Compensation as a Reflection of Values
4 March 2021
Compensation: the word alone is enough to trigger a fight-or-flight reaction in many. But we in technology have the good fortune of being in a well-compensated domain, so why does this issue induce such anxiety when our basic needs are clearly covered? If it needs to be said, it's because compensation isn't merely about the currency we redeem in exchange for our labors, but rather it is a proxy for how we are valued in a larger organization. This, in turn, brings us to our largest possible questions for ourselves, around things like meaning and self-worth.
So when we started Oxide – as in any new endeavor – compensation was an issue we had to deal with directly. First, there was the thorny issue of how we founders would compensate ourselves. Then, of course, came the team we wished to hire: hybrid local and remote, largely experienced to start (on account of Oxide's outrageously ambitious mission), and coming from a diverse set of backgrounds and experiences. How would we pay people in different geographies? How could we responsibly recruit experienced folks, many of whom have families and other financial obligations that can't be addressed with stock options? How could we avoid bringing people's compensation history – often a reflection of race, gender, class, and other factors rather than capability – with them?
We decided to do something outlandishly simple: take the salary that Steve, Jess, and I were going to pay ourselves, and pay that to everyone. The three of us live in the San Francisco Bay Area, and Steve and I each have three kids; we knew that the dollar figure that would allow us to live without financial distress – which we put at $175,000 a year – would be at least universally adequate for the team we wanted to build. And we mean everyone literally: as of this writing we have 23 employees, and that's what we all make.
Now, because compensation is the hottest of all hot buttons, it can be fairly expected that many people will have a reaction to this. Assuming you've made it to this sentence it means you are not already lighting us up in your local comments section (thank you!), and I want to promise in return that we know some likely objections, and we'll address those. But before we do, we want to talk about the benefits of transparent uniform compensation, because they are, in a word, profound.
Broadly, our compensation model embodies our mission, principles, and values. First and foremost, we believe that our compensation model reflects our principles of honesty, integrity, and decency. To flip it around: sadly, we have seen extant comp structures in the industry become breeding grounds for dishonesty, deceit, and indecency. Beyond our principles, our comp model is a tangible expression of several of our values in particular:
- It has set the tone with respect to teamwork. In my experience, the need to "quantify" one's performance in exchange for justifying changes to individual compensation are at the root of much of what's wrong in the tech industry. Instead of incentivizing people to achieve together as a team, they are incentivized to advance themselves – usually with sophisticated-sounding jargon like OKRs or MBOs, or perhaps reasonable-sounding (but ultimately misguided) mantras like "measure everything." Even at their very best, these individual incentives represent a drag on a team, as their infrequent calibration can prevent a team from a necessary change in its direction. And at worst, they leave individuals perversely incentivized and operating in direct opposition to the team's best interest. When comp is taken out of the picture, everyone can just focus on what we need to focus on: getting this outlandish thing built, and loving and serving the customers who are taking a chance on it.
- It is an expression of our empathy. Our approach to compensation reflects our belief in treating other people the way that we ourselves want to be treated. There are several different dimensions for this, but one is particularly visceral: because we have not talked about this publicly, candidates who have applied to Oxide have done so assuming that we have a traditional comp model, and have braced themselves for the combat of a salary negotiation. But we have spoken about it relatively upfront with candidates (before they talk to the team, for example), and (as the one who has often had this discussion) the relief is often palpable. As one recent candidate phrased it to me: "if I had known about this earlier, I wouldn't have wasted time stressing out about it!"
- It is (obviously?) proof-positive of our transparency. Transparency is essential for building trust, itself one of the most important elements of doing something bold together. One of the interesting pieces of advice we got early on from someone who has had outsized, repeated success: modulo private personnel meetings, make sure that every meeting is open to everyone. For those accustomed to more opaque environments, our level of transparency can be refreshing: for example, new Oxide employees have been pleasantly surprised that we always go through our board decks with everyone – but we can't imagine doing it any other way. Transparent compensation takes this to an unusual (but not unprecedented) extreme, and we have found it to underscore how seriously we take transparency in general.
- It has allowed whole new levels of candor. When everyone can talk about their salary, other things become easier to discuss directly. This candor is in all directions; without comp to worry about, we can all be candid with respect to our own struggles – which in turn allows us to address them directly. And we can be candid too when giving public positive feedback; we don't need to be afraid that by calling attention to someone's progress, someone else will feel shorted.
These are (some of!) the overwhelming positives; what about those objections?
- Some will say that this salary is too low. While cash compensation gets exaggerated all of the time, it's unquestionable that salaries in our privileged domain have gotten much higher than our $175,000 (and indeed, many at Oxide have taken a cut in pay to work here). But it's also true that $175,000 per year puts us each in the top 5% of US individual earners – and it certainly puts a roof over our families' heads and food in their bellies. Put more viscerally: this is enough to not fret when your kids toss the organic raspberries into the shopping cart – or when they devour them before you've managed to get the grocery bags out of the car! And speaking of those families: nothing is more anxiety-producing than having a healthcare issue compounded by financial distress due to inadequate insurance; Oxide not only offers the best healthcare plans we could find, but we also pay 100% of monthly premiums – a significant benefit for those with dependents.
- Some will say that we should be paying people differently based on different geographical locations. I know there are thoughtful people who pay folks differently based on their zip code, but (respectfully), we disagree with this approach. Companies spin this by explaining they are merely paying people based on their cost of living, but this is absurd: do we increase someone's salary when their spouse loses their job or when their kid goes to college? Do we slash it when they inherit money from their deceased parent or move in with someone? The answer to all of these is no, of course not: we pay people based on their work, not their costs. The truth is that companies pay people less in other geographies for a simple reason: because they can. We at Oxide just don't agree with this; we pay people the same regardless of where they pick up their mail.
- Some will say that this doesn't scale. This is, at some level, surely correct: it's hard to envision a multi-thousand employee Oxide where everyone makes the same salary – but it has also been (rightly) said that startups should do things that don't scale. And while it seems true that the uniformity won't necessarily scale, we believe that the values behind it very much will!
- Some will say that this makes us unlikely to hire folks just starting out in their career. There is truth to this too, but the nature of our problem at Oxide (namely, technically very broad and very deep), the size of our team (very small), and the stage of our company (still pretty early!) already means that engineers at the earliest stages of their career are unlikely to be a fit for us right now. That said, we don't think this is impossible; and if we felt that we had someone much earlier in their career who was a fit – that is, if we saw them contributing to the company as much as anyone else – why wouldn't we reflect that by paying them the same as everyone else?
- Some will say that this narrows the kind of roles that we can hire for. In particular, different roles can have very different comp models (sales often has a significant commission component in exchange for a lower base, for example). There is truth to this too – but for the moment we're going to put this in the "but-this-can't-scale" bucket.
- Some will say that this doesn't offer a career ladder. Uniform compensation causes us to ask some deeper questions: namely, what is a career ladder, anyway? To me, the true objective for all of us should be to always be taking on new challenges – to be unafraid to learn and develop. I have found traditional ladders to not serve these ends particularly well, because they focus us on competition rather than collaboration. By eliminating the rung of compensation, we can put the focus on career development where it belongs: on supporting one another in our self-improvement, and working together to do things that are beyond any one of us.
- Some will say that we should be talking about equity, not cash compensation. While it's true that startup equity is important, it's also true that startup equity doesn't pay the orthodontist's bill or get the basement repainted. We believe that every employee should have equity to give them a stake in the company's future (and that an outsized return for investors should also be an outsized return for employees), but we also believe that the presence of equity can't be used as an excuse for unsustainably low cash compensation. As for how equity is determined, it really deserves its own in-depth treatment, but in short, equity compensates for risk – and in a startup, risk reduces over time: the first employee takes much more risk than the hundredth.
Of these objections, several are of the ilk that this cannot endure at arbitrary scale. This may be true – our compensation may well not be uniform in perpetuity – but we believe wholeheartedly that our values will endure. So if and when the uniformity of our compensation needs to change, we fully expect that it will remain transparent – and that we as a team will discuss it candidly and empathetically. In this regard, we take inspiration from companies that have pioneered transparent compensation. It is very interesting to, for example, look at how Buffer's compensation has changed over the years. Their approach is different from ours in the specifics, but they are a kindred spirit with respect to underlying values – and their success with transparent compensation gives us confidence that, whatever changes must come with time, we will be able to accommodate them without sacrificing what is important to us!
Finally, a modest correction. The $175,000 isn't quite true – or at least not anymore. I had forgotten that when we did our initial planning, we had budgeted modest comp increases after the first year, so it turns out, we all got a raise to $180,250 in December! I didn't know it was coming (and nor did anyone else); Steve just announced it in the All Hands: no three-hundred-and-sixty degree reviews, no stack ranking, no OKRs, no skip-levels, no numerical grades – just a few more organic raspberries in everyone's shopping basket. Never has a change in compensation felt so universally positive!