You’re going to make mistakes

In our last post about compensation and levels, I talked about a common, positive situation. Though you should still go back and read that post, here’s the basics: You’ve hired someone, and they’ve exceeded your expectations. Awesome! Now you have to decide what to do to reward and recognize that person. This is an excellent position to be in. You have someone on your team who is fabulous, and you know it.

But what happens if your new hire isn’t the total badass you had hoped they’d be? What if the story centers on the E3 who is getting lapped by the more junior E2? What if at time of hire, you had leveled that E3 as an E4?

Level early, revisit on a regular cadence

Levels are a guide to help you calibrate your expectations. They give you future guidance on how to adapt and adjust compensation as people grow… and as they don’t. Let’s assume for the rest of this discussion that you’re taking a close look at an employee that you hired in as an E4. What if you determine that their performance isn’t up to E4 standards?

By quantifying your expectations using levels, Past You gave Present You a gift. Now, you look at how the employee is performing and ask the hard question, “Is this what an E4 looks like in this company?” Further, those thought exercises can help you decide if that E4 has a path to success in your company.

I admit, this one is way harder than the super-badass-E2 situation I described. What do you actually do when you have an employee at the wrong, higher level?

Should they stay or should they go?

When there is an egregious mismatch between your expectations and an employee’s self-assessment — why? Your first step is figuring out why someone isn’t meeting expectations, and seeing how you can remedy that. This can be a frustrating exercise, but it is worthwhile. It’s often much easier and more efficient to debug a person than to replace them.

It might mean that they aren’t clear on what you want. Or that they are getting mixed messages from different internal stakeholders. That one isn’t always easy, but you can fix it. But it might be that they are struggling with the pace of working in an early-stage company. That one… not so easy to fix. You may need to let them go.

never take compensation away from an individual

I can’t think of a time when taking comp away from an individual has made sense long-term. Not one.

Changing their compensation

One thing you may consider is changing the struggling employee’s compensation. It’s tempting to try matching the company’s pay-out with the employee’s contributed value. You can’t change the equity/options you’ve already given, but what about salary?

Do not consider this lightly.

Taking salary away is hard. It’s hard enough, I can’t think of a situation where it makes sense. (If you think you have such a case, I’d love to hear it!!) In the best case, you’re sending a message to that person that they’re just meh. Or even worse, that you’re giving up on them yet too conflict-averse to cut ties. I guarantee that the employee will talk with colleagues about the situation as well, and this story will spread.

Yes, there are cases where an organization may lower salaries across the board to save costs. Those are hard enough, but this isn’t that. There’s pretty much no way to reduce salary for an individual that doesn’t make you look like an asshole. It sends the message, “Please quit. I can’t bring myself to fire you.” And that ain’t leadership.

Decisions about compensation and salary are complex.

These decisions get more complex the closer you look at them.

Changing their level (and not in the happy way)

Upon reflection, you might decide that your employee is doing well enough for now. You’re going to keep them on, and re-slot to a lower level. They may have out-of-band salary, but that comes with this change. From a planning perspective, it could mean smaller future raises but no salary changes now.

This is where super-transparency cuts both ways.

It can be refreshing to be in an organization that tells you all the planning details. Transparency can be wonderful, but it isn’t free. (Full disclosure: Both Lisa and I worked in a company with extraordinary transparency. We’ve seen the good and the not-so-good.) Using levels only for planning and strategy, you can easily make a level change. Sure, the employee will be out of band for the level. But by re-slotting them, you can clearly identify and communicate your future expectations.

 

When a transparent company culture includes sharing salary and level information with employees, these decisions are more complex. As humans, our self-image is often informed by how we see our work. An employee may (rightly) see a change in level as setting them back in their career. When you openly share salary and level information, then other employees may (rightly) point out that this discrepancy isn’t fair. Like I said, transparency can be wonderful, but it isn’t free. No matter what, you shouldn’t make a change like this without serious consideration. That’s especially true if you’ve shared levels, bands, and/or salaries.

Everyone makes mistakes about compensation.

Take a good look at your mistakes. Own them, and move forward.

Own your part in this

Every company gets into the “mis-leveled employee” situation at some point. It happens when we hope that someone will be more badass than they turn out to be. Sometimes, we find ourselves trying to rescue the situations. Other times, we have to let an employee go. But no one gets levels right 100% of the time — there is an error rate.

You are going to make mistakes.

As founders and hiring managers, we have to take the lion’s share of blame for these situations. We fall in love and believe that someone will be our 10x superstar… even when their references don’t bear that out. We forget that being extraordinary at a past job doesn’t magically translate into being extraordinary in our companies. Simple desperation to fill a role can lead to compensation mistakes that are hard to correct.

We can’t only assign levels based on our hopes. We also need to take a hard look at our past failures to accurately assess new hires, and work to improve. Aligning employees with an appropriate level is a skill, and you can get better at it. It takes both effort and introspection to improve your accuracy.

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