Lockstep Salaries Are Making A Comeback
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.
The Lockstep Way
The idea of lockstep salaries is simple: workers should be paid equally for equal levels of experience or title. Thus, a newly-minted college graduate should be paid consistently throughout a company, and all vice presidents should be paid the same. To receive a higher salary, a worker should get promoted or stay longer at a company to reap the benefits of years of service.
This system remains quite common in the United States. Nearly all government workers are assigned grades and steps that determine the exact salaries they will receive. Elite professional services firms also tend to use these models, particularly in fields like lawwhere almost all associates are paid equally based on years of experience (although the industry is changing in the wake of the global financial crisis).
There are immense benefits to the lockstep model. Foremost among them is that these sorts of salaries can potentially foster greater cooperation within an organization. Raises are no longer perceived as a zero-sum game, especially compared to organizations that use stack ranking as their means of evaluating employees.
Of course, we immediately encounter everyone’s greatest fear about this model: that workers will shirk their work since they know that their individual performance doesn’t matter to whether they get next year’s salary bump.
However, there are several ways around this concern. First, an up-or-out model is quite effective in ensuring that workers are still operating at their peak performance. That’s the model that is used in law firms, in which promotion to partner is the main goal for every associate, but access to that promotion is limited to a small percentage of employees.
Perhaps more importantly, an organization’s culture matters tremendously in how workers approach their craft. Organizations have the ability to inculcate workers to see their craft as above immediate salary goals. Professional service firms emphasize service to the client as a means of building this sort of performance-driven culture even when salaries are lockstep.
Negotiation-Free and Transparent Workplaces
Outside of reduced competition, two other advantages to lockstep are eliminating salary negotiations and increasing transparency. On the first, few people effectively negotiate with their employers for salary increases, and a lot of people fail to negotiate at all. Companies perform better at negotiations than workers, for the simple fact that they do it all the time compared to their employees.
The net effect of this situation is that employees – even those doing the exact same tasks – can be paid tremendously different wages.
This is one of the largest concerns today in equality for women in Silicon Valley and really throughout the United States. Studies have repeatedly shown that women are less likely to negotiate their salaries, for a host of different reasons. This difference between the genders is one explanation for the persistent female pay gap.
However, negotiations don’t just disadvantage women, but can harm the employee-employer relationship for everyone. There is an awkward moment just after receiving a job offer from a company when we are expected to begin these salary negotiations. Just as we are getting to know each other and becoming partners, we now have to argue for some more salary dollars. Lockstep salaries ensure that this relationship grows naturally instead.
The other side of removing negotiation is increasing transparency in an organization, which may reduce office politics as well. While some organizations, notably Buffer, have made all of their salaries public knowledge, many workers may still find that unappealing.
However, lockstep salaries ensure that those of us sharing the same title or years of experience are being paid the same. That knowledge can help to reduce office politics over salaries, and bring the focus of the workplace back toward the work at hand.
Popularity in Silicon Valley
Lockstep salaries are in some ways hardly new in Silicon Valley. Almost all large technology companies have a sort of lockstep salary structure, built around salary bands that depend on specific title and years of experience. While there is some potential to negotiate larger salaries, that effort is probably better spent on transitioning to faster-growing projects where title advancement will be quicker.
The more important change is happening at startups. The intense competition for workers the past few years has encouraged startups to offer almost anything to get an engineer to sign paperwork, but now there is a sense among some founders that this approach has led to unfortunate side effects.
One example is Jet, the ecommerce startup launched by Marc Lore, which uses a form of the lockstep model. Lore described his company’s system in an interview. “Everyone at the same level makes the same comp. Everyone knows that no one is getting paid more at a similar level,” he explained. “We don’t respond to offers from elsewhere, since everyone at the same level gets paid the same.”
Lore is in the vanguard of founders addressing the female pay gap. “I do think that women do get the short end of the stick that they sometimes aren’t as aggressive about negotiating comp, and I don’t that is fair at all. Here, once they get pegged to the right level … no one can negotiate.”
That might sound like a nightmare to some zealous startup compensation negotiators, but it is well past time to consider how our current model has performed. Lockstep salaries are not just for Mad Men, but could be a model usable by very modern tech startups looking to bring more fairness to the workplace.
Adapted and Extracted for the benefit of readers from Techcrunch.com
30+ Enterprise startups from India that have taken the world by storm
Enterprise startups are not the kind of startups that you hear about every day. This is primarily because they’re not sexy like shiny apps built by college dropouts. But enterprise startups are the ones that build products that sit beneath a lot of other things and provide a technology foundation that helps to make things work better and faster.
Last Year, Dev Khare, one of the partners at LightSpeed Venture Partners, wrote this piece about the fourth wave of enterprise startups and gave a succinct categorization of enterprise startups.
Primarily put into two buckets — Applications which are used by businesses to automate workflow and platforms or tools. This set of startups saw a surge in 2013and early 2014 with a lot of investor backing. Last year, has been one of consolidation and growth. There are some amazing B2B companies being belt from India at the moment. We take a look at around 30 companies here (which are in no particular order):
FreshDesk: An online customer support software and helpdesk solution. Founded by Girish Mathrubootham, FreshDesk is one of most promising companies coming from India. Started from Chennai, building for the world, FreshDesk recently raised a $50 million series E round and is serving more than 40,000 enterprise customers.
ChargeBee: Subscription and recurring billing software. Co-founded by Krish Subramanian from Chennai, ChargeBee got backing from Tiger Global and Accel Partners worth $5 million and is processing $100 million for their customers annually.
Capillary: Intelligent customer engagement management solutions. Founded by Aneesh Reddy and Krishna Mehra, Capillary is a seven-year-old company that has managed to crack the global market. The company has raised $34 million till now, the most recent of which was a $14 million series B round from Sequoia Capital and Norwest Venture Partners.
Peel Works: Cloud-based tool that helps businesses build a smarter sales force through data analytics. This SaaS venture was started by Sachin Chhabra and raised a $2 million series A round in July 2014.
Sapience: Time management and employee performance software. Co-founded by Shirish Deodhar, Pune-based InnovizeTech Software recently raised INR 45 crores series B round from Orios Venture Partners and other angels. Helping companies improve time efficiency at work, Sapience sold more than 60,000 licenses in 2013-14 alone.
Helpshift: A CRM for mobile apps which lets the app users to get in touch with the developer. Led by Abinash Tripathy, this startup that went global from Pune raised a$10 million series A round led by Intel Capital and Visionnaire Ventures.
Framebench: File reviews online. Founded by Rohit Agarwal and Vineet Markan as a collaboration platform for designers, the product has pivoted and found an enterprise play. Backed by Blume Ventures and earlier going through the iAccelerator program, Framebench wants to invent a new approach for professionals to share, review and work together on any file across remote locations.
Kayako: Helpdesk and customer support software. Founded by Varun Shoor in 2001, Kayako is a hidden gem that is a global success story built from Jalandhar. Completely bootstrapped, Kayako has a team in Jalandhar, New Delhi and London, and its enterprise software is being used across the world.
Mindtickle: Sales readiness solution helps get a sales team ready. Starting as a learning platform, Mindtickle is a Pune-based company that started in 2011. Since then, it has found a sweet spot with sales team training and is building on its strong gamification foundation.
Unmetric: Social media analytics firm. Based in Chennai and New York, Unmetric raised its $5.5 million series B round in 2013 and currently boasts of having processed more than 150,000,000 pieces of micro content over six social networks for 25,000+ brands from 30+ sectors.
Zoho: Software for various business needs. Founded by Sridhar Vembu, Zoho is a bootstrapped company with revenues estimated at a whopping $100 million. Zoho is one of the few enterprise companies that has been able to keep up with the times and has managed to become a global brand.
Mobstac: iBeacon proximity marketing and analytics platform. Co-founded by Sharath Potharaju, Mobstac started out as a product that helped brands leverage mobile commerce and this was the model till they raised a $2 million series B round from Accel Partners and Cisco. After this, they found a more targeted area and are focusing on the iBeacon technology.
Druva: Enterprise end point data protection and governance. Founded back in 2008 by Milind Borate, Jaspreet Singh and Ramani Kothandaraman, Druva has attracted more than $65 million in funding and 3000+ enterprise customers globally.
CloudByte: Storage for shared , multi-application environment. Founded in 2011 by a team of senior technology professionals, Greg Goelz is the CEO of the CloudByte and the company has raised more than $6 million in funding till now. It boasts of clients like Sony, Citrix, netmagic, Apptivo, etc.
Webengage: Onsite customer engagement suite. Founded by Avlesh Singh and Ankit Utreja, Webengage is backed by angels like Rajan Anandan and it later raised an INR 2.5 crore round from Blume Ventures and GTI Capital. Based in Mumbai with a presence in New York, Webengage is used by thousands of enterprise customers.
Wingify: Pioneers of A/B testing, it is now entering the field of testing and optimization. Wingify is a bootstrapped startup that created a space for itself in the A/B testing arena with more than 3700 customers at the moment. Founded by Paras Chopra from New Delhi, Wingify is a storehouse of knowledge around A/B testing.
SignEasy: Electronic signatures. Founded by Sunil Patro, SignEasy helps companies and people expedite business transactions and workflows by eliminating the need for printing, faxing, scanning and overnight shipping involved with paperwork. Used by companies in more than 150 countries, SignEasy has more than 50,000 paying customers.
Ozonetel: Hosted contact center & IVR services for businesses. Based out of Bangalore, co-founded by Chaitanya C., Ozonetel is a bootstrapped venture that expect to hit an ARR (annual run rate) of $5 million this year. Look at Ozonetel’s last year in review here.
Exotel: Cloud telephony service provider. Based in Bengaluru, founded by Shivakumar Ganesan, Exotel raised a $500k round in 2012 and since then has been growing on the back of paying customers which include the likes of redBus, Ola and UrbanLadder.
Knowlarity: Cloud telephony and cloud handling solutions. Founded by Ambarish Gupta, Knowlarity is based in New Delhi and has managed to acquire clients the world over. In July 2014, Knowlarity raised a $16 million series B round.
Germin8: Social media analytics platform. Since the launch of its first product- Explic8- in 2012, Germin8 has leveraged its proprietary technology platform and algorithms. Since then, it has grown to acquire customers globally and raised $3 million from Kalaari Capital.
Covacsis: Big data analytics for manufacturing firms. Founded by Tarun Mishra and Abhijeet Mhatre in 2009, Covacsis is a Mumbai-based company that has conceptualized, designed and implemented the Intelligent Plant Framework (IPF) targeting manufacturing industries. The company has raised INR 2.45 crores from Reliance Industries and Cisco.
Logistimo: Mobile supply chain tools. Founded by Anup, Akkihal, Logistimo is a logistics & supply chain software for rural emerging markets.
Seclore: Information security and rights management. Founded by Vishal Gupta, Seclore is a security software company that raised $6 million in 2013 from Helion Venture Partners and Ventureast. The team has grown more than 20 times over the last three years and currently employs more than 100 people.
Ezetap: Making payments easier. Co-founded by Abhijit Bose and backed by AngelPrime, Ezetap is building products to solve the payments issue. The company raised $8 million series B round in February 2014, and with a team of more than 100, Ezetap has more than 20,000 devices being used across India, South East Asia and Africa.
Tyto: Founded by ex-ThoughWorks professional V Narayan Raman, Tyto’s Sahi Pro is a tool focused on automation of testing web applications. Bootstrapped and a global company, the team completed their 5 years in December with 350+ customers using Sahi Pro. Read their complete story.
Zapstitch: Syncs data between e-commerce store & accounting software. Founded by Satya Devarakonda, the Bengaluru-based company raised an angel round in early 2014. Zapstitch is currently being used by more than 1200 online stores.
CoCubes: Assessment and campus hiring platform. Co-founded by Harpreet Grover and Vibhore Goyal, CoCubes is used by more than 450 corporate and 2600 colleges. CoCubes is backed by Ojas Venture Partners and other angels.
Contify: Competitive intelligence for enterprise and teams. Founded by Mohit Bhakuni, Contify’s intelligence platform is used by enterprises to supercharge their competitive strategy, special projects, outreach programs, and deliver more value to clients.
Whatfix: Helps companies build interactive ‘How-to’ guides. Founded by Khadim Batti and Vara Kumar, whatfix pivoted to current enterprise model and has since raised a $1 million round from Helion Venture Partners.
Wooqer: A platform for increasing team and individual productivity. With 100+ clients and 100k users in total, Wooker is a bootstrapped company that has a platform designed to drive communication & engagement across large closed groups (companies, forums etc).
Simplify360: A Bangalore based social media analytics company which was started back in 2009 by Bhupendra Khanal. The company was in news about a year ago when Adope, WPP, etc. were rumoured to buy out the company but Simplify360 stood strong. With a string of top notch clients like Hero, Infosys, HDFC, Ogilvy and many more, Simplify360 is a strong contender in the global social media analytics space.
KNOLSKAPE: Experiential learning solutions for businesses. Founded by Rajiv Jayaraman in 2008, KNOLSKAPE has grown to build competency in immersive gamification and simulation software focusing on talent transformation. The company is tying up with some high profile HR management companies and also have a significant presence in countries like Singapore, Malaysia and Philippines.
Note: This article was written with an idea to highlight some of the work B2B startups are doing from India and we’re sure there are many more companies doing equally good work. The article will be updated once after one week of the publishing date with more names, do drop in a comment with your thoughts.
Adapted and extracted from yourstory.com