Yeah- that part of the article was not that good. Its clear in 2021 that the companies that win at compensation are the companies that win full stop. Its also telling that California, which has exceptionally robust legal protections around salary transparency and freedom of movement (illegality of non-compete clauses), has become a technology powerhouse.

I always like to keep in mind what Patrick McKenzie (aka patio11) like to say: "everyone's preference space is N dimensional".

I mention that because a lot of people see "compensation" and think only money but that is just one of many dimensions e.g. flexible schedule, career growth, benefits etc

This is a great blog post about using those other dimensions when "just throw more money" is not an option: https://web.archive.org/web/20130409033601/http://www.articu...

As the CEO of a company with 180 employees working full time, I can tell you that the advice to avoid overcompensating is outright wrong. I made the mistake of undercompensating for too long and suffered severely for it. More damage will happen from undercompensating your best employees than by overcompensating.

I am of such mixed opinions on this. I've been the undercompensated employee that was going to walk and got a great package in return. I stuck around for another 5 years and consider my salary to be my own business, and no one elses. (disclaimer: I'm in my 40's)

As VP Eng supporting a team of 30 at a startup. I had a similar situation. One employee was absolutely crushing it by performing above level and when compared to peers, despite earning about 5% less than the median (zero prior experience before being hired, so it was a bit of a gamble for the company). At annual comp adjustment time, I gave him a bump that brought him a percent or two above peers (including their own adjustment).

Well, did that unleash a shitstorm. One of his teammates complained that it wasn't fair that he made more money. She was solid and consistent and was squarely in the "meeting expectations" bracket. It was irrelevant to her that he was overperforming. She had been at the company 2 months longer and therefore, should make more money.

However, what really blew my mind was when the employee who got the raise complained about this as well. He also felt that it was unfair that he made more money than his teammate. They both then brought up that they felt that they felt it was an issue of sexual discrimination, which was especially ironic since our CEO, COO, and VP Finance were women (yes, I was on the management team of a tech company where women outnumbered men).

In any case, the agreed upon solution to make the problem go away was to a) bump the teammate's pay to match and b) completely eliminate any discretion or performance components to annual pay increases. Everyone simply got 3%.

Throwing merit out of the window is not a valuable argument on this discussion. The situation you described is mind-blowing on how out of reality the 2 people were, probably firing both of them would have been the sane solution for everyone else.

The worst part was, it wasn't just the two of them. It was essentially everyone on the team aged < 30 years. As a footnote, they both ended up leaving within a year, and just in time to avoid a nice cash bonus resulting from the company being acquired.

Some folks are irrational; probably not a good reason to throw out rationality.

Unfortunately, as a smallish company, even the hint of having to deal with such a lawsuit made it the most expedient solution. We didn't have the cash to spend on something like that.

Note that the bullet point was not just “overcompensating”, but rather “overcompensating... because she gets another job offer”. I suspect the author would agree that appropriately compensating the employee in the first place would have avoided this problem.