004: The future of compensation is flexible (Part 2)
I'm not talking about "working from the beach".
Okay, here is my ultra-stripped-back take on employment:
As individuals, we invest time in building skills that the market values. Then, our compensation is a reflection of how we choose to sell those skills.
For all the reasons and more that I covered in last week’s newsletter - Part 1: The future of compensation is flexible - people are shifting from selling their skills and time through traditional employment to building a portfolio of work as independent contractors.
Continuing to Unlock Talent Pools
Similar to how pandemic-turned-remote companies experienced a sudden and vast widening in their talent pools, companies that embrace a fluid team and way of working (hire people part-time, to job share, as contractors, as fractional team members, etc.) will unlock another, often highly skilled, talent pool.
Here’s an example of what this looks like in a job description from XWP:
We’re moving toward a future of salary ranges in every job description. So far the conversation has largely focused on one piece of compensation - base salary. But, by listing ranges of traditional W2 Employees (in the U.S.) - we’re reinforcing out-of-date employment structures and missing out on an opportunity to design more inclusive systems that aren’t the same ol’ one-size-fits-all.
I believe the future of employment is flexible which necessitates flexible compensation.
Where to Start?: Map Total Compensation
Here’s a quick exercise to map out your current Total Compensation Matrix:
1. Copy this compensation matrix and customize it: List out the elements of your total compensation that map back to individual growth in the short / long term and company growth in the short / long term + add the fixed elements of total compensation.
Here’s an example of a filled-in matrix:
2. Write down why: Once you've listed out and mapped each piece of total compensation, ask why you offer that type of compensation (i.e. why do we offer our team members profit-sharing bonuses?).
⭐️ By completing this exercise you have just answered key questions about your compensation strategy:
How do we align business objectives with individual performance and skill development?
How can we balance our compensation to motivate employees in both the short term and long term?
How will we talk about our Total Compensation Matrix in our Compensation Philosophy?
Give people flexibility over how their Total Compensation is structured
Imagine you made an offer where the Total Compensation was $190,000 but the person had three scenarios to choose from.
Scenario A: Lower base salary / Higher equity
Scenario B: Mid-base salary / Mid-equity
Scenario C: All base salary (i.e. 1099 contractor in the U.S.)
This adds an element of complexity to forecasting but by providing ranges to scale from, you can put bounds on the base salary / equity selection. This is just one example of a flexible offer, another version might be a Total Compensation of $190,000 where someone can scale between 20-30 hours/week.
This isn’t a new practice, people in leadership positions often have flexibility in what their total compensation looks like and negotiate before joining any team. They choose what they are motivated by and how their compensation aligns with their current stage in life.
To me, that last part is the most important to expand on: choosing how compensation aligns with their current stage in life.
Base salary transparency will help us reduce gaps in base salaries. But the gaps are even more shocking when you start looking at equity grants.
I think we should expand transparency to all pieces of total compensation so people fully understand each lever and can select the elements of total compensation that matter most to them.
Pay Transparency in NYC
I can’t end this post without addressing pay transparency going into effect in NYC yesterday. I may or may not have spent a good chunk of my morning refreshing job postings listed in NYC.
I'm curious to see how companies approach this over the next few weeks and months. I know how much work goes into being able to provide meaningful salary ranges in job descriptions.
Props to companies who have prioritized including salary ranges in their job description before and by November 1.
I have a few tips based on what I'm seeing so far. 👇
Bonus tip: Don’t do this! 👇 That is in no one’s good faith. 🙅♀️
Up next: Next week I’ll share my interview with Lance, Director of Talent Acquisition at XWP. XWP has had a salary transparency practice for about 3 years now so he's had time to learn how to navigate it, particularly how it can positively impact talent acquisition.