
Never Make Counter-Offers - floetic
http://bramcohen.com/2011/12/04/never-make-counter-offers
======
jeffbarr
And then there's another post waiting to be written -- "Never Accept Counter
Offers."

I didn't heed this advice, and took a counter offer (doubling my salary at the
time). This seemed like a good deal.

What did I turn down? 10,000 shares of Microsoft stock. In 1983.

Oops...

~~~
bkrausz
For those curious, 1 share of MSFT in 1983 is ~= 288 shares today due to
splitting, making this stock worth $87MM.

Sorry Jeff, don't mean to rub it in. Just had to do some Googling (ironic, I
know) and figured I'd save others the time.

~~~
InclinedPlane
2,880,000 shares would be worth $87 million today. However, since 2003 (after
the last stock split) MSFT stock has had dividends. In total those dividends
have come to $6.75 per share, adding an additional $19.44 million for a grand
total of $106.44 million.

~~~
philwelch
And if you sold your MSFT stock at its peak and invested all that money in
Apple stock instead, you would be one rich motherfucker.

~~~
masklinn
You'd be worth a billion or two yeah (I'm not sure if the google and yahoo
finance charts are split-adjusted, I'll assume they are in which case, since
MSFT's peak corresponded to an AAPL high tide ($25 in December 1999, up from
$4 in January 1998 and would fall to $7.5 by December 2000) and the ratio was
~2:1 (both stocks have split 2:1 since so that does not need to be taken in
account) he'd own 5.76 million AAPL shares worth... $2.6bn (at the current
$459 price))

------
ary
This is counter-intuitive from a business standpoint. Managers behave this way
because they've learned through experience that:

1) Most of the worst employees hang on for dear life to their jobs and don't
dare risk losing them for any reason (asking for a raise, etc). Incompetence
or sub-par job performance not withstanding.

2) Occasionally employees get a fire lit under them by a spouse, mid-life
crisis, etc and attempt to obtain a raise. Doing so communicates that the
employee wants to stay at the company, and that they can be low-balled.

3) The best employees have mobility in the job space and can get better
offers. This is why quitting is the only reliable way to get a raise (counter-
offer). The employee has clearly shown market value above their current
position, and the psychological effect of social proof kicks in.

There are of course exceptions, but even a moderate amount of time in a large
company shows this to be generally true. Managers are incentivized to keep
personnel costs down, and only give in if their hand is forced. It's just
human nature at work.

~~~
palish
Am I insane for being completely satisfied with $80,000/yr to do really cool
multithreaded programming work on some seriously beefy hardware? (Midwest
area.)

I wouldn't ask for a raise for the simple reason that I'm totally satisfied
with my number. So I'm just trying to figure out which of the following is
true: I am overpaid, I am stupid for being content and happy, or people just
tend to be greedy.

~~~
mishmash
>Am I insane for being completely satisfied with $80,000/yr to do really cool
multithreaded programming work on some seriously beefy hardware? (Midwest
area.)

In 10 years of midwest experience, $80k is probably a bit on the low side for
systems-level work. Just a few years ago I would see DreamWeaver jockeys pick
up full time for ~$50k/year. One hire did NOT know the difference between
HTML and an HTTP server, someone else called me into a _training_ session she
was hosting and asked why her form wouldn't work. She had set the form's
action param to email:

    
    
      <form action="mailto:example@domain.com">
    

Sadly I'm not kidding. :(

On the high-side, I've seen C/C++ contractors charge $100-$250/hour, depending
wildly on the individual consultants.

So I don't think you're crazy for being happy. And great working conditions
can have an often immeasurable impact on life. Happiness, is, after all, the
end game - and a guaranteed $80k/year might be worth more than an unknown
$120k/year for some people.

~~~
kragen
Mailto actions were widely supported in early (pre-Netscape!) browsers,
weren't they?

~~~
mishmash
Cool, I didn't know that (started late 90s here) but that wasn't what this
person attempting to do. Apparently she had asked for the source from another
dev's script and saw something like:

    
    
      action="process.php"
    

And just thought This Should Work™ too and put the mailto: into the form. When
it happened, in front of 50 other people, I just stared at her for a moment
and said it was complex and we could look at it later. Not really much else
you can do in those situations.

~~~
Drbble
<http://www.google.com/search?q=mailto+form+action>

------
jrockway
This is a great article. It describes exactly how salary negotiation works in
the US, and now when someone asks, I won't have to write it all out myself.

Ironically, I only realized the way things worked at my last job. I wanted to
get paid more, but didn't really know how. Then a few companies contacted me
out of the blue; I interviewed at each and was offered a job at each. They all
involved moving, which I didn't really want to do, but I kept that to myself.
I then asked my current employer to match the highest offer, which they agreed
to do. Then I showed them the offer letter, and they didn't believe that my
other offers were so high, and tried to negotiate me back down to my current
salary. I put in my two weeks noticed and my managers looked extremely
surprised. Apparently nobody had ever actually followed through on their
threat to quit; everyone had used "I have another offer" as a way to get an
easy raise (but never as much as the mythical offer).

Anyway, my current employer is More Enlightened and I don't think I will have
to play this game for a long time. Which is nice, because you never actually
win...

~~~
Drbble
Interesting, because many posts here accuse your current employer of being an
aggressive screwed negotiater, with full time compensation specialists.

Posts by former or non-employees, so, perhaps biased.

~~~
jrockway
People are mad that Some Random Hedge Fund will pay them more than Google and
that Google won't match it. This is upsetting because now they have to choose
between a shitty job that pays a ton and a great job that merely only pays a
lot, when they want a great job that pays a ton.

Honestly, nobody's ever offered me more money than Google, so I have no reason
to complain.

------
brudgers
There are organizations where it takes the threat of quitting to get one's
salary, job duties, etc. reassessed. There is a lot of poor implementations HR
processes out there - and poor implementation by managers, rather than company
policy, often underlies the situation.

Many managers no more want to have negotiations about pay and advancement,
than many employees do - there are two sides to the coin, many employees
prefer the excitement of an affair with another company than trying to work
out the existing relationship. The new company expresses their love; the old
ignores the employee.

In other words, the situation described is frequently a failure of
communication between supervisors and managers and their employees.

~~~
Drbble
The "affair" metaphor is perfect perfect. Interviewing is a socially
acceptable form of romantic dalliance.

------
wccrawford
At my previous job, I signed on with really low pay because I had little
professional experience, but tons of personal experience. They quickly
realized they were underpaying me and in a year, I was almost at what I was
worth, and at 3 years, I was there. Since this was my only real experience on
my resume, I felt this was a good response from them, and they valued me.

Then they refused to give me good raises the next 2 years. My skills were
increasing faster than ever, and I was the only guy who knew the entire system
inside and out. Everyone in the company came to me when there was a problem
because I knew how it all fit together. (I did not hoard this knowledge...
Others were disinterested in having it, or didn't stay long enough to matter.
I was unable to pass it on, and documented as much as I could at all times.)

So at 5 years, at my review, I asked for a raise. The answer was that if I
"really cared" I should go talk to my boss's boss. ... Seriously? After some
arguing, my boss eventually told me that they would be looking to correct
everyone's salaries within a year.

Faced with the knowledge that they intended to knowingly screw me for a year,
and then possibly continue afterwards, I started replying to the job offers
that had been coming in. I had previously been ignoring them.

Right away, I found a company that looked good, and signed on. For a 40% pay
hike. I had known I was underpaid, but didn't realize it was that much.

6 months later, the pay raises came in at the old job. A friend who was making
what I made (!) got a 20% increase. He managed to find get a job offer at the
same rate I was now making, and took it back to them. They refused to match
it.

And in case that wasn't insult enough, they put out a job ad for 7 new people
at the rate I was now making. The rate my friend tried to get them to pay.
Their existing, experienced, efficient works were worth less to them than
random people off the street.

I told my new boss about all this and he gave the same advice that a lot of
people here gave: Do not accept a counter offer. IF the company gives one,
they intend to replace you soon with someone who won't hold them hostage.
Because that's how they see it. You are demanding that they pay you more, or
you'll quit and leave them short of staff until they can find a replacement.
They can't take the chance that you'll do it a second time, so you're out of
there as soon as they can make it happen.

And he's right. I'd do the same thing in his position. All he needs to do to
avoid that problem is to pay me properly, and that's happening. It's so
simple.

~~~
charlieok
So...

-If you ask for a raise without an offer in hand, you have a weak bargaining position

-If you ask for a raise with an offer in hand, you are “holding them hostage”

What is an employee to do then? Simply expect fair raises to come
periodically, initiated by the employer, and quit if they don't?

~~~
joelrunyon
Treat your employer like an employee.

If they're underperforming and not living up to what you want from them, fire
them and find someone else who will.

I don't understand why employees are expected to just act helpless and be held
hostage because someone gave them a job. If you're good in your field
(especially in an area like tech), you should have no trouble finding other
jobs at your fair market value and keeping your employer honest.

~~~
orthecreedence
This is how I view just about any business relationship. They are not hiring
me, I am giving them something in exchange for them giving me something. If
the arrangement is not beneficial to either of us, it should be renegotiated.
I have no problem finding someone else to enter an arrangement with (including
contract work).

If I need something I don't go on my knees with my hand out. I understand that
in the current economy, the balance of power has shifted towards employers,
but it's times like these that the above attitude can make all the difference
(for the better).

I also take every job I do very seriously and never abuse the responsibility
I'm given. People appreciate those who can get the job done, a lot of which I
can attribute to my success. If you do have a cocky attitude, it helps to be
able to back it up ;).

------
MatthewPhillips
> Management figures as long as they always match what someone is offered
> elsewhere, the employee will always prefer to stay

Do some companies _really_ believe that? I can't speak for the world of
employees, but if I have to put in the work of finding another job because my
salary situation is stagnant, I am going to be very bitter with my current
employer and require a crazy large counter offer to consider staying.

~~~
mirkules
"Management figures as long as they always match what someone is offered
elsewhere, the employee will always prefer to stay"

This is not true (the original post, not yours). Typically, when an employee
submits their resignation letter, they are out of the company, literally or
figuratively.

If an employer makes you a counter-offer, never, _ever_ take it. First, you
already have a reason that you wanted to quit. It's usually not _just_ for the
money, but probably for other reasons (e.g. intellectual boredom). If you are
unhappy with your job, more money will just not help. As someone wise told me
once, "Money is not a motivator, but lack of money is a de-motivator."

Secondly, and more importantly, the reason the employer is making a counter-
offer is not to entice you to stay, but to buy enough time to find someone
else -- a _loyal_ and qualified someone else -- to replace you. Effectively,
they are making you the counter-offer so that they don't have to spend the
time and money looking for someone and training them, when they can have you
train them for six months (even with a slight-but-temporary increase in your
salary). You will be let go as soon as the employer feels that the new
employee has been trained adequately.

The moral is, once you submit the resignation letter, stick to your guns, and
don't be fooled by counter-offers.

[Edit: forgot to add, another reason they prefer you to stay is so that you
can finish your current project. This minimizes risks to your project, while
at the same time training your replacement. The employer would only keep you
until the current project is complete, and you will probably not get any new
ones.]

~~~
nandemo
> Secondly, and more importantly, the reason the employer is making a counter-
> offer is not to entice you to stay, but to buy enough time to find someone
> else -- a loyal and qualified someone else -- to replace you.

How does one decide that an outsider is "loyal"? More often than not the
company will be "poaching" the outsider from another company. Doesn't that
suggest that outsider is not loyal? And why the hell any company that does not
offer life employment would expect loyalty from employees?

~~~
Drbble
Bloggers, routinely overlook this wisdom. Also, your replacement is nowhere
near as competent as you at your job, if you have any unique responsibilities
(code you alone wrote). Current employees are far cheaper than new hours, if
productivity is taken into account (but often it isn't)

~~~
mirkules
I agree, that's exactly the point I was trying to make.

Btw, I think I fat-fingered and downvoted you, so I'll upvote another one of
your comments (sorry)

------
bravura
Ben Horowitz (of a16z) discusses just this very problem:

[http://bhorowitz.com/2010/08/23/how-to-minimize-politics-
in-...](http://bhorowitz.com/2010/08/23/how-to-minimize-politics-in-your-
company/)

I enjoy Ben's blog post because talks about a more general company problem
(politics), and gives guidance and process on how to avoid politics.

~~~
jazzdev
There's a lot of great insight in there, but he's talking about senior
executives, not technical contributors. From the article:

 _if you manage a junior employee and they ask you about their career
development, you can say what comes naturally and generally get away with it.
As we saw above, things change when you deal with highly ambitious, seasoned
professionals._

I've worked with Ben and I know that if a highly-valued technical contributor
turned in a resignation he would make a counter-offer to keep them.

------
EvanKelly
My first professional experience was working at a company where this seemed
like the norm. They had no well-defined plan for advancement or raises, and I
was constantly given the run-around when I would bring up the topic in
conversations with my manager or HR.

Those which consistently threatened to quit renegotiated by throwing other
employees under the bus, which led to a very tense work environment.

I wholeheartedly agree with the sentiment that retaining employees by
expecting them to renogiate for themselves is wrong headed, but I'm not sure
that "never make counter-offers" is a great philosophy. You paint yourself
into a corner by having this doctrine which doesn't allow you to have your
whole arsenal available when the moment arises in which you might want to make
a counter-offer to retain an employee.

------
wyclif
_Sooner or later the lower paid employees are either going to get the feeling
that all the necessary secrecy around salaries means they’re getting screwed
(because, um, they are) or find out that someone got a raise by quitting, and
go about doing it themselves._

A good axiom I've always gone with is that the amount of pressure and process
a given company has built into promoting secrecy about pay is inversely
proportional to my desire to work for them. If you're asked by management to
never discuss salary with your peers, you know they're screwing people.

~~~
fleitz
Management that engages in that frees up more money for others who want to
negotiate. Why should management give money to people who don't want it?

~~~
SatvikBeri
It's a productivity killer. If everyone knows that John is a better developer
than Bill, but Bill gets paid twice as much because he understands corporate
politics, then people focus on politics, feel like life is unfair, etc. The
money saved by underpaying your best employees is rarely worth the inevitable
productivity hit and loss of talent.

~~~
wyclif
Yes, I agree with Cohen here. Smart companies reward productive, smart
employees incrementally, and don't place the burden of negotiation entirely
upon them. This is not to say negotiation isn't possible or beneficial to the
employee. But if a company rewards employees with regular raises and profit-
sharing, negotiation isn't as political.

------
dustingetz
this isn't going to be very popular, for obvious reasons.

> The most devoted, upstanding employees are the least paid, and the most
> conniving, disinterested ones are paid the most.

disagree. the best employees are the ones are constantly being recruited, they
know their value, they have the quitting credibility to leave and go get a job
_anywhere else_ if their value isn't met.

anyway, if the employee wants to stay, it shouldn't get to the point of a
counter offer. they ask for the raise, they have implied quitting credibility
that is obvious and doesn't need to be used as a threat, they get the raise.
if you have to actually threaten to quit, somebody is doing something wrong.

> If an employee tells you they have a job offer, tell them that if they take
> it then you’ll wish them well, and stick to it.

clearly Mr Cohen isn't working with superstar engineers, the type that are a
massive blow to the company if they leave. you do what you need to do to keep
them at any cost, not whine on a blog.

~~~
irahul
> clearly Mr Cohen isn't working with superstar engineers,

I can't find where he works(wikipedia, his blog doesn't mention anything). But
considering he is the inventor of BitTorrent protocol and wrote the first
client, I assume he won't be working at a place where his team doesn't
comprise of equally smart people.

Also, his point was your strategy shouldn't be to make counter-offers, but to
optimize the salaries and workplace in a way that people don't feel they have
to quit to get counter offers.

~~~
kragen
> But considering he is the inventor of BitTorrent protocol and wrote the
> first client, I assume he won't be working at a place where his team doesn't
> comprise of equally smart people.

I can't figure out what you're trying to say, but if you think there are
enough programmers as smart as Bram to staff an entire company, you're a fool.
And if you think they all want to work for Bram, you're doubly so. Lots of
them want to start their own projects, not work on somebody else's.

~~~
irahul
> I can't figure out what you're trying to say, but if you think there are
> enough programmers as smart as Bram to staff an entire company, you're a
> fool

I am saying Bram Cohen isn't going to work at a place where grade school
teachers tell him to settle down(an example picked from some other thread
where someone was telling about grade school teachers managing a bunch of
programmers).

He can be selective at this point in his career. He will most likely work with
small teams with smart people, or big names like GOOG, AMZN et al. which are
known for their superior engineering culture.

> And if you think they all want to work for Bram, you're doubly so.

You know, there are a lot of good engineers. He doesn't need all of them. Who
gives a crap if all good engineers want to work for him or not, as long as he
can find n good engineers who want to work with him.

PS: Take a breath. I would have done without your fool remarks.

~~~
kragen
> You know, there are a lot of good engineers.

There are not a lot of engineers as smart as Bram Cohen. I've met maybe ten in
my life, and one of them is dead.

~~~
randallsquared
_There are not a lot of engineers as smart as Bram Cohen. I've met maybe ten
in my life,_

These statements appear to contradict each other...

~~~
kragen
You might think so, but I'm talking about people like Len Sassaman, L. Peter
Deutsch, Richard Stallman, Dan Kaminsky, Ed Fredkin, Ian Hickson, Allan
Alcorn, Zooko O'Whielacronx, Norm Hardy, Graydon Hoare, Ian Goldberg, and
Richard Greenblatt — world-famous hackers I know, many of whom are dumber than
Bram is. There probably aren't dozens and dozens more out there that I haven't
heard of, let alone hundreds or thousands.

------
alexwolfe
I think the essence of what he is trying to say is very true, although his
approach may be a little dramatic.

Ultimately retention is about creating an environment that is pleasant for
your employees. This means creating opportunity financially, professionally,
and personally. It's hard for any employee to leave a job that appreciates
them and fosters their all around growth. Money is certainly part of it but in
the big picture the message is "Build a great workplace". It's a proactive
approach of doing good instead of a reactive set of rules on what not to do.

------
mathattack
It took me many years to learn the leave and counter game. The caveat is once
you start playing this, you lose trustworthiness in the eyes of your employer.
You get money, but lose promotions.

I think firms need to be consistent. Either play the game all the time, or
never. If you waver, you might lose someone who just thinks it's a way to get
a raise.

The investment banks are the worst at this.

------
Jare
Making or accepting counter offers only ends well when the employee is
inexperienced and/or confused as to why he is quitting. In any other case,
you're only delaying the inevitable, and in most cases the short-term benefits
of that delay will be overshadowed by the mid- and long-term consequences
(less need to fix the real problems that led to the employee quitting,
employee growing restless again quickly because it in fact was _not_ just
about the money, etc).

------
larrys
"Management figures as long as they always match what someone is offered
elsewhere, the employee will always prefer to stay, because that’s easier to
do, and salaries are kept to the absolute minimum they can be with no real
risk."

No. Could be they prefer to stay but have found out that their value is higher
elsewhere. Nothing wrong with that. Also doesn't mean that the company is
knowingly trying to save money and clearly knows the value of the employee or
the position. If someone doesn't like their job and finds a job that is
clearly better (maybe it's just closer to where they live with a little more
money) they might not even care what the response is of the employer.

Besides, if the person didn't in some way desire to stay they wouldn't even
present an offer to stay.

By the way, all this info pertains to the tech situation right now. In
traditional business it's not always great to be paid the max of your value.
Those are the people that are let go first when the boss has to cut costs. The
people who provide the most value might very well be the ones to keep their
job.

------
daviddaviddavid
> The most devoted, upstanding employees are the least paid, and the most
> conniving, disinterested ones are paid the most.

"disinterested" means impartial or unbiased.

"uninterested" means not interested.

I wasn't going to comment on this (and thereby be a grammardouche) but I've
seen the word quoted/used in the comments so many times that I thought people
might actually not know this!

------
MixedContent
The behavior described in the post sounds like the kind of intellectual and
moral laziness that you'd have to expect when The Market is assumed to yield
Truth, like some kind of modern Oracle of Delphi. And those who practice it
risk serious rotator-cuff injury from constantly trying to pat themselves on
the back for being so incredibly cynical... um, 'scuse me, _efficient_.

Management, done right, requires the ability to make _judgments_ , including
character judgments. Collapsing all possible human motivations into the single
dimension of fear/greed may swell the bottom line of whoever can do it the
most cynically, until at some point it doesn't, because over time (if not
immediately), it will produce an atmosphere that is poisonous to innovation.

------
idlecapacity
This post strikes a chord. Personal experience below, economics first.

It seems best for the species that wages be allocated to where they have the
highest marginal impact on the final value of goods produced or services
rendered. If a great employee happens to be too squeamish to ask for a raise,
but he will still go on adding steady value to the widget, it strikes me as a
societal waste to initiate a pay raise for him. However, there is this HUGE
possibility of negative externalities from chronic under compensation
(resentment of firm, shame of cowardice for not asking for more, laziness,
obstinance, etc). This makes the problem of wages extremely difficult. Factor
in the complexity that "market prices" based on outside offers are inflated to
cover switching cost to the employee and it gets even harder to determine the
RIGHT wage. Without quantifying these externalities, the best answer to what
the right wage is, from the firm (and probably system) perspective, is the
least amount of money you will take to perform the work. If this sounds un
appealing to you as an employee, its probably good you're reading hacker news!
THE PAIN of salary management comes from finding that "lowest amount" you're
willing to take. Spending energy negotiating just to get to your scenario of
indifference is slow torture. The winners in the whole process are probably
below average people for whom salary reverts to the mean.

I left 100k USD in the midwest to become a west coast entrepreneur. In Chicago
I got my salary raised three times in three years, first unsolicited for
performance, second to counter a threat to leave, and third as a promotion.
The threat to leave tied the promotion in dollar amount, but was highest in
percntage terms at the time. The unsolicited raise for performance was so
small that it set me down a destructive path of engineering larger pay raises
which i thought i deserved and didn't receive.

What I Learned -Money feels VERY important when you hate your job -Big company
jobs are comparitively more valuable to people with children and houses -While
the employee-led raise environment is painfull to experience, it seems to
produce an appropriate allocation of LABOR eventually

Hopefully one of us will someday solve the puzzle of quantifying the value of
individual labor inputs to finished goods. This would have two amazing
effects. 1) workers would be fairly compensated, 2) all workers would have
empirical info on how to improve their value add.

~~~
Drbble
I hope you appreciate how your logical train of thought obliterated the facile
economic myth you started with.

------
tomkarlo
The OP ignores the fact that at most decent tech companies, a TON of time is
spent on annual or semi-annual reviews to determine raises and bonus comp for
better performing employees. The exact reason this is done is to ensure
they're being compensated fairly and don't go off shopping for offers.

It's not true that management has the goal of minimizing comp for employees.
Management tries to minimize _total compensation expenses_, which includes the
costs associated with replacing an employee (and those costs can equal a full
YEAR of comp in most cases.) Not to mention the disruption to projects that
occurs when a key team member departs.

Really smart tech companies take a step farther: if you're in good standing
when you leave, they have a special process for hiring you back if you decide
you want to come back later. It's smart: they expect that lots of the best
employees will want to try their hand at a startup or smaller venture at some
point, but they don't burn the bridge with someone they know is a good team
member.

------
rmc
This is decent advice for companies. And I presume some will follow it "No
$EMPLOYEE, it's for your own good that we don't make counter-offers, sorry!".

However they have to follow the other part of the advice: _"Have clear and
consistent salary guidelines, and regularly give raises to people who are
outperforming their pay level. Don’t be a tight-fisted, short-sighted moron."_

------
jay_kyburz
I kind of like the idea of only giving raises to employees when they have a
offer letter for another job. That way there is no doubt in the employees mind
about how much they are worth.

Why not turn the problem around, instead of only having your most "conniving,
disinterested" employees looking for new jobs, why not encourage all your
employees to have a look around. Why not even give them some work hours to
"assess their own worth". Send out CV's and do phone interviews.

Then when your best employees come back with better offers you will be happy
to pay them more. Even better, the guys who are not working out have somewhere
better to go and everybody is happy.

Of course, it's a dangerous game and you might not be able to afford more.

.

I've never read a good plan for doing employee reviews and salary increases.

"Have clear and consistent salary guidelines, and regularly give raises to
people who are outperforming their pay level."

The problem is right here, what is a pay level. Just because there is a number
somewhere in a spreadsheet doesn't mean an employee will be happy with what
you give.

~~~
jsankey
I think if you consistently did this you would end up overpaying, for a few
reasons. It's pretty common for offers to be made on the high side as an
incentive to sign on, for example. People could get higher offers from places
that have less appealing work (i.e. the job is not more valuable overall).
Generally if you're always matching the highest offer, you're probably paying
above the fairest sustainable wage.

~~~
mgkimsal
Being that open about it would mean employees would let it slip, and you'd be
a target by competitors to raise your costs far higher than they'd need to be.

------
ansy
My ideal company would have a culture where people would want to work there
for free. Above a certain amount, money stops contributing to real happiness.
Some people have even suggested that number is as low as $60,000 in the United
States. [1]

Unfortunately jobs are not the stuff we often fall in love with. Those
opportunities are few and far between. But I think it is a far nobler goal to
try and make more places like that than to have the most competitive salary
policies.

[1]
[http://www.ted.com/talks/daniel_kahneman_the_riddle_of_exper...](http://www.ted.com/talks/daniel_kahneman_the_riddle_of_experience_vs_memory.html)
(see q&a in at the end of the transcript)

~~~
rorrr
60K is what, around $3500/month after taxes. If you live in NYC or SF, that's
not a lot. Barely enough to get a small apartment, food, and go out once in a
while, and save a little.

~~~
Drbble
More like $5000. 30% effective income tax kicks in around $150k annual salary.
Still, your point holds. Not retiring or having a very healthy and actualized
child or three on that salary.

~~~
kingnothing
$5,000 * 12 = $60,000. I don't think the OP's suggestion of $42,000 a year,
take-home, was too far off assuming a marginal tax rate of 25%.

------
djtriptych
Is this his only post? Or is there someway to browse this site that I'm
missing?

~~~
slmbrhrt
Looks like he may have done some cleaning. I noticed he doesn't seem to own
bitconjurer dot org anymore, maybe this is why?

~~~
bramcohen
I still own bitconjurer.org, there's a misconfiguration of some kind which
needs to be tracked down.

------
iamleppert
Horrible advice. Having unilateral policies like this are things that give
people excuses to stop treating people like people.

Each case is different. It depends on the individual employee, their
performance and role in the organization.

And I don't much like how you are blaming the employee for "not wanting to
work for you". Of course that will be true for some people, who simply need a
change for change's sake. However, do you not share some of the blame for a
high quality employee seeking outside employment? What happened to that
employee to want to make them work some place else?

------
SonicSoul
i've been on counter offer side of things a few times.. at first, it was nerve
wrecking.. having to resign and admitting to have been "cheating" on your
employer by secretly interviewing.. it feels horrible. but indeed, it was
always well received (or maybe i was lucky in having rational bosses) in a do-
what-is-best-for-your-career manner. and some of the counter offers were crazy
good, but it would feel weird to stay based on that.. after all, while
resigning i always listed other things that propelled me to do that (like
being skipped for a promotion for 2 years because promotions were limited (to
1 per year) and other employees demanded them outright while i stayed quiet).

taking another offer is a big risk. you're leaving the cozy confines of your
current job, where you know everyone and all the systems you've so carefully
crafted over the years. Last time, the company i left for ended up laying off
60% of dev staff (myself included) 5 months after switching. But i am still
glad i did it. i learned lots in those 6 months i wouldn't have if i stayed,
and interestingly enough, when my old boss found out i was laid off he
generously offered my old job back.

i have a friend, that outright tells his boss that once a year he'll be
interviewing just to see what the market worth for his job is. This seems
insane to me, but his boss is totally fine with that. My friend has a great
job with amazing perks (sales) that would be very hard to beat elsewhere. This
move does let his management know that he isn't going to stick around unless
his growth at current place continues.

------
stream_fusion
It assumes that all employees are informed about other employees playing a
quit game. From a management perspective, it may be good strategy to make the
counter offer, if you could ensure that it is kept quiet from office gossip.
Also, an individual employee has no incentive to broadcast the fact that he is
using the threat of quitting, and is likely to play into that stratey if he
receives what he wants in pay/status/hours etc.

------
Drbble
This discussion has overlooked the last paragraph of Bram's post, which is
that counteroffers are a non-solution when the manager has already failed.
Don't give counteroffers, because you should avoiding do situations where your
employees get competitive offers from outside. There are good ways (money,
respect, excitement) and evil (sweatshop campuses) to achieve that

------
Drbble
Bram Cohen was laid off just prior to inventing BitTorrent, right? No doubt
that experience (and being a founder) colors his perspective.

------
maaku
Or better yet, pay your employees what they're actually worth to you, and
remind yourself regularly to evaluate them for raises.

------
sigzero
Usually there is more going on than $$$ when someone entertains the offer to
leave a company. Getting more $$$ only plugs one of the holes in the dike and
usually (in my experience) that person is going in 6 months anyway.

I never entertain counter offers simply because I consider it a firm agreement
with that other company that I already accepted.

------
miha123
The advise is similar to tricks to train dogs

------
its_so_on
Sorry, guys, I am going to have to disagree with both this article and the
suggestion that counter-offers should be turned down by employees.

The truth is that despite the fact that lots of hn (yc) type startups have
employees working for enough to cover their rent or whatever, and a bit of
equity that has absolutely no defined value, when the company does take off,
it's only fair to ask: All right, thanks for sticking by me, now what are you
guys really worth! What is this killer graphics designer worth ; what is this
DBA back-end coder worth who has just scaled us from a bedroom to millions of
customers ; what is this accountant worth.

If they don't have other offers, there is NO answer to that question. You
can't appeal to the cost of their bedroom or car, you can't appeal to the
chance to build something great, none of this is external or fair.

Fair is what the market says.

I remember somewhere years ago on Slashdot that it's impossible to be "ripped
off" in a transaction, reasoning thus: "When you have a fistful of cash in one
hand, and the offered good or service in front of you (forget what the example
was), and you say 'ok' and get it, that's your choice, if you get what you
thought you would get giving the money that was asked, you physically can't be
ripped off. The money was in your hand and it was your choice".

Well, sorry slashdot poster from years ago: that's false. When you have a
fistful of money and buy something, but you are radically misinformed about
the market price (to your disadvantage) then you just got ripped off. If you
sell your vintage gold (whatever) for a couple of bucks, being told it's just
for the value in gold, but a vintage gold (whatever) is worth 100x what you
just paid: then you just got ripped off.

The thing about talent like this is there is no market price because everyone
is unique. The market price is whatever other offers you get.

In the vintage gold whatever example, if someone says "This only has a tiny
bit of gold in it, I can give you $100 for it", but in the same town five out
of the five other specialists you would sell it to if this person wasn't in
front of you offer at least $3,000 - then you just got ripped off.

I'm not talking about if you were to sell it yourself (instead of to a
specailists) to another buyer: maybe buyers themselves pay $8,000. I'm talking
about other opportunities in the exact same circumstances and market.

The fact is, "intrinsic" arguments (like how many ounces of gold is in
something), what food and rent costs, what you paid the last guy, whatever,
are worthless:

the ONLY thing that establishes the market price in my market of my graphics
designer is their other offers (not their own other work, which is a different
market).. The ONLY thing that establishes the market price of my back-end
engineer is their other offers (again, not their consulting work, which is a
different market).

I want to be fair with my employees, and I want to be treated fairly. I don't
want to rip anyone off, nor do I want to be ripped off.

The ONLY way to do this is to explore market prices, and the best mechanism to
do this is through other offers (since no one is fungible with other people in
this industry; you can't just 'look it up').

So I'm going to have to strongly disagree on all points here.

~~~
barrkel
The market is inefficient because of the information problem - precisely as
you say, everyone is unique. That harms your appeal to the market as a pricing
mechanism.

Anyone making an offer for an unknown potential employee logically and
necessarily discounts the offered salary by a certain amount to take account
of the unknown. So the market price for a developer is lower than what that
developer should be making once they are a known quantity for the most
profitable position for them in the market.

And companies should give raises based on this - not on the market price, but
on the known quantity, such that the only way that an offer exceeding the
salary could be made is either (a) a position that creates more value (in
which case the employee really should move, should money be their motivation)
or (b) an irrational company.

~~~
its_so_on
I don't really understand what you're saying. I gave a pretty concrete
example: I have Andrew or Alice who does graphics design, Barbara or Bob who
does finance, and Carol (m/f) who does the back-end coding and all operations.
They're pretty young, and I can't pay them what they're worth or anything near
it. Now, I get some cash into the company: how do I now pay them what they're
worth? What is your suggestion?

If my company competes successfully in its niche because of the level of fit
and finish, and design, should I pay Andrew/Alice proportionally more than
Barbara/Bob or Carol? Now what if my company competes successfully because of
the scalable infrastructure - it's really an ops company, and it's just a
faster service and that's why everyone uses it. Nobody cares about design.
Then suddenly does Carol deserve more money than Andrew/Alice or Barbara/Bob?
Now what if it's an excruciatingly tough market where everyone is incredibly
price-sensitive. But by doing market research and have our financial acts
together the best out of the companies competing in our space, we grow and
prosper and persevere over them?

No. This is wrong. This leads to talented designers and finance gals and guys
leaving because they're not being paid what they're worth OR appreciated. It
leads to the ops company saying: "You don't get what you'd make elsewhere
BECAUSE you're less important". This is the WORST POSSIBLE SOLUTION.

Of course, at an executive level you can choose to hire a BETTER designer/lead
designer in one type of company, a BETTER or BETTER-CONNECTED or MORE
EXPERIENCED finance gal or guy in another context, or a BETTER or MORE
EXPERIENCED or whatever gal or guy for ops and back-end in a third context.
You pay them more because they're WORTH more.

If you really want to go above and beyond, sure, pay them MORE than they'd get
elsewhere. Show appreciation by paying or rewarding above market.

But your suggestion is right in line with command Communist economies, and
goes about as far. By the way I think that's great in a small 1-5 person
socialist setting (as in a family for example!). It's no way to run a company
though.

*I also want to add that on the small level, "to each according to need" is also valid! If only one of the three first employees has a mortgage, then they might get a bit more to start off. This doesn't scale, and I'm telling you what needs to be done when you become an actual company with sound finances and a desire to grow, acquire and retain talent that won't be bitter.

~~~
barrkel
I think you think I'm suggesting paying people what they're "worth", as if
that has some intrinsic value.

That's not what I'm suggesting at all. My argument is entirely based on
orthodox Western economics and free markets; and that's the jargon I use.

What I'm talking about is the market price for labour, _in an efficient market
with perfect information_.

The labour market is not an efficient market. In particular, there are large
information problems. It's only after you've worked with someone for a while
that you reduce the information gap. And then you can pay them closer to the
_true_ market price. This reduces the risk of them getting a better offer
elsewhere, because offers from elsewhere _underprice_ labour owing to the
information gap; unless they could be creating more value elsewhere (and hence
command a larger salary, even taking into account the information gap) - in
which case, for the (theoretical) good of society at large, they should move!

(Theoretical merely because not all utility is priced.)

~~~
its_so_on
I have a better understanding of what you mean, but I think we're talking
about totally different things. You're talking about a few percentage points
around a 'true' price (under or over), that account for whether someone is
worth more like $80k or $95k.

I'm talking about who you'll pay $35k, who you'll pay $60k, who you'll pay
$30k, and who you'll pay $80k when you first get funding, and whether you will
pay anyone over $100k at all.

When market price of two of your employees are each 80-95k depending on how
much information a potential employer in your geographic/other market
(including you) has about them, then it is the worst possible result for you
to justify a salary of $40 or $35 for either on some grounds of fairness. It's
also wrong to pay one $95k and one $60k also alluding to internal factors, how
much information you have about them.

You don't pay someone $60k who's worth $90k if you're being fair (it's
different if you just don't have the money). We're talking about a 50%
difference here, not the few percentage points that come from inefficiency of
information.

I think if you had any idea what the average first employees of hackernews/yc
type outfits get as initial offers, you would feel quite different about where
the problem lies. (just my humble opinion).

your suggestion is not about such radical differences as compared with 'true'
worth, but only smaller ones.

~~~
barrkel
Most companies aren't startups, in the HN/YC sense of the word. I was
addressing the majority scenario.

First employees in startups are playing a different game; a combination of
risk and novelty. The employees are gambling on stock options and a payout
(not a particularly rational gamble, of course); but they're also working on
new technology, greenfield development, in an exciting environment, often with
younger people who are less, shall we say, "conservative" in their career
trajectory. All of this is utility to such first employees; and it compensates
for salary, depending on their utility function.

As a company ages, the profile changes. Depending on how the employees have
changed along with it, they may seek a different mix.

~~~
its_so_on
they may also get no stock or options. when they are young, recently educated,
as you say they will jump on for the combination of novelty and a chance to
grow and extend themselves.

when it comes time to pay them fairly, either after they have acquired the
experience or simply you raise enough money to do so, fair becomes determined
by what they get elsewhere.

------
javajosh
I disagree strongly. Management has better things to do than push unasked-for
money on employees, especially in a young company. An employee who wants more
money can and should ask for it.

~~~
ganjianwei
It creates a lot of unnecessary tension between management and employees if
employees can't just assume that they'll be rewarded for outstanding results
and don't have to ask for it. If there's a tacit agreement that if you do
great work you'll get a raise with a quarterly or semi-annual review process,
employees don't have to get distracted by thinking about when they should ask
for a raise or whether they need to get a competing offer to get leverage to
ask for a higher raise.

Management might have better things to do, but if this creates an atmosphere
where employees feel under-appreciated, they'll leave, and this churn can
really hurt the company, which makes it a huge problem for management that
could have been avoided by rewarding high performing employees earlier.

~~~
javajosh
I agree that there is a cultural bias in favor of this type of wage structure,
and that any company that ignores it does so at their own risk, as it will
create unnecessary tension, as you say.

But still I bristle at tacit assumption behind the OP's point that both the
amount and timing of my wage increases should rest in the hand of a manager.
The OP is saying that managers should be enlightened about it, and I'm saying
you can't trust management to be enlightened about it and should take charge
of your own compensation.

------
abalone
I love it when intellectual property thieves lecture others about how to
compensate intellectual property creators.

