Would you be comfortable letting your coworkers decide your salary?
For the 140 employees at Expensify – a $3 billion tech company specializing in expense filing that went public in November – that’s the only option. All employees vote on every team member’s pay, even Chief Executive Officer David Barret, according to CBS MoneyWatch. No negotiation is allowed.
Barrett said he started developing the company's compensation philosophy by thinking about what a “dream company” would be. His goal is to have a “flat” and “transparent” company where everyone is on the team.
His own salary, which was $933,000 in 2020, is set by a board based on company votes.
While employees can volunteer to take part in the voting process (it takes around 10 hours to complete every six months), all salaries are determined by the vote results. If they decide to vote, employees must compare 9,000 pairs of workers and decide in each case which one should be paid more.
These pairs are shown side by side, with their names and information about their accomplishments in the past six-month period.
Once the votes are in, “the company trims the outlying top and bottom scores to control for issues like people who have grudges or who want to reward their friends,” said MoneyWatch.
“There definitely have been weekends when I spent my whole weekend doing comp review,” said Gabi Horowitz, head of marketing and brand at Expensify. She has worked for the company for more than five years. “It feels really important. It's a way we can all acknowledge and reward each other for our hard work.”
Horowitz said she felt trying to get a raise at her former employer “felt very combative,” and she prefers the Expensify approach.
Some employees have been less impressed by the policy, said Barrett.
“Say if someone is unhappy, let's talk about it,” he said. “But let's understand why it is that the company assessed you at this place. Either you are doing something that no one else knows, or it's also possible that everyone else is right and you are wrong.”
“In the vast majority of times, it's you are really not as good as you think you are,” the CEO said.
“I haven't heard of a scheme quite like this,” said Jennifer E. Dannals, an assistant professor of business administration at Dartmouth College, of the Expensify model. “It's not uncommon to have a peer rating within your team, but it's unusual to have it within the entire company,” said the professor, whose research focuses on how people and teams interact, including biases in negotiation.
Barrett added that the company banned negotiating in part because that process rewards negotiation rather than actual performance. Even initial pay for new hires is set by the curve following interviews and they too are not allowed to negotiate.
“It sounds like what they are trying to do is democratize the performance evaluation,” said Harvard Business School assistant professor Julian Zlatev, who studies issues such as the choices people make to reinforce their value to a company.
“You will inevitably be ranking people you don't have a lot to do with on a day-to-day basis,” he said.
Shelly Holt, chief people officer of compensation company Payscale, said the method could invite more bias into pay determination.
“It could turn into a popularity contest over who is positioned to be top on that leaderboard,” she explained.
However, some research suggests that evaluating a worker in comparison with another employee does remove some bias, according to Zlatev.
Managers are more likely to judge a worker's actual performance when comparing her against another worker, rather than falling back on gender stereotypes, one study indicates.
Holt also said that the Expensify approach would be hard to implement at a larger company, as employees would be less likely to have knowledge about their coworkers’ responsibilities.
Though Barrett credits the democratic salary process to helping him keep employees longer than other tech companies, he agreed that his company’s approach isn't right for all employers and that the company is open to tweaking the compensation voting process. It has already made changes over the years due to feedback from employees.
“It has a nice benefit — we think it controls for internal bias because there is no manager you have to suck up to,” he said. “The only way you can game the system is by kicking ass. You win by being amazing.”
Along with Expensify’s new approach to setting salaries, other companies are re-thinking compensation strategies to allow for more transparency, said MoneyWatch.
“More states and localities are also enacting laws banning companies from asking about a job applicant’s pay history because it often locks women and people of color — who historically have been paid less for the same job — into lower salaries,” said the outlet.