Posted Thursday 19th September 2019
Imagine handing over control of your company to your employees. No hierarchy, no managers, an open forum for ideas and strategy, and most significantly, workers who set their own pay and benefits.
If you’re choking on your espresso at the thought, brought to you by the office junior who would love the chance to award himself a pay rise, then listen up.
Self-managed organisations, and self-determined pay in particular, is the new ‘cool’ among innovative young companies, typically in the tech sector (where else?), who are seeking top talent, increased employee engagement and resulting productivity growth.
Makers Academy, Pod Group, GrantTree and Smarkets are among the UK companies that have already taken this leap of faith and handed power to employees, be it hiring and firing, deciding holiday entitlement, contributing to company direction or setting pay.
Remarkably, they report only a modest rise in salary costs and significantly enhanced job satisfaction – no mean feat among today’s millennials.
Pay self-assessment, in particular, is at the heart of self-managed organisations. Supporters argue that it promotes a culture of openness and transparency, pertinent in this era of gender pay gaps and CEO pay reporting. Plus, it removes the adversarial nature of traditional salary negotiations, encourages entrepreneurship, builds trust among employees, increases engagement and staff retention, and enables a firm to shine when recruiting.
And it’s a far more grown-up carrot than skateboards or basketball hoops in the office.
According to the latest Working Lives Report 2019 compiled by the Chartered Institute of Personnel and Development (CIPD), less than half of workers in the UK consider themselves to be paid appropriately, given their responsibilities and achievements.
But how does pay self-assessment work in practice? Typically, an employee will research pay levels of similar roles in both the open market and within the company, and set out what they have achieved at work to justify a salary increase.
In many organisations, they must then seek feedback on their performance and their wage proposal from colleagues. This is key: it prevents employees from under-selling themselves, a real danger for those with lower self-esteem and less bluster; it also keeps pay requests realistic and grounded.
Another essential element is sharing company financial data with staff (have you choked again?), and more importantly, educating them in understanding it, so that employees have a true sense of their worth to your business.
Of course, employee autonomy isn’t a new concept. Brazilian Ricardo Semler famously transformed the fortunes of his company Semco in the 1980s by implementing his own self-management system, including self-determined pay.
In 2014, US online retailer Zappos introduced the holacracy method of decentralised decision making (named after its creators, US firm HolacracyOne), to mixed reviews, but it continues to utilise it today.
Critics of the system argue that such strategy is simply not sustainable long term, and that it only fits with smaller businesses undergoing rapid growth, with tight-knit employee pools. In addition, there will always be employees who simply don’t want the responsibility that self-management brings, or indeed, have the skills for such decision making.
But if you’re looking to foster a culture of collaboration and staff engagement, and attract the best talent to your business, it may be worth further thought. Just ensure that you remain loyal to that office junior as under a self- management system – he may be asked to comment on your next request for a pay rise.
This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.