Article: Can you retain people with an open salary system?

Compensation & Benefits

Can you retain people with an open salary system?

The benefits of open salary and democratic appraisal policy include a high degree of ownership among employees and a low attrition rate compared to industry standards.
Can you retain people with an open salary system?

In an era where fair and transparent performance assessments are highly in demand, Sahaj Software, a technology services company, has implemented a unique democratic appraisal policy and open salary system.

This approach encourages open discussions and debates among employees to determine the companywide wage bill hike, which is then implemented at an individual level - and if anyone has a challenge or wants a review of the hike at their level, they are encouraged to approach the leaders.

The system fosters a culture of collaboration, trust, and transparency, says Akash Agrawal, Co-Founder & CEO of Sahaj Software.

In a recent interview with People Matters, Agrawal shed light on the company's decision to implement these practices and the benefits they have brought to their employees.

How did your company decide to implement an open salary and democratic appraisal policy?

The idea of open salaries and our appraisal system germinated from our urge to keep processes within Sahaj transparent, fair, and driven by people themselves. Sahaj is firmly rooted in our vision of reducing exploitation of people -- both within and outside the perimeters of the organisation -- who form a part of the ecosystem. Treating people fairly is paramount.

How are employees evaluated and appraised under this system? 

When it comes to appraisals, feedback and salary hikes are independent of each other. Traditional ratings and other assessment methodologies have been replaced with more evolved processes.

At Sahaj, feedback is not an intermittent process. Instead, it happens continuously and organically to enable course-correction and consequently, growth at professional and personal levels.

In addition to one-on-one feedback, there are mechanisms in place to enable group feedback too. In this way, people seek, share and work on feedback solely with the motivation to grow.

The whole organisation comes together to debate, discuss, and arrive at what should be the company-wide wage hike percentage which is then executed at an individual level. Anyone who is dissatisfied with her/his hike numbers takes it up with the leaders to have an open conversation and arrive at an outcome mutually agreed upon. Further, organisation-wide hike numbers don’t come into effect until every individual has signed off her/his hike.

What are the benefits of the system? Have you noticed any challenges or drawbacks to the policy?

Since our inception nine years ago, the appraisal process has indeed undergone a lot of transformation. The values of openness and transparency have gained a richer appreciation over a period by over 200 individuals who constitute Sahaj.  

As a result, there is a high degree of ownership in every individual. This has been a major factor behind our low attrition rate (in the early 10-12 per cent) as opposed to the industry-wide 25-26 per cent.

When the concept was originally conceived, there were concerns: how does one manage performance differentiation? What’s the path for setting goals and objectives? Will people receive feedback in a timely fashion for course correction? Compensation could become a challenge as well.

To solve these challenges, it was important to ensure that the core values of trust and transparency were exercised within the organisation at every step. It was imperative that there was ample feedback mechanism put in place and that policymakers and followers were not two independent groups operating in silos, functioning at two extreme ends of the hierarchy.

Further, there had to be a company-wide shared understanding that no policy/process is absolute and there is always scope for evolution and making things better.  

How do you ensure that salaries are fair and equitable for all employees? How do you handle disputes/disagreements between employees and their appraisers?

Through this journey of over nine years, we have incorporated a lot of initiatives to promote honest feedback and learning. For instance, we have a monthly all-hands meeting called Gram Sabha that provides a platform to every individual to share her/his views and suggestions across a wide range of topics from talent management to technology, marketing, and even operations.

Annually, there are retro conversations wherein every individual’s observation and input are discussed and debated to course-correct and find the best way forward for the organisation. As a result, there is a high degree of ownership in every individual.

To further promote fairness and transparency in salary decisions, we are exploring the possibility of allowing individuals to collectively apply their own hike percentages in a group setting, instead of leaving this decision solely up to managers. This approach creates a sense of ownership and accountability among people, as they are empowered to advocate for their colleagues and ensure that everyone is paid fairly based on their contributions and performance.

We have seen firsthand how this open salary approach fosters a culture of collective responsibility, with team members supporting each other and advocating pay increases that are deserved. This not only promotes a sense of equity and fairness among individuals but also helps to boost morale and engagement across the organisation.

We believe that by involving people in the salary decision-making process, we can create a more inclusive and collaborative workplace where everyone feels valued and empowered to contribute to the company's success.

How do you ensure that the appraisal process remains unbiased and transparent?

The fundamental idea of building such a system is to ensure equality and reduce exploitation. All conversations throughout the process are done openly and on a regular basis which ensures that any kind of prejudice or favouritism is weeded out of the system.

People are constantly engaging with team leads, project members and leaders to gain clarity, raise questions and provide clear inputs on how to improve. This further strengthens the idea of transparency and reduces biases in the system.

How has the implementation of open salaries/democratic appraisal policy impacted employee morale and satisfaction?

Team members and peers have open dialogue and give/receive feedback frequently. This has fostered an environment of trust, respect and more importantly, enabled people to debate, challenge and change what they think goes against the grain of the organisation.

We have a very low attrition rate of under 12 per cent annually, a good indicator of how people feel about the process. Frequent conversations happen to ensure that an individual’s challenges are resolved and her/his aspirations are respected and furthered. All of this combined leads to increased morale and satisfaction of every person within the organisation.

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Topics: Compensation & Benefits, Employee Engagement

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