The same exact thing happened to me a couple of years ago - except that I wasn't working at a startup, but at an established company. I even proposed to have a results-based salary (I was doing a lot of sales engineering, so that would have been fairly simple) but was refused.
So I started working just my contract hours, and building hashtagify.me on the side. In the end I gave my resignation notice, they went into a panic and offered me 5 months of half-time work - but with 85% pay; this cost them much more than what I would have expected as a bonus at the time, not to count the almost two years of not-really-enthusiastic work.
I really can't understand how managers/business people can be so stupid sometimes.
Do you realize how insane such a suggestion is? I know it probably sounds totally reasonable from a "the harder you work the better you do" mindset, but companies abandoned that in the 1980s. There's a reason why even as technology has multiplied the productivity of employees by leaps and bounds average salaries have remained flat since 1980.
If you want to understand managers/business people, read their books. Seriously, read the books they have on their shelf. Books written for managers are like something produced in a bizarre sociopathic universe. And they very consciously divorce the idea of employee compensation from the value of the work an employee does.
Employee compensation is absolutely not associated with the value of the work the employee does.
Instead, it's associated with the best replacement that the company could find.
If Joe makes $2M a year for a company and gets paid $150k but Steve can do the same work at the same level for $100k, Joe's out and Steve's in. The initial $2M of value doesn't matter, except to lower the chance that a replacement could outperform you.
Cynical and unfair? Sure. That's how it works, though. Start your own company if you don't like it.
Using that formula, how would management like to compensate Joe given the following:
* Steve is hired for $100k
* A year passes
* The company starts to lose money, let's say down to $1.5M a year.
* It is decided that Joe's industry knowledge - and only Joe's knowledge - had been making extra money for the company. It was some non-transferrable knowledge.
* Aside from the previous caveat, Steve and Joe had precisely the same skillset
* Joe is happily employed somewhere else for $150k
That's a broken model for many reasons. For one is that it replacement omits or undervalues the cost to acquire and retrain a replacement to being a) competent in the context of the position, and longer term b) being truly integrated into the company and able to bring deeper value to the business.
Time to a) can be short, particularly if the candidate is a good fit, but time to b) is typically three years. Early in my career, I took a little offense when a manager once told me that it would take three years to become useful. After some discussion, that wasn't a comment about my technical ability or level of work (they were actually very happy about that), but it was just a realistic timeline to get to b), the point that they could throw about anything at me and I could reliably pull resources and people together to get things done for the company in an independent and cost-effective manner. Depending on the work, time to (b) could be shorter or longer, but it's surprisingly long - longer than many want to admit to themselves. Over the years, I've looked at people in companies through this lens, and three years is typical.
Companies with an employee "replacement cost" model often have churn rates so employees stay with the company well below (b).
The "replacement cost" model also leads unwillingness to invest in employees, either by explicit training, or on the job training anticipating increased responsibilities. After all, they might be gone soon and we just have to go shopping for a replacement.
Longer term employees (typically the mid-level management) are then stuck because they're managing details that they really wouldn't otherwise need to, masking time to take care of problems that they would otherwise should be the sole owners of.
They're both subtle outgrowths of undervaluing people, leading to company underperformance.
Note that the corrections you propose still have nothing to do with the value that the employee produces. They just adjust the replacement cost to something more realistic.
It's still about minimizing expenditure to bring in a certain amount of profit.
If, because of the replacement cost model, you don't spend time and some effort to get and keep well integrated employees, the business misses out on deeper value the employees could bring. Further, those deep-value employees can handle more issues, freeing higher level management to focus on bigger, higher value issues. I think that has a lot of relevance, but then I think a lot of companies miss out on expanding value when they're focused on squeezing costs.
>Cynical and unfair? Sure. That's how it works, though.
That's how it doesn't work. Except if you sell bricks or something.
In the IT industry it's a surefire way to replace loyal and precious employess with talentless slobs, while you're thinking you're getting a better deal for your company.
Maybe you missed the point where I said I was heavily involved in sales (actually I was both a project manager and a sales engineer). When you work with sales, it's not unusual to have part of your salary tied to those.
> And they very consciously divorce the idea of employee compensation from the value of the work an employee does.
And that right there is my problem with management people. Most see people are "resources", and that too equal resources. What they fail to understand is that everyone is different and some people will be better than others.
I'm still in college but the mindset here seems like any company. All students are treated similarly and have same rules. These rules are designed to get an average output. People who are lower than average get a bit of benefit because of this but people who are above average get dragged down in the process!
Most managers think of themselves as being the biggest and most important cog in the machine. However I've seen Directors and CEO's sat there playing solitaire not really knowing how they got to that position in life or what role some people have in their company.
If you're an introverted programmer growth-hacking for the company, try telling the CEO about the value you're adding to the company... typically (in my experience) this news is usually met with disbeleif, furrowed brows and denial.
You were right to do what you did, hopefully you both learned from the experience ;)
Well, ironically that manager was just sacked - and my resignation was one of the reasons alleged for this (it was just an excuse in my opinion). Even more ironically, his role will now be filled by a Director who is MUCH worse in that sense.
So, I'm pretty doubtful that any lesson will be learned from there, because it's most likely the owner who set up that compensation policy. He built the company on selling hardware, and I guess that he doesn't understand that with software the quality of your people is almost everything (unlike with hardware that you resell).
That. Or maybe they realized that with the downturn, a newborn child, a newbought home, a mortgage, and a wife that had been fired when pregnant I wouldn't have had much room to leave anytime soon...
When someone is clearly making an effort you need to recognise that.
A common symptom of management insanity is that if you're working like 14hrs a day, it's because you are inefficient and should be thankful that they're putting up with your incompetence.
I am constantly surprised by bosses that do not realise the consequences of their words.
When someone is clearly making an effort you need to recognise that. Maybe it's just a "hey, thanks, I appreciate it" when you have no money.
Saying "I pay you a wage and you do the work" is a sure way to force people to do just enough.