There was a problem. Please try again.
Thank you!

It was middle school. Nine-year-old Tracy Lawrence was crouched in the bathroom, hurriedly gulping down her lunch in a stall. This was her safe haven from the bullies who gossiped about her and taunted her every day. It was also a way to avoid the humiliation of sitting alone in the cafeteria.

Many years later, that memory returned to Lawrence. She had an epiphany as the now-CEO of the office catering startup Chewse. Gossip may run rampant among pre-adolescents, but it’s not something you should have to tolerate as an adult. And the deepest, darkest secrets in a company? They’re typically around compensation. So Lawrence and her cofounder, Jeff Schenck, made a decision that might have seemed counterintuitive for an early -stage startup. They put together a spreadsheet listing every employee’s pay — including their own. Lawrence told her employees as they stared at her, wide-eyed, that they were introducing transparency to the company, which at the time consisted of 18 people. And that it was going to start with salaries. She typed out an email and attached the spreadsheet. She closed her eyes, heart pounding, and hit ‘send.’

Nothing happened. No one freaked out. In fact, no one said anything at all.

Well, okay, some things happened. In the 16 months since sending that email, Chewse’s voluntary turnover has dropped by half to 10% in the first full year of implementation. Employees who resigned provided an average of 5.25 weeks of notice, compared to the national standard of two weeks. The percentage of employees who thought their compensation was fair was at 72%, compared to a national average of 20%. And no employee has ever approached the company with a competing job offer, thanks in part to the company’s clear system of ratings, expectations-setting and regularly scheduled conversations around performance and salary. Some have even told Lawrence they’ve never opened the spreadsheet. It’s been enough just to know that it was there.

Chewse’s team has doubled now to 36, and the workplace is thriving. The company nearly tripled its sales in the past year. Lawrence, who previously founded student dining guide Dish Dash and worked as a corporate event planner for TEDx, has become a champion for authentic transparency — not just in salaries, but as a company value. Here, she takes us through why even the earliest stage startups should consider an open salaries policy, especially if they care about diversity. Lawrence explains how to implement such a program, and why you should pair it with a carefully designed feedback and review system. She shares a four-step process on how to give regular and constructive employee feedback that set expectations and strike the right tone. The end result: a culture of openness, fewer hard feelings around pay and clear communication channels between managers and employees.

The Case for Transparent Salaries

Kicking things off with an obvious question: why consider open salaries at all? Here are the top reasons you should consider implementing a similar policy:

Foundational cultural values. For starters, it’s about embedding the values of transparency and fairness into your company culture from the very beginning — and laying the framework for a healthy environment. In Chewse’s early days, Lawrence and Schenck debated how to best show appreciation to their employees. “We considered different benefits programs, but it always came back to compensation. People really care about their comp. We wondered, what was the most authentic way to handle compensation? It only seemed right to introduce transparency,” Lawrence says. And if you think this is something to hold off on until you have a fully-fledged HR department, think again. This policy is especially effective for super early-stage startups. That might seem counterintuitive, because with such a small staff, wouldn’t there be even more sensitivity around pay? “Incorporating transparency from the very start will set the tone for the organization you become. It’s so critical that you hire people who want open salaries — not just as a tool, but as the type of person who appreciates that approach. You find people who say, ‘I buy into diversity, I buy into equality and fairness.’ Those are the kind of people that you want to grow into leaders at your startup.”

Recruiting. Open salaries can improve the candidate experience and attract talent. “Candidates would overwhelmingly say they really appreciate the transparency. It resonates with a certain type of person. In a survey we ran, 90% of our new hires said the policy set up clear expectations for compensation and the offer process. That really says something. People often feel they’re up against a black box when it comes to pay. It’s verboten. You’re not supposed to talk about it. We bring it straight out into the open, and we find it really impresses a lot of candidates,” Lawrence says. “Not only does it tell them a lot about how they’ll be compensated, it says a lot about what it’s like to work for us. Closed salary systems are also really hard on job candidates. It's incredibly opaque and you're negotiating in the dark. People can feel like they’re fumbling. That didn't feel right to us. We want to be shoulder-to-shoulder with our candidates throughout the process— not be friendly, then get adversarial over comp and then assume everything will be fine again.”

Chewse CEO Tracy Lawrence

Retention. Transparent salaries can also go a long way in keeping employees around for longer, as they’re likely to feel more satisfied with their pay — because as part of the system, you’ll make it clear how it was calculated. “Many people will not speak to their manager if they feel their salary is too low. They'll go and get another job offer. At Chewse, we have a system for monthly conversations about an employee’s output level, which directly affects pay. It’s designed to be less about someone’s worth and more about their output and our formula for salary based on that,” Lawrence says. “It's also not going to be about waiting till December for this mythical pay raise. A raise is not going to be because you're negotiating a better offer. Nobody has ever come to us with another offer from another company and said, ‘I want to negotiate my pay.’ Nobody. They'll come to us at the beginning and say they don’t agree with our assessment of their output level. Great. Then we can have conversations about it. That's where we’d prefer to be versus having to say, ‘You were upset about this for six months and you went and you spun your wheels on trying to get another offer? Sure, I could've increased your pay two grand.’ We don't see that happen here.”

Diversity. You could also see gains in this important area. Chewse has — its full-time staff consists of 55% women. “Women are more likely to be uncomfortable negotiating salary. I've learned in my time as a manager that women and, for us, engineers have tended not to negotiate or negotiate not as hard. I've always been baffled by it, because as a manager you're trained not to give your final offer. So you lowball it and you expect somebody to negotiate and then get to about the right place. That tactic doesn't really work when you have women or minority groups that just aren't comfortable with negotiation. Every time someone didn’t do it, I would cringe and ask myself, ‘If diversity is so important to me as an Asian-American, female CEO, why am I hampering it at my own company?’” Lawrence says. “If you want women and underrepresented minorities to stick around, pay them fairly and make sure they know it. It’s not just the right thing to do morally. It’s the right thing to do for your company, and for your employees. You’ll see that people are happier. They’re more at ease. Pay everyone equally and, just as importantly, make sure they know that’s the case.”

Tech should be a role model for the way diversity works. Right now, we have a problem. One solution: open salaries.

The Four Keys to Making Transparency Work

Open salaries isn’t just posting everyone’s comp on a bulletin board, however. “There’s so much more to it than that. You have to have a culture that’s built on foundational transparency. This permeates everything from how often and in what way managers talk to employees to how a person can get a raise,” Lawrence says. “At the same time, you’re not going to stop resentment entirely. But the key here is to surface it. Instead of it becoming a toxic force where no one feels they’re being listened to, you know exactly who's feeling resentful about who because it's an open, shared space. Some companies will fire you for sharing your salary. Here, we say, ‘Come talk to us about it. You don't agree with your pay. It's okay.’ We talk about it every single month. Since we’ve implemented open salaries, we haven’t been surprised about anybody leaving, especially cases that hinged on compensation. From a planning and succession point of view, especially at a startup level where things evolve very quickly, that's incredibly helpful.”

Here’s her four-step guide to how Chewse has done it:

Post salary in your job descriptions. “Be clear and upfront right in the beginning. Include the salary range. Because our salaries are output-based, a common question we get at this stage is how do we measure output? So be specific in your job description about how you quantify the determinants of salary. Include details about your open pay system in the job description as well. For the most part, people are very excited when they hear about it. It can be a great recruiting tool,” Lawrence says. “This approach will also save you time, effort and heartache by filtering out people who aren’t a cultural fit for your company because they’re turned off by salary transparency, or who aren’t a fit because they’re outside of your range. It’s a phenomenal filter. You waste so much time having 20-minute conversations where at the end you realize you aren’t aligned on comp. You could have saved yourself a lot of time and trouble. Of course, make sure the range you post is the real range. We’ve been tempted to deviate from how we determined pay for certain candidates in the past, but in the end, transparent salaries kept us honest — and hire people who best fit the company, not just the role.”

Excerpt of a Chewse job description, including compensation details, for a VP of Operations & Logistics

Define a ratings system. Chewse uses an A-G rating system to classify its employees by skill and expected output level. An A represents someone who’s fresh out of college or otherwise untested and new, while a G represents a person who’s at the top of her field — perfect for the job, and a rare find. “The way we measure their rating is by output, which makes it easier for managers to have these conversations. It takes a lot of the emotion out of it. Of course, how we define those levels is very dependent on the manager and the role. For sales it’s about hitting a quota X percent of the time. Once that person starts to deliver, we can start to talk about moving him from a C to a D or an E. Then there are other roles like with engineering where it's a lot less based off of hard metrics. This is where the art of management comes in. It’s not a science,” Lawrence says. “A is beginner, B is intermediate and C is performing consistently at the job standards. If someone’s been hanging out in A or B for too long, that’s an indicator you’ve got a problem. In D, E, F and G is where you especially start to get into what's art. It’s become a shorthand for the organization of how we refer to the skill levels and experiences we need. While it varies from job to job, the expected performance levels should have meaningful, nuanced milestones associated with them.”

Chewse's A-G rating rubric

Choose the variables to determine a compensation formula. Chewse uses a formula that gives a base salary, then a multiplier based on a person’s performance. The better and more high-value the performance, the bigger the multiplier. “We use Payscale data and AngelList data and gut-check it with our network. I'll ask other founders what they’re paying for certain roles. Typically for sales people and for account managers where there's a lot of those people in the role you get great data and this works fine. But in the beginning, I didn’t realize how high the comp was for executive roles,” Lawrence says. “We went through a series of people saying our range was too low. At first we thought we just weren’t finding people who understood the startup phase. But after the fourth or fifth time, we realized we weren’t catching the signals from the market. It's definitely something that we've struggled with, so we now work with a comp specialist. She's worth every penny because she helps us understand when we’re underpaying. Then we nip it in the bud. We’ll market test and get the data from Payscale once a year, and build our base and formula off of that.”

Hold monthly reflections, which double as performance discussions. Here’s where the magic starts to really work — here’s the space in which you create an openness that paves the way for honest, authentic conversations around an employee’s work and growth. “We conduct monthly one-on-ones with managers and employees. It’s a way of doing a gut check and staying on top of whether someone is meeting their metrics. It’s also a space for airing out disagreement or identifying problem areas, and to have a monthly conversation about compensation. Here, set expectations and give people specific goals around how to increase their output level,” Lawrence says. “Trust the framework of monthly reflections. It really does work. We had a manager who, in the process of multiple reflections, found out a person on the team was getting ready to leave. The manager initiated a conversation about output level with her, and it led to this big conversation about career progression and dissatisfaction that they were able to address. That person's still here today, and more engaged than ever.”

Here’s Lawrence’s six-step approach to conducting productive monthly reflections.

Start by hiring people receptive to feedback. This happens before the monthly reflection, but it’s an important structural support. “We hire for our values, which include fearless introspection. One question we ask in the hiring process is: ‘What’s been an important transition point in the past 18 months for you where you've learned something about yourself?’ We look for instant intimacy. They don’t have to tell their whole life story, but they have to be willing to get vulnerable,” Lawrence says. “Part of that will come if you just show receptiveness to their honesty. My managers and I all bring our own fearless introspection to the table, and we encourage others to do the same. For example, we had someone who we interviewed and she was a little bit late. She was almost in tears. I happened to be the first interview and said, ‘Hey, what's going on for you right now?’ She's said, ‘I just feel like I've messed up and I feel like I've failed this interview process.’ We hired her. Her opening up and being vulnerable that helped clinch it.”

Use a simple, low-lift grading rubric. Chewse has a standard form that managers fill out before the one-to-ones. The grading rubric ranges from √-- (check minus-minus) — indicating failure to perform, with immediate action necessary to address it — and √++ (check plus-plus), which means far exceeding expectations. “First, managers assess work performance, which is basically your output level. The next three sections list our values: authentic connection, fearless introspection and intellectual curiosity. At each reflection, show them how you’ve ranked them. I don't hide it, and I've learned to normalize it. The first few times it feels fucking awful. You say, ‘Listen, I gave you a check minus,’ and even if it's justifiable, it still feels horrible to tell someone the bad news,” Lawrence says. “But you know what? Every single time the person has said, ‘Thank you for telling me that. I'm so grateful that this hasn't been hidden.’ Then it starts to get easy. The next month maybe you’ll give a check-plus for rocking it, and then you do that three, six, nine months in a row, and at that point it’s a signal that it’s time for an output level increase, because they’ve been kicking ass. While this process does take time for managers to execute, it pays dividends in employee satisfaction and expectation-setting.”

Use the meetings to develop and grow your employees. The reflections are an opportunity for employees to discuss their growth with their managers, and get honest feedback on where they are on their trajectory. “One of my managers has the bullet points for A-G performance. She might say, ‘Yeah, they’re doing well at B, but they’re not yet at C territory.’ There has to be a step change difference. For account managers, you have to be either taking an active mentorship role or you've taken on your own individual projects in addition to your own workload,” Lawrence says. “Still, you don’t have to fill every requirement to move to the next level — it’s more of a discussion with your manager, who has a framework for measuring your performance. People sometimes pick their paths, and we tell them that there are several ways to go. You can start to take the mentorship route, becoming the future manager. The fork in the road usually happens at C — be careful when someone’s been hanging out in A or B too long. And advancement has many faces. You could be a really great individual contributor who's specializing. Someone might be doing incredible work but not want to be a manager. They should still get an output increase.”

We're human. We can't hold everything in our head. Monthly reflections help quantify a streak of good performance — or bad.

Expect — and welcome — disagreement. While this framework takes a lot emotion out of the process by linking it to performance, the issue of compensation is still a loaded one — so expect people to disagree with their reviews. “We totally expect disagreement. We've had it before and we'll have it again. It’s about how you set expectations around performance and give people specific goals around how to increase their output level. That's not an easy job. Sometimes managers say, ‘I'm having all these hard conversations for the first time,’ but as a result of those hard conversations, people don't leave your team. We measure success not just in retention figures, but in the number of hard conversations we’ve had,” Lawrence says. “It’s about having a lot of clarity upfront, too. On your first day of the job, we give you very clear guidelines, and from there we always keep referring back to it as these conversations happen. That way there’s no question of what expectations are. As long as you're thoughtful about it upfront, the system does the work for you. This process also eliminates surprises. Let’s say throughout the year we’re telling a sales rep, ‘Hey, you're great at closing deals but you're struggling with upsells.’ It's something that we’ll have reinforced in our monthly reflections. So at the six-month mark, it should be no surprise when we say, ‘I'm keeping you at a C because I've given you all this feedback that we're not yet ready to move you to a D.’ It gives managers an easier time of just saying that it’s output.”

Train your managers in tone and approach. Lawrence’s team uses the principles of nonviolent communication, an approach designed around compassion and empathy. “We use the OFNR framework to structure feedback: observe, feel, need, request. Make an observation, state how it makes you feel, then what you need and finally cement it in a specific request. For example, “I know getting from a C to a D is really important to you, so let’s talk about that. I’m excited for this, but I noticed you’ve thrown three work parties in the last two weeks. It’s making me feel like you aren’t putting your all into these deadlines. What I need to feel is that you’re hungry, because the organization needs it right now. We're in the middle of a financing and we need to hit revenue milestones so that we can fundraise,’” Lawrence says. “Don’t trigger a person’s fight or flight response. Be empathetic but also straightforward. Set the tone from the start as a manager: ‘I’m going to be tough with you and I’m going to be real with you but I’m going to do it from a place of care. Always frame it from a place of care.”

Convene tribunals to help managers measure success uniformly. Use your weekly management meetings as opportunities to discuss. “All the managers come together and talk about who they're considering for raises. We actually prioritize it at our weekly executive meetings, too. At the end we'll always save a space for anybody issuing output level increases. They’ll present both the data about output and the monthly reflections. We’ll ask questions. The tribunal is a tough place. We’ll push back and ask for more data, or challenge each other to say, ‘What about this person? Doesn’t she deserve an output level increase?’ We advocate to each other,” Lawrence says. “It has to be unanimous. And it’s a way to make sure everyone is grading by the same yardstick. If you're lagging, trust me, your employee's going to know. They'll say, ‘My friend has an easy manager. This isn't fair.’ We try to keep consistency there. It’s hard, but if you bring people together regularly and have them challenge each other, that’s a way to keep everyone on the same level playing field. Having a timeline is important, too. People will either forget or it’ll only be the squeaky wheels who get the raises. We evaluate everyone on their output at their six-month mark, but if someone’s rising faster, you can initiate an increase sooner.”

An employee’s output level is the micro, but the macro is their career progression. Monthly reflections can capture both.

Looking Forward

Move toward a transparent culture by making employee salaries open. This tactic can also benefit your diversity and inclusion efforts. Build a framework and structure around how you rate and evaluate employees for raises. Start with a ratings system that’s tied to a worker’s output level. Formulate how you’ll determine compensation based on that — try a multiplier, or tinker around with your own formula. Then hold monthly reflections, which also double as performance discussions. Train your managers to speak empathetically and openly during these meetings, and in hiring, look for candidates who demonstrate a willingness to be introspective and open. Convene quarterly tribunals for managers to make their case for raises and challenge each other on their decision-making.

“After implementing open salaries, we’ve become a more healthy-conflict culture. Originally, my thinking was, ‘Can’t we all just get along?’ What it's actually forced me to do is to recognize that conflict is inevitable, and get serious about how myself and my managers communicate when it happens. You can’t avoid disagreement. What you can do is surface it, address it and talk about it early, and that’s what having an open and transparent culture is all about,” Lawrence says. “If more companies implemented this policy, I think you'd have a lot more diversity. You'd have a lot more women and minorities applying for tech companies and being part of tech. Cultures would become less toxic and you’d have more productive conversations faster. This is the only way innovation and inclusion can continue on together.”

Photography by Bonnie Rae Mills.

Recommended Articles
First Round TalentAccess exclusive opportunities at the startups in our community