With the closing of the Mad Men era, what is old is popular once again.
Silicon Valley may be known for its colorful workplaces and free catered lunches, but its true innovation in compensation was exchanging the rigid tenure-based salary systems of East Coast professional firms for the meritocracy of the pure labor market. Everyone must discover their own competitive wage and equity level in the marketplace, and if done properly, this level should match the productivity of the worker.
That meritocracy argument has not been entirely shattered, but it certainly has been under extensive attack lately as new data about differences in salaries – particularly between male and female tech workers – has been released by Silicon Valley companies. Satya Nadella, CEO of Microsoft, got into hot water for his comments that women should have “faith” that they will be paid properly.
Technology firms are now swinging the pendulum the other way on compensation, moving away from pure market-driven wages for every individual worker and toward lockstep salaries that pay everyone at a certain level equally. Some workers will chafe under such uniformity, but there are real benefits to the model that deserve a wider look from founders and HR executives.