Setting salaries without managers: this is how we do it as a self-managing company

If there are no managers working at Voys and people fill their own roles, how do you determine what someone earns? We get asked this question on a regular basis. And rightly so, because our self-management system, Holacracy, does not provide the answer to that. Over the past few years we’ve been experimenting to come up with a system that works for us. In this blog, we tell you how we set up our salary system and the responsibilities colleagues take on in the process.

Colleagues have multiple roles within the organisation

Self-management gives our colleagues the chance to develop fully at Voys: it doesn’t lock people into rigid profiles. Colleagues get the opportunity to discover their potential and grow in areas they might never have the chance to explore at another company. Brackets disappear, which is very healthy from a human perspective.

At Voys, colleagues take on different roles: for example, a combination of programming and HR type roles is not that strange. In addition to that, colleagues also change roles regularly. It is not at all certain that someone will always do the same work or keep the same focus within the organisation. In fact, things are a lot more likely to change than to stay the same.

However, co-workers also have to pay mortgages, buy groceries, and make sure the electric bill gets paid every month. So whereas the roles are constantly changing, a salary system requires something quite different: stability, clarity and transparency.

Our salary system did not fit our organisational model

Let’s go back in time, because you don’t really understand how our salary system works until you know how it originated.

When Voys was just starting out, our salary system wasn’t that complicated. We were small, the work was fairly straightforward and by far most people were happy. But in recent years we have not been standing still. We’ve grown incredibly fast, and our original salary system wasn’t designed for that.

This quickly created tensions because colleagues wanted to know where they stood. It was not always clear why someone had a higher or lower salary, and no one continuously checked whether the salaries were actually in line with the market. After all, what do you look at when someone is dealing with sick leave, developing our product and organising connecting team outings, all at the same time?

We recognised that it was time to take the next step and find a system that fit our core values: equality and transparency. Of course, that system did not emerge immediately.

When we run into something, we almost always experiment with different ways before making a final choice. We did the same this time. To make the experiment successful, we asked ourselves some important questions:

• How can we justify a salary?
• How can we verify that a salary is appropriate?
• How do we reward people for their impact on the organisation?

The requirements for a new salary system

After the initial experiments, we soon discovered that there was no existing salary system that met our needs. And so we decided to develop a salary system ourselves.

For this, we had the following requirements:

• It must be transparent to everyone in the organisation how salaries are determined
• It should not be based on functions (because we don’t have them)
• It should not be directly linked to the roles people have now (then people might only hold a role because of their salary)
• It should provide clear guidelines to assess performance in an objective way

Once we had our needs clear, we discovered the Baarda model. The beauty of this model is that it looks at people rather than job descriptions. But then again, it was developed for the traditional, hierarchical organisational model with managers. Everything we are not, in other words.

At the heart of the Baarda model is the idea that people have different levels of problem-solving ability. For example, one factor is how many variables they have to keep track of in order to do their job. Other factors include, for example, the level of abstraction of the work, as well as experience, of course.

As a result, we felt we could adapt this model to our needs. Thus, we developed a salary system with, on the one hand, a model with a proven basis and, on the other hand, the translation to a self-managing organisation in which things go a little differently.

The path matrix: this is how it works for our organisation

Now we’ve been working with our own salary system based on the Baarda model for many years. For this we use the path matrix. Let me explain.

The path matrix contains eight defined paths with different problem-solving skills. In the matrix we distinguish four different levels in each path: junior, medior, core and senior. The matrix does not represent a role or position, but the entire organisation. Thus, the performance of an existing colleague or the expectations of a new colleague are determined by how a person relates to the entire organisation, not just his small piece of expertise.

We look in the matrix to see which path and level best suits the colleague. This gives a very clear picture of where someone is at that moment.

At the same time, the matrix also gives a lot of insight into the organisation’s strengths and weaknesses. We immediately see which skills are underrepresented, where we lack experience and what the ratio of senior colleagues to junior colleagues is. We can then actively use this when looking for new colleagues. This keeps the organisation in balance.

Each place in the matrix has a salary scale. This salary scale is also further divided into steps. Now you may be thinking: but a traditional salary system also has scales and steps and annual growth right? You got that right. The difference is in the potential and development the person has. Not the position, not the role, but the person growing and developing within the organisation.

Colleagues take initiative for a new profile themselves

What really makes our salary system different, and this is by far the biggest difference from any other salary system, is that there is no HR department or managers determining the place in the matrix for colleagues.

As colleagues learn, grow and develop, it makes sense that their salaries grow with them. In this, colleagues also have their own responsibility. We expect each colleague to have insight into his or her own career development and to take the initiative to investigate whether they belong in another place in the matrix.

Once things start to shift and the current spot on the matrix no longer feels appropriate, there is a process the colleague can go through. These are simple steps, so that there are few barriers to initiating the process, because the process is supposed to be accessible to every colleague.

Here are the steps:

• The colleague submits a request for a new spot on the matrix
• The colleague asks immediate colleagues to assess whether this idea is correct
• The ‘Value Advisor’ role supports this process
• A colleague does or does not get a new spot on the matrix

Colleagues determine your place in the matrix

Colleagues determine your place in the matrix. They are the appropriate people to judge your work, because they see you in action every day. The circle lead, the leader of your circle, also thinks about your place in the matrix.

Good to know: a group of colleagues working together on a specific task is a circle. For example, we have a marketing circle, an HR circle, a product development circle, etc. Such a circle has a leader who keeps an overview, is a point of contact for colleagues and communicates with the other circles: the circle lead.

Because colleagues have multiple roles, they are often in multiple circles and have multiple direct colleagues who can help them decide on their place in the matrix. The decision about their place in the matrix is not only about what a colleague does, but also about how they perform their roles. Two people with the same role can both interpret this differently, this says a lot about the level and profile and thus the place someone occupies in the matrix.

Assistance from the Value Advisor during the process

To make it a little easier for immediate colleagues to assess their colleague’s performance, there is a clear description of the behaviors expected of each path from the matrix, including a series of yes/no questions that help bring clarity to a colleague’s development.

To help colleagues, there is a special role, the Value Advisor, who facilitates the entire process, assists in interpreting the model and profile descriptions, and implements the new salary system. Thus, the process is monitored by someone who is not directly involved and provides practical support without personal opinion.

We also have a role that ensures that once a colleague has a spot in the matrix, there is a salary proposal that matches the spot someone has been given in the matrix. So we make sure that the salaries we offer are in line with what colleagues are earning, but are also market-based.

Improve processes step by step

Requesting a new spot on the matrix is very simple, but even within the model as we have it now, we have experimented to get here. We have continuously improved the process and we, of course, remain open to change.

For example, step by step we have adapted the requirements, the number of direct colleagues to be invited, the minimum percentages for salary growth and the digital tools to be able to hold the sessions online. We also added additional checks to the process, as we discovered that not everything we value in a colleague was adequately captured in the expectations associated with the profiles in the matrix.

Concrete goals to grow in salary and development

In a traditional, vertical organisation, you get promoted to manager, but if you don’t have managers, where do you work towards? This salary system is a very nice answer to that. It gives colleagues even in our horisontal organisation the tools to grow, develop and work towards goals, in the form of salary, but also in the form of development processes that help colleagues reach the next level in their competencies.

So salary is not an end in itself, but a logical consequence of the steps colleagues take and the responsibility they take over their own development process. This means that we can recognise and reward growth without suddenly having a completely different set of tasks.

That gives peace and confidence on the one hand and, on the other, much more control over the future than hoping for a promotion if the manager is in your favor. It is more honest, transparent and motivating and therefore healthy for the organisation.

Is your salary system transparent?

The salary system we now use feels like a huge win for our organisation and colleagues. The transparency we offer fits perfectly with what we stand for at Voys. Now I’m curious: how are salaries determined in your organisation? Is there a clear system and how does it work? Let me know via our LinkedIn page!