the height of therefugee crisis. We found a way to sponsor a refugee coming from Egypt to do oneof our courses, and then got them a job at one of the top companies in the UK.That was a real life-changing story for that person, it happened not because wehad a quota for doing this kind of thing in any given year, but because it wasan opportunity that was aligned with our values. This initiative came via theteam, not from me or senior management. We trust and expect them to work inthat way. As this example demonstrates, our values mean that collaborations,partnerships and projects often begin at a grass roots level rather than atboard level. We don’t sit down and try to figure things out strategically andthen expect the team to implement it — instead, we let things emerge as ourteam spots opportunities. For example, we’re launching an apprenticeshipcourse, following the introduction of apprenticeship by the UK government. Thepeople on the career team realised that we could train people without chargingthem for the course; the people on the course would get paid in the process, andthey would essentially be guaranteed a job on day one after training. Itsounded like an amazing opportunity and something we wanted to get involved in,so we started exploring it. Months of exploration was done by the careers teamlong before we even discussed it at board level or started to integrate it intoour strategy.
Tell me aboutthe Makers Academy approach to hiring.
We try to hireslowly and fire slowly. Make no mistake, if someone isn’t working out, we arenot going to tolerate it for six months or a year. But because we are reallycareful about who we hire and take a lot of time to bring on the right people,we really commit ourselves to doing whatever we can to make sure our employeesare successful. This is quite different from hiring quickly and knowing thathalf your new hires won’t see the end of the probation period. We want to giveapplicants the message that we will have a pretty long and in-depth conversationbefore they join us, in which, they ask us, and we ask them loads of questionsto make sure that we’re on the same page. If we hire them, it means we will beas committed to making a real successful collaboration out of this as we expectthem to be, for the foreseeable future.
We start theprocess with a phone interview with the head of recruitment or the line managerfor the role, and if that goes well we have the first face-to-face interview.At this stage things are more exploratory. We invite the candidate to ask usquestions rather than the other way around. When I interview I get as muchinformation out of their questions as I do out of their answers, so in a senseI don’t really mind where the conversation goes in that first interview. What Icare about is that we cover the number of areas we need to cover, but who’sdriving the conversation feels less relevant to me.
The next stageis a deeper interview, where we try to focus on the candidate. Usually this isdone by getting them as involved as possible in the real work they’d be doingon the team. For example, when hiring for a role on the careers team, it mayinvolve attending a real client meeting or, if we can’t arrange a clientmeeting in time we will set up a role play which closely mirrors a real clientmeeting. If a candidate gets through the phone interview and the firstinterview, it means they’re good enough to meet one of our clients and weexpect them to get involved in that meeting. After the meeting, we will have areview with the candidate to discuss what was good, what was less good and whatcould be done differently — this conversation usually tells us a lot about thecandidate generally, and specifically around their willingness to take and givefeedback. This part of the interview process usually takes between half a dayand a full day, and if it does take a full day, we pay them for their time.
The processlooks different for each role we hire for. Recently we brought on a Head ofPeople, and we invited her to spend a day with the team. She met around eightpeople in one-to-ones and group conversations throughout the day. It was anopportunity for the team to meet the candidate but also for her to interact directlywith the team she would be working closely with. At the end of the day,everyone gave the same feedback — that we absolutely needed to hire her. As ateam, we got to this place not through the traditional formal interview processof asking and answering questions, instead, she spent a day in the office interacting- asking our people what works, what doesn’t work and what could be donedifferently.
When we hiredour finance director a year ago, the day in the office involved the shortlistedcandidates doing a mini finance audit. I gave each candidate read only accessto our accounts and asked them to produce a report on what we were doing well,what we were not doing well and what we should be doing differently. It wasreally useful for me to get a number of different perspectives on the company,but also very useful for them because they were getting information on thecompany not just from the team, but by looking at the actual numbers. Onecandidate told me that when they joined previous company, they didn’t realisewhat the company’s financial situation was until they signed their employmentcontract and that they wouldn’t have joined had they known the truth.
Making a hiringdecision is a team responsibility – how does that work for you as the CEO who,in a normal startup, would make the final hiring decision?
The hire or nohire decision is for those who are going to be working closely with thecandidate. As CEO, I meet everyone who is joining the company but my opinion issimply one of the inputs and not the final decision. For example, last week Iwent into an interview with a candidate and after I left I told the team I hadno idea how that person had gotten so far into the pipeline as I had seriousdoubts that they were the right person for us. The team listened to myfeedback, went away to discuss and then came back and said that while they sawhow I could have arrived at that conclusion, they thought that I might beincorrect. They believe there were some things I had missed, and asked me whatI thought about arranging another interview to go deeper into some of the areaswhere I had concerns.
The team relayedfeedback to the candidate including some fairly difficult stuff from me and thecandidate responded very well to it and offered their perspective on why theymight have come across this way. In this situation I didn’t act as a blocksaying it was a definite yes or no.
Generally, everyoneinvolved in the process has the right to veto a candidate but we don’t reallyuse it like that. I questioned rather than vetoed, and would veto a hire onlyin very rare cases. In fact, I can’t think of a single situation where I’ve hadto do that. If I have really strong concerns, there is usually an explanationthat will make sense.
How do youonboard new people?
We have done itvery poorly up until now, because we didn’t have anyone responsible for itexcept the new hire’s immediate team lead — and that person doesn’t usuallyhave experience in running that process. We’ve realised that good onboardingdoesn’t happen by accident or out of the box. My mistake was to assume thatpeople would automatically figure out how to onboard new joiners. People aretoo busy, and they assume that new joiners will just figure it out— perhaps via osmosis! Our new Head of People will take responsibility forbuilding the onboarding process.
One of thethings I’m seeing is that people give their discretionary energy to companieswith strong cultures.
We’re seeingthat too — we get great ideas and initiatives from our people and theseoften result from energy expended outside of the work environment. There’s alot of freedom to experiment and innovate at Makers Academy, whether it’s doneat home or at work, and our people live and breathe the culture and mission,which is why we’re trying hard to ensure that they align at the level ofpurpose when new people join.
There is ashadow side to this though. It’s very easy to build a culture where thisbehaviour leads to constant overwork and people being in permanent overdrive.It’s not that easy to maintain the balance between being excited about whatwe’re doing and also working at a sustainable pace, month after month and yearafter year. Mentally checking out at 6pm on the dot isn’t great, but at thesame time if you’re always thinking about work and can’t maintain a healthylifestyle, that’s definitely not good for anyone
In our cultureit’s easier for most people to push themselves harder than we push them becausewe’ve created a highly self-motivated culture in which it’s normal to keeppushing yourself all the time. At times this is appropriate, but at other timesit’s really inappropriate. If you’re on a team and your team leader isconstantly tired and sick because of how hard they’ve been pushing themselves,they’re not a good role model. You want to come to work and know that you’rehitting your goals and moving in the right direction at a steady sustainable pace.That’s hard to achieve in an environment like ours and it is something I amthinking about a lot.
What hassurprised you about the process of building this business?
My owninexperience. It surprised me how much harder it turned out to be than Ithought it would be. It probably speaks volumes about how inexperienced Iactually was because I’d assumed that good intentions got you two-thirds of theway there. I’ve learned that while good intentions are a first step, you need ahell of a lot of experience, execution and effort. Building a culture and workenvironment is difficult, never-ending work. It never stops.
What’s thebiggest mistake you’ve made when it comes to culture?
I think thebiggest mistake I made was assuming I knew more than I actually did. That ledto me not learning more about culture, how it works and not learning from moreexperienced people and I therefore made a lot of mistakes that could have beenavoided. So, arrogance on my part was one of my biggest mistakes… and I hopeI’ve been addressing it!
Is there anything else youwould like to add?
Yes, the onething I’ll add is that everything I’ve spoken about is open to change. We’renot fanatically committed to any of this. Our job is to build a successfulcompany and a productive working environment. If some practices help, we’ll dothem. If some of them don’t, we’ll stop doing them. For example withself-setting salaries, we’ve been doing it for over two years but it’s also notan integral part of who we are. We won’t continue to do it for 50 years justbecause we do it now. We may get together and decide to change it. Nothing’sset in stone.
Learn more aboutMakers Academy at their website: http://www.makersacademy.com/.
You can alsoread more about how people self-set their salaries here: https://blog.makersacademy.com/how-to-self-set-your-salary-6f4819361335