What I learned from letting my team set their own salaries
We set out to build a company based on trust, and not fear. One of our key policies was expecting everyone to set their own salary.
In this issue:
Essay on what I learned building a company on trust, not fear
An exceptional senior AI technologist profile: Simon is available for work
Peer group of CEOs in transition: one space left, starting next week
Guided breathwork: have you tried it?
For several years, when I was the CEO, every permanent employee at Makers was responsible for setting their own salary. We introduced the policy when we were about 15 people and rolled it back when the team was about 50.
We learned plenty of lessons, but not the lessons everyone expects when they hear about our approach. Surely everyone would abuse the system and pay themselves way too much? That’s not what happened. The real lessons we learned were far more interesting.
First, let me explain how we arrived at this idea. We started with the assumption that at the core of building a good business lies a team that trusts each other, inspired by Frederick Laloux’s book Reinventing Organisations. I wrote on the company blog in 2015:
Almost all companies are built on fear, not trust. It’s so common, we don’t even notice it. Quite the contrary, when we see companies built on trust, and not fear, they seem highly unusual — that can’t possibly work, right?
Most practices we see in modern companies stem from fear. Why do decision-making hierarchies exist? Because of fear. Fear that those in non-executive roles won’t or can’t make good decisions. Why does most of the legal language of any employment contract focus on what happens if things go wrong? Because we fear that employees will leak trade secrets, defect to a competitor, slack off at work, and poach ex-colleagues. Why limit holidays to a certain number of days a year? Because of fear that someone (and then, gosh, everyone!) will abuse the system and take an extra week. Why not allow employees to set their own salaries? Because of fear that everyone will abuse the system and rob the company.
We saw trust as the core principle behind building a business that would not only be commercially successful (there are plenty of companies built on fear that make decent profits), but be a good place to work at and a genuine force for good in the world:
Trust is one of the key reasons early stage startups can be so incredibly efficient, disrupting powerful incumbents. The founders and early employees trust each other to do their best. Everyone is aligned around the same goal. Everyone is trusted to make decisions in the best interest of the startup. Everyone has access to the information they need. In fact, one of the biggest reasons startups fail (other than not building something people want) is co-founder conflicts, almost always resulting from a break-down of trust.
A trust-based environment attracts top players. Instinctively, nobody wants to work for a company that doesn’t trust you to do whatever you think is best — but most have to. We are motivated by autonomy, mastery and purpose; trust is a prerequisite for autonomy.
Trust wasn’t the only pillar of our approach. We also went big on autonomy and transparency. We expected our team members to be free to choose what to work on, acting in the best interests of the business, assuming (not entirely incorrectly) that people closest to the customers have a better idea of what’s going on than the management.
To enable everyone to make good decisions, they needed to understand the context, so we went out of our way to be transparent not only with our financials, but our thinking, sharing as much as we could with the team.
As you won’t be surprised to learn, our holidays were unlimited, job specs were light and mostly written by people doing the job, many didn’t have job titles, managers were treated with suspicion and product direction was somewhat vague as we were trying to incorporate many different voices into one coherent narrative.
It took me years to realise that running the company as I did was a great way to avoid facing my own issues.
Facing my own demons
A business is always a reflection of its leaders. It’s a reflection of their light sides — their vision, their ethics, their values, — but also a reflection of their shadow sides. As far as I can tell, both as a founder myself and as a founder coach working with other CEOs, every dysfunction in the business can be traced to some unfinished psychological work at the top.
One thing I wasn’t aware of in myself at the time was how uncomfortable conflict made me feel. Instead of recognising this and learning how to engage in a mindful, respectful and productive conflict, which is necessary for building a healthy team, I started creating policies that would help me avoid conflicts. Hate employees asking for a raise? Let them set their own salaries. Hate fighting for your vision of the product direction? Trust people to do what they think is right instead.
It was also a way for me to seek approval. While some people thought I was crazy, there were plenty of others who saw what I was doing as a genuinely fresh take on management, helping me feel better about my “visionary” approach. I felt like I was in a good company of startups like Buffer that championed transparency or Zappos that implemented self-management:
In most companies, new ideas have to be approved by a manager or a chain of managers. As a company that uses a self-managed organizational structure, we encourage Zapponians to identify areas of opportunity within the organization and propose solutions. At its core, self-management means knowing exactly what you are responsible for and having the freedom to meet those expectations however you think is best.
However, the biggest blind spot that I didn’t see at the time was my own discomfort with power. For reasons that go deep into my childhood and might be a subject of another essay in the future, I internalised the belief that having power over others is inherently bad. Of course, I wouldn’t phrase it this way, but that’s how a part of me felt deep inside: “power = bad”. Our psyche is both infinitely sophisticated and can be incredibly simplistic at times.
Any leader must be comfortable stepping into their own power. One common mistake is to take it for granted and abuse it, with examples of power-hungry leaders too many to count. However, another mistake can be destructive too: not accepting the power and abdicating from our responsibilities. When I look back at the early years at Makers, I see an organisation that was built to work around my unprocessed psychological stuff.
Jerry Colonna, an executive coach, illustrated this beautifully in his book Reboot: Leadership and the Art of Growing Up with a story of a CEO who attended one of his CEO bootcamps (on a side note, my own experience of attending two of Jerry’s CEO bootcamps was so great I still can’t stop recommending them nearly a decade later):
We sit safely in a circle. I read a poem. Tears are flowing in the small circle as they come to what will be the first of many recognitions: They are not alone. They are not alone in their fear, in their shame, in feeling unmoored and lost. We are here for radical self-inquiry, I tell them, because that is the path of authenticity and that path leads to resiliency.
“What the fuck are we doing listening to a poem,” one camper yells, his faced twisting in anger. “I didn’t come here to listen to goddamn poetry. I came here to be a better CEO. I have a greedy son-of-a-bitch head of sales and he’s driving everyone crazy and I don’t know what to do about him. That’s why I’m here.”
I’ve seen this resistance before; I stay steady. “I’ll make a deal with you,” I say, “If you stay through the weekend and if, at the end of the weekend, you don’t know what to do with him, I’ll give you your money back.”
He calms down. Two days later we’re deep into it. I’ve asked everyone to look at their own lives, to look at the companies they’ve created, the conditions they say they don’t want. I turn to the camper with the greedy head of sales. I shock him, “Tell me about the shame.”
He looks up, his eyes marked by the pain of a hard, hard life.
“I was a teenager when I ran away,” he says, tears streaming. “I started drinking then. I ended up living under an overpass.”
“Tell me about the night and the promise you made to yourself,” I prompt.
He’s startled. His eyes ask, “How did you know?”
He says out loud, “It was raining, and I was cold . . .”
He goes on to explain that he’d sworn that he was never going to be cold or hungry or alone again. I nod in recognition. I see him as he sees himself more fully.
“Who hired the sales guy?”
He looks around sheepishly. “I did.”
“And who promoted him?”
“Me,” says the camper.
“There is nothing to be ashamed of,” I tell him. “The problem isn’t his greed. He’s just doing what you hired him to do. You outsourced your need to never be cold and hungry again to someone more acceptable. And he’s doing a great job at that.”
“What if you took back your greed,” I ask him, “and instead see it for what it truly is: a desire to be safe, warm, and happy?”
Take back the wish, take back the promise you made to yourself, leave aside the shame and own the fear not as something to deny but as something that fuels you.
He brightens. I continue: “Let’s expand that view now. Let’s go beyond making sure that you and your family are never hungry again. Let’s see the ways you and your company have made it possible for your employees and their families to not be hungry. To feel safe, warm, and happy.”
His body unfolds, and we all bear witness to his taking his seat not merely as a CEO but as a man, capable of providing for the boy under the overpass.
Radical self-inquiry is how we learn to become more of ourselves, more like ourselves, more authentic. More human.
And better humans are better leaders.
Colonna, Jerry. Reboot (pp. 31-33). HarperCollins. Kindle Edition.
You see, whenever there’s something that drives us crazy as CEOs, be it a discomfort of negotiating salaries with the employees or a “greedy son-of-a-bitch head of sales”, there’s a link to something in the leader’s psyche that needs to be seen, felt, understood and brought into the light of conscious awareness.
When a leader doesn’t see their own shadow, it shows up as a dysfunctional company.
The resulting dysfunction
The way it manifested in the early years of Makers was in lack of alignment. By going so hard on autonomy, we removed management structures and processes that are meant to bring the team into alignment. It’s crucial to keep the team aligned to it to make good progress.
We also underestimated how much people can benefit from good support from experienced managers, especially when they’re just starting their careers. We grow and perform best when we are supported, not left on our own.
At the time, we jokingly described Makers as a cult, but there was a grain of truth of it. People often said they loved working at Makers, and yet our staff turnover was higher than it should have been. Why? By maximising autonomy we implicitly made everyone responsible for fixing all the way in which the company wasn’t perfect, which was beyond the capabilities of any individual. To put it simply, people felt that the fact they had a problem was their fault because, on paper, they had the autonomy to fix anything.
We also had difficulty attracting diverse or senior talent, who were less inspired by experiments with management and more alarmed by lack of sound (and boring) management practices.
And, speaking of salaries that the team was setting themselves, it worked in a sense that our payroll was, by and large, reasonable. However, the process of deciding what to pay yourself by looking at the market, reevaluating your own performance, discussing it with your colleagues and putting it all in writing was simply too laboursome for most people who are not into non-traditional management practices.
What is worse, our approach, being decentralised, was guaranteed to result in different people paying themselves different salaries for the same roles. It shouldn’t come as a surprise that men paid themselves, on average, slightly more than women, for example.
Being unable to address this problem without “taking back control” and recognising the difficulty of managing the self-led system ultimately prompted us to revert back to a traditional salary setting process.
However, one of the biggest dysfunctions was that at the time we lost the focus on the customer. One of the earliest hires on the team (who’s still with Makers, so he really saw it all) once remarked that the company could be selling tyres: it existed not to serve our customers, but to prove that our approach to management could work. Hard as it was for me to hear, I couldn’t deny that it was true.
A step towards being a better leader
It was a wake up call for me as the CEO. At some point I had to look in the mirror and ask myself: am I trying to build a good company or am I trying to prove that self-management could work?
As uncomfortable as that question was, the right answer was obvious, at which point I started to run the business differently. It’s not that trust isn’t important in teamwork, it absolutely is, but it doesn’t need to come at the expense of alignment and support. Management structures and processes exist in order to enable a large group of people with different skills, seniority, goals, and levels of commitment work productively and happily together.
Maybe my biggest lesson was learning more about myself, my reluctance to engage in conflict, my discomfort with power, my desire for approval from others. When we serve as leaders, we grow not only professionally, but also personally, as long as we are willing to look in the mirror and ask how our own psychology is reflected in what we say we don’t want to see in our organisations.
One of the most important tools I learned from Jerry Colonna at his CEO Bootcamp is the question “How am I complicit in creating the conditions I say I don’t want?” We’re nearly always complicit. Not necessarily guilty, not even necessarily responsible, but there’s usually a way in which we contribute to what we say we don’t want. Seeing it is the step towards becoming a better human.
And, as Jerry says, better humans are better leaders.
Simon is exceptional
Simon was my co-founder at a different company many years ago. I did my MSc thesis at Imperial under his supervision. I know him very well. He's an amazing technologist.
Since then he started a business and sold it to Google. Did patented work that is now inside Alexa. Co-founded a fully programmatic hedge fund for crypto and built its tech. He built systems for Google to identify bots on their ad platforms. He's a rare person who understands startups and can build complex tech systems working at Google's scale.
And he's a wonderful human being with good ethics and sound values.
He's looking for an amazing organisation to join: a late stage startup with genuinely interesting data problems to solve at scale. In his own words:
Simon is a full-stack AI engineer, ex-Google, with a PhD from Imperial.
Simon generates business-critical insights by building, operating and applying complex data pipelines. At Google, he built classifiers to identify fraud; he improved search ranking for service-area businesses; and he established service reliability metrics for Google Cloud Platform. Recently at Programmable Ventures, he built systems to measure, classify and predict the real-world impact of crypto protocols. At human.ai, he researched and prototyped protocols for privacy-aware genome analysis. As Chief Scientist of spider.io (acquired by Google), he built web-scale reverse-Turing tests (where machines seek to identify human browsers of the web). At True Knowledge (now Amazon Alexa), he developed patented NLP technology.
Simon is looking to join the engineering leadership team of a 100+-person organisation that is looking to scale a data-heavy product. His ideal role would have three parts. It would involve providing technical direction, with expectations that this direction be pragmatic, clear, and empathetic. It would involve getting hands dirty—to provide coding leadership by example. It would involve providing guidance on engineering processes to increase velocity and reduce risk.
Drop me a line on evgeny@evgeny.coach for an intro. He'll be an incredible hire for the right organisation.
Startup CEOs in transition peer group
Nearly every startup CEO thinks about stepping down at some point. Yet, almost everyone faces these two questions in solitude, because admitting that you're considering leaving your business is still taboo:
How can I decide to step down?
How do I prepare the transition?
Next week I’m starting a peer group of startup CEOs where we'll explore these questions together, and there’s one space left.
This is for you if you are:
A startup CEO trying to decide whether to step down
A startup CEO preparing the transition to a new CEO
Here's how it works:
Meeting bi-weekly for 90 minutes
No advice giving, only sharing experience to see how others are navigating questions that torment us
Strict confidentiality expectations
No more than 5 founders and me as a coach and facilitator
Monthly fee invoiced discreetly (so that your finance team doesn't know you might be considering stepping down)
If you are interested in joining, drop me a line on evgeny@evgeny.coach. And if you know someone who might need this, forward them this essay, they'll say thank you.
Have you tried breathwork?
Most of us are familiar with the impact that breath can have on our mental state. Something as simple as box breathing (four seconds in, four seconds hold, four seconds out, four seconds hold) can calm us down in a matter of minutes. Likewise, taking out-breaths longer than in-breaths can take us out of fight-or-flight response.
For this reason, breathwork is a big part of Level 2 Aletheia coaching training, in which I’m currently enrolled.
However, I recently came across Othership breathwork app thanks to Jonny Miller and it blew me away.
Othership offer guided breathing tracks set to music prepared for a variety of situations: to wake up or go to sleep, to calm down after stress or wind down after exercise.
Unlike meditation, of which I’m a huge fan, you feel the effects of breathwork immediately after a short session.
Get 3 months off on either iPhone or Android with a code CURIOUS, which I picked up on Jonny Miller’s great newsletter Curious Humans.
Trust is very important in a startup and you took it to a new Level with the approach of letting employees set their own salaries. Your perspective on leadership is inspiring and really loved your way of thinking Evgeny