I worked at Netflix for several years, where they actively practice paying ‘top of market.’
This is an oft misunderstood tactic, but in action means:
1) Yearly, employees are asked to seek evidence for their top of market compensation.
2) employees do two things as a follow up - They either interview elsewhere to get competing offers to establish ‘top of market,’ or they feel fairly paid and do nothing.
Having worked at a few large tech companies that practice the typical equity grant and vesting structure designed to maximize retention, Ive never seen a more effective tactic to completely remove the concern of ‘am I paid enough’ from the employee. As a result:
1) The really high impact people are paid extremely well, as Netflix always overbids.
2) The average performers either go elsewhere or retain without jockeying for greater comp and ownership.
The proactive seeking top of market is a good feedback loop to pay for/reward impact and to build trust with your team, and is something I still practice with my teams outside of Netflix.
This was back in 2015, so some things may have changed. Regardless, the net to the business has compounding returns. At an average company:
1) Most employees do not pay for their salary in business impact.
2) Top performers drive outsized impact relative to their compensation.
If you find a way to mitigate 1), you can pass the savings into 2), protecting and retaining your highest value employees.
While other factors do obviously matter, and comp isn’t everything - removing comp from the hierarchy of needs entirely dramatically changes the mindset towards ownership of work and outcome.
I'm probably taking the wrong lesson away here, because from an outside perspective the message seems to be "don't waste time interviewing someone who currently works for Netflix".
You'll either waste your time, or get buyer's remorse. Very little upside.
I've had this same practice with a team of two that has moved with me to different orgs over time. Had no idea it's a norm and followed by big companies.
My motive was exactly this. If you remove the "am i paid enough" concern, it allows talented engineers to focus at the job at hand and deliver really impactful outcomes
This is an oft misunderstood tactic, but in action means: 1) Yearly, employees are asked to seek evidence for their top of market compensation. 2) employees do two things as a follow up - They either interview elsewhere to get competing offers to establish ‘top of market,’ or they feel fairly paid and do nothing.
Having worked at a few large tech companies that practice the typical equity grant and vesting structure designed to maximize retention, Ive never seen a more effective tactic to completely remove the concern of ‘am I paid enough’ from the employee. As a result:
1) The really high impact people are paid extremely well, as Netflix always overbids. 2) The average performers either go elsewhere or retain without jockeying for greater comp and ownership.
The proactive seeking top of market is a good feedback loop to pay for/reward impact and to build trust with your team, and is something I still practice with my teams outside of Netflix.
This was back in 2015, so some things may have changed. Regardless, the net to the business has compounding returns. At an average company:
1) Most employees do not pay for their salary in business impact. 2) Top performers drive outsized impact relative to their compensation.
If you find a way to mitigate 1), you can pass the savings into 2), protecting and retaining your highest value employees.
While other factors do obviously matter, and comp isn’t everything - removing comp from the hierarchy of needs entirely dramatically changes the mindset towards ownership of work and outcome.