Today’s guest is Natalie Cleaver, the Head of People at Rune Labs, a software and data platform company focusing on neuromodulation. In today’s episode we learn about some of the challenges startups face during recruitment drives, the development of interpersonal relationships between team members, diversity and inclusion for startups, the importance of empathy from management, Natalie’s revolutionary compensation strategy, and much more.
[0:00:06.1] RS: Welcome to Talk Talent to Me. A podcast featuring the most elite talent leaders on the frontline’s modern recruitment.
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[0:00:59.4] RS: Joining me today on Talk Talent to Me and beaming at the very outset here in my recording tool, which I do appreciate is the head of people over at Rune Labs, Natalie Cleaver. Natalie, welcome to you, how are you today?
[0:01:11.7] NC: Hey, very nice to meet you. I am doing great. I am indeed the Head of People at Rune Labs and my name is Natalie Cleaver and my pronouns are they/them. I am transgender and non-binary.
[0:01:21.5] RS: Thank you for sharing, appreciate that context. How are things going for you right now? Is Rune Labs quite hectic normally? A normal amount of hecticness, particularly more busy than normal, how would you characterize the state of the Rune Labs Union right now?
[0:01:35.6] NC: We just went through a period of chaotic hecticness but I’m kind of excited to say that we have stepped into the next phase, which is the exciting growth. We’ve got a lot of traction on our core product, stabilized some of our internal things like engineering management, et cetera.
This next phase, like where we are right now is we’re series-A stage startup. We have currently 50 employees. I’ve got another 10 to 15 people getting onboarded in the near term future and then probably by the end of June, I estimate we’ll be about 80 people and that really is the team that should take us through this next phase of growth and on to our series-B raise.
[0:02:13.5] RS: Got it, so these 10 to 15 onboards, are these people who have accepted offers, have offers out, where are they in the funnel, Natalie?
[0:02:21.6] NC: I would say we have maybe 10 people with accepted offers, five people we anticipate are going to accept offers and somewhere along the hiring process for the other 10 to 15.
[0:02:31.1] RS: Got it. How ratcheted down is the onboarding process? Because at this stage of 50-ish people, it can be pretty – what’s the word? It can be kind of a freestyle. I remember, I’ve started at companies sub 50 and I walk out and people will be like, “Can I help you?” I’m like, “Yeah, I work here now, I really hope you can help me” I hope that’s not exactly what it’s like at Rune Labs. How are you thinking about onboarding these folks?
[0:02:52.7] NC: It’s definitely true, onboarding is a huge challenge for startups, especially at that early growth stage. You know, until I would say, we have now got onboarding pretty well managed but maybe up to even two or three months ago, that wasn’t he case. It was still just sort of throw bodies over the fence and every once in a while, a new team member would start and everyone would look around going, “Well wait, who is going to onboard that person?” like did somebody tell them what we’re doing but now it’s a lot smoother and part of that has to do with just some key pieces and are we put in place.
One kind of, our security and IT function. I would now have someone leaving that, that’s been hugely helpful. I have a people operations manager, he reports to me and she really is handling the day to day of onboarding for the group as a whole and I think we’ve even smoothed out that handoff from, “Hey, here’s your intro to Rune and then, here’s your intro to your team” and all the important professional content that you would hit at that point. So, I think I got its move, it’s absolutely necessary, we can’t hit on hang-ups at this point and keep moving forward or just snowballs.
[0:03:48.9] RS: How do you think about the lifetime of onboarding? Because frequently, it can stop after a couple of days but surely, that first few months is a pivotal time to whether someone is going to either one, stay or two, stay and succeed. What do you think is the people team’s role and continuing that sort of engagement monitoring?
[0:04:08.6] NC: I’m about to say something I maybe shouldn’t say. Since I can backtrack later, I’m going to say it. I think it’s true, there are gains that can be made to having a more comprehensive consistent managed, onboarding process that also looks at that person’s first week, month, 60, 90 days. We’re not there yet. One of the – the kind of fun things about startups but it’s about that continuous improvement, re-iterating, right?
You’re always trying to figure out, not just what needs to be done but where the greatest gains are. It’s at that longer term, more in depth onboarding of culturation process. Right now, we’re still a little ruthless like not cruel in any way but we just sort of throw people on to the pot. We are definitely getting them up to speed on technical stuff that’s happened within the organization and I think it’s an extremely welcoming group but it’s still a bit free form.
So it’s more like, throw the person into the pool and say, “Hey everybody, make sure that the new person that joined us can swim, everybody keep an eye on it, I’m going to be busy out the door recruiting new people.”
[0:05:06.5] RS: Yeah, I think that’s reasonable to expect at that stage that the individual managers themselves need to step-up and do a lot of that work, especially in the beginning and I think as a candidate, you can expect a degree of that as well where it’s like, “Look, we have sub-50 people.” There is kind of an expectation that you need to show up and just start doing your job, right?
That’s just how it is at the earlier stages and you know, welcome to the jungle, we’ve got fun and games over at Rune Labs. So, I don’t think that’s controversial what you said, just to give you a little bit of grace there. So where you are with onboarding is you know, factor or prioritization a little bit at this stage. What are you prioritizing, what’s kind of top of mind for you?
[0:05:45.7] NC: Absolutely last few key hires so new growth phase, post next raise for sure but right now I’m at the end of our roadmap for our series-A growth, right? And we do still have a couple of really key roles that we need to fill. General Counsel I’m looking for right now as well as probably somebody and a kind of VP operations, COO level sort of a kind of very high level management role at the company.
Trying to make sure that these last few folks and my part did shift, a tiny bit with recruiting, you know? Initially, especially when you’re recruiting engineers and you’re just like, engineers are tough. They’re a hard sell you got to get out there, you got to run a good process, you have to go and get experience, make sure you’re a great place to work, we’re mission driven, we work to help facilitate treatments for things like Parkinson’s so that’s a good selling point.
But early on, you’re just like, “Hey, how am I going to grow the team fast enough, big enough?” These last few hires, I think my focus has shifted just a bit and the only thing I would say we’re prioritizing a little bit more right now is really genuine interest in what the company is doing. Now, I know lots of people are looking for work, we all got to work.
You need a job but I do really – especially with these key folks on our management organization, you know, I want to make sure that it’s something that they are – not just have a background or right skills for but they’re generally inspired by and they really do want to and this is the final thing, be part of the collaborative team.
This is the thing I tend to emphasize above everything else. It doesn’t matter what kind of rock star you are, it doesn’t matter how great you are or what experience you came from, if you cannot work with other people there is no space for you in our organization.
It’s not even like a sentimental thing, it’s not a feel good thing like, “Oh, co-operation, sesame street, we all get along” It’s just pragmatic. The whole reason you raise all these money, the whole reason you built a team is you have goals to accomplish and you cannot accomplish those goals as an individual. It doesn’t matter how many resources you had, how brilliant you are but you have to get the other pieces that you need.
For me, as a people person, can I accomplish the same thing with a team of 50 that I can with a team of 75? If we can avoid hurdles of anyone who might be destructive to the organization or who is so self-interested that their goals are not aligned with the team. It does take some culture norming, it takes also just reminders, you know, day to day, things happen.
You know, people, we all have feelings, we develop a kind of whether to – you know, things like performance or how’s this going to reflect on me. So it’s easy to think about goals that are not just the company’s but that’s always we’re trying to bring people back to and this is one of the reasons that soft skills get to be such an important thing too.
[0:08:08.2] RS: That makes sense, the mission alignment, because it’s an easy thing to say, you see it on lots of ‘About Us’ pages but at this stage too, someone just being able to do the job, it sounds late to say but that’s probably not enough, right? Because if they don’t really care, then they’re not going to do good work, right? And the company won’t succeed.
Especially in the early stages, the input of the initial crew and them caring, I feel like is so crucial to success so that makes sense. You mentioned a big piece of that is culture norming and sort of indexing on soft skills, what’s your approach there?
[0:08:37.2] NC: So, soft skills are, I think one of the hardest things to hire for, hands down. You know, you can look for specific kind of experience, specific industry expertise, certain skills, no problem. Soft skills are much more hard, they’re much harder to evaluate and the other thing that kind of comes into play is when you talk about evaluating soft skills, it’s more subjective.
I can tell you, you know, you have experience in this kind of law and this sort of practice but how do I really say like “Oh, this person communicates well, this person doesn’t communicate well.” It’s an opportunity for bias and prejudice to enter the interview process. So you always have to measure that and to count for it as best you can, I think in the process, to make sure that you’re being fair and really generally giving equal opportunities to everyone.
Also, just bringing in different voices, different perspectives, especially for healthcare, this is super important, you know? We’re going to make sure that everyones’ experience is reflected in the product that you’re creating and that your product will serve in one’s needs but, soft skills are the single most important thing, I think.
It’s not just stuff like communication and this directly relates back to the collaboration issue, co-operation. At the end of the day, what really makes people successful, not just as I see it as managers, it is interpersonal skills. It’s empathy, it is the ability to understand other people what they need to understand problems, to hold in mind multiple solutions, to be flexible in your approach to things, to listen, to receive feedback, to change.
Those are pretty, like, high order things to ask from any human and sometimes we do have minor conflicts which – that’s already started. I mean, you can’t run an organization of five people without like some minor conflicts here or there. Sometimes I’ll sit down with people and start and say, “Hey, you know, I’m about to ask you to do something really unreasonable” essentially.
“I need you to take a deep breath, a safe space, first of all, we’re just talking. But here’s a problem that needs to be solved. So let me invite you to be part of the solution” to not hear this say, “Hey, there’s a problem, there’s no wrong with you, this is criticism, you’re in danger. None of that but here’s the thing that’s happening and can we together, now work to change the outcome?”
Some people can do that, some people can hear that and some people can’t and that’s absolutely like emotional intelligence, it is personal maturity and those are skills you absolutely need in an organization.
[0:10:57.3] RS: What do you think is the risk of not prioritizing soft skills or not indexing on soft skills?
[0:11:04.7] NC: It’s conflict for sure, right? All you have to do is think about the resources that conflict eats up in our organization to understand why it’s undesirable. But beyond that, I think it really does, again, goes back to collaboration.
You really cannot afford to have people who pursue their own path and their own interest. That is I think what happens if you really are – I’ve been in other organizations where people are tempted. You’re tempted by certain candidates, all the right degree, skills, qualifications, maybe they interview really well but there’s something like a lack of flexibility.
Something missing on the soft skills side or a lack of empathy and then you think like, “Okay, well, could I use this person in a more limited role? What if they don’t have reports, what if they don’t need to manage?” and I think that is a rarely a good trade-off honestly, in hiring.
[0:11:49.4] RS: Could you give us some examples of the resources that conflict uses up?
[0:11:54.7] NC: Well, time. Time, absolutely, right? The number of hours and it grows exponentially like right off the bat because now you’ve got some of your people team involved, you’ve got multiple individuals involved, your people team involved, you’ve got managers, God knows how far up the ladder.
All of whom have multiple different multi-directional conversations around the issue, trying to problem solve it and then there is the ill will that bears on the team. If was to tell folks like “Right now, we’re 50 people, we’re just about to head into, we have an in-person on site next week in Monterey, we’re all going to be together, it’s going to be awesome.” I tell people all the time, we don’t – they better give up more places in a family? No.
First of all, everyone comes with lots of different kinds of families, we don’t need that that. We don’t need to be deeply involved in each other’s lives. We don’t need to have difficult relationships but we do need to treat each other with respect. We do need to have empathy to be able to hear and to be heard, right? It doesn’t have to be this deep profound engagements but it does have to be respectful and collegial.
By emphasizing that, deep interpersonal relationships have the potential for deep conflict and that can just rip an entire team apart and now you’re in a place where as an organization, you have to replace a whole lot of people or replace an entire department or restructure part of your team, catastrophic. It can be catastrophic. I just want to emphasize too, because I don’t want to get the impression that I’m like, “Oh, we don’t have to get along.”
Even while I’m saying that, we’re not a family or we don’t have to be a family, we don’t have to have these super tight-knit interpersonal relationships. We do at the same time like care about each other and I don’t have too, as a people, like hand that down. I don’t have to say, “We’re a culture and we care about each other.” These are all decent people that we’ve hired and we spend a lot of time with each other, problem solving, working together.
Some people become good friends with, some people we’re going to get along with, some people, not your either personalities don’t work together. Whatever, but you can work together for the 15 hours a week that you need to and then the time that we’re together and this is another one of my priorities is like, increasingly. If I hire people, I want them to stay. We’re not looking for people to be with us for a year or two years. We’re looking for people to stay with us for a lifetime, which in a startup is four years.
I want people to be really invested in staying and growing the company. If we’re all together for four years, you know, those people that you work with every day, those relationships that’s gradually bought over time some of them, you’re going to care about and they’re going to have kids and they’re going to get a new dog or something terrible is going to happen or they’re going to lose somebody and you know, we tried to have like genuine human relationships without needing – indirect at the same time but that doesn’t mean that we have to be living together on top of each other, everything together, all the time, always.
[0:14:26.4] RS: You’ve honed in on an interesting paradox about work because I tend to agree with you. If someone says that their company is like a family, you should run but the same time, you might spend more time with your co-workers than you do with your family. Less so in the remote world but in a world where you go into the office and even when you had to shut yourself in your work from home situation for a good chunk of each day.
You spend a ton of time with these people and it’s too much time and life’s too short for you to not like them I think or get along with folks. What is the balance there I guess, culturally? How much should we expect to get from co-workers.
[0:14:59.5] NC: I can work about this in practical terms. Let me give you a practical answer and then a more theoretical answer. I’ll tell you practically what we’re doing at Rune. We are a remote first company, absolutely. Our team’s distributed in the US and Canada with a couple of folks who do work from us from Europe as well, with the bulk of our team is in the North American time-zone.
For those folks, we’ve adopted a model where we’re going to hire people remotely, we have standard working hours, four hours a week where everyone is generally speaking, expected to be around and available. It makes it possible to work concurrently to have meetings scheduled, et cetera.
Beyond that, we encourage certain kinds of personal, none of this is rocket science, it’s all pretty basic. Like, we encourage certain kinds of personal interactions on Slack for example, right? Slack isn’t just a tool for communicating about work, it is also that but you know, we share things like we have little silly channels like, “What are you eating? What are watching?”
We talk about ‘Severance’ and we talk about what we’re all watching right now. Old enough show like little Japanese toddlers going on their first errand, that’s really cute. We share photos of what people had for lunch and those kind of stuff. It’s silly little interpersonal ways of relating but it’s also pretty foundationaly human, a lot of what we talk about.
We also have settled on doing it once a year, we are going to have this in person meeting for the whole team, times that it makes sense for us all to get together, have the face time, do a little bit of the interpersonal stuff that you do miss in a remote setting to just kind of face to face, casual relationships rather than directed communication all the time and then beyond that, we’ll do a couple of like, functional meetings during the course of the year too.
We’ll bring people together in functional groups, they’re our product team, I remember our star designers and they can have the chance to collaborate in person. Those expenses that company is happy to pay because I do think it re-enforces that very human desire to be together and just changes the way we communicate.
Once a quarter, we do a digital event so we have silly stuff, is there like, you know, a Pub Quiz that we all did on zoom, you know? We had an art lesson and we held a watercolor class which was actually really awesome, I was surprised. Super fun, we try to do little things like that and I think, right now for our purposes, it’s working. It’s enough, kind of social context that it lubricates, it makes it easier, facilitates the relationships that we do have that are more work oriented.
That’s like practical answer about how you get people to just relate to each other. This involved sharing who you are and then this leaves me into the more theoretical answer. One of the most difficult things I think that I deal with is people. It’s an awareness of how norms don’t apply to us all. We know that there are differences and we talk about big categories, race, class, gender, right?
We know that we come from different backgrounds, educations, where we’re from geographically in cultures, religion. All the stuff and so, for us to work together, when you’re really just like kind of pulling people at random from across the globe in some cases, what we have to do is collectively agree upon a set of standards and it’s very easy to just assume that everyone shares your cultural norms and this is just what gets you in trouble again and again and again.
For the most part, people have ironed out a lot of the really obvious ones but there are still less obvious ones and I can give an example if that’s useful. For the onsite that we’re doing next week, it’s like, we’re going to spend three, four days in Monterey and lots of different activities, lots of meetings, fun stuff, dinners, parties, the whole nine yards. And we just developed this habit early in the company of making everything a secret.
It’s kind of a joke but when we have events of like, “Ah, super-secret event” you know, “Coming on Friday.” It’s always for silly stuff like a pop quiz. In this case, we kept a lot of the events or the itinerary a secret, it’s like, “Oh, mystery activity, surprise thing here.”
Someone on my team reached out and said, “Hey, you know, I’ve got a bit of feedback. I get why this is kind of cute and entertaining but I got to admit, it gives me a lot of anxiety and I have a general anxiety disorder and I’ve been through this experience before of kind of walking into an unknown situation and have them be really uncomfortable. I know that’s not what’s going to happen here but it’s kind of an issue.”
Again, I think that’s brought to mind this recent incident with – there is a settlement recently for this fellow who his company had thrown him this forced birthday party after he had explicitly –
[0:18:56.2] RS: Right, he was like, “Please don’t give me a surprise party” and they were like, “Okay, we won’t” wink. Then they did, yeah, what a nightmare for that person.
[0:19:03.0] NC: And I’m sure there are people who look at that anecdote and they think, “Ah, it’s a birthday party, like, how much harm could that cause? Like, that’s really ridiculous, why is this person getting a settlement?” but what were those people really trying to do?
It seems to me like a very clear-cut example of hazing and essentially, it’s a way of saying, “Hey, we’re all like this, this is what we do and if you’re not going to behave the same, enjoy the same things, care about the same things then you don’t belong here and we’re going to make you feel bad.”
[0:19:29.3] RS: Yeah, the settlement, wasn’t it the wrongful termination because he was like, “Please don’t do this” and then they did it and then he was like, “I asked you not to do this” and then they fired him. Is like the TLDR, yeah.
[0:19:38.2] NC: Exactly, yeah. I’m glad to see him win the suit. It’s hard to always think, I’m constantly kept humble by it honestly because you just don’t. We all bring our own narrow backgrounds, narrow frames of reference. The important thing again is soft skills, it’s staying open, it’s being able to hear criticism and not just, “Hey look, but we just put together this nice event. What are you talking about? How could you react like this? That’s not reasonable.” No, instead you really want to think about how it is affecting people that you might have just been outside of your sphere of consideration before.
[0:20:07.3] RS: Yeah, you just put that really well, look at people outside your sphere of consideration and this is by the way why it’s important to have a representative work for us because other people can bring up things you wouldn’t think about but it is just a matter of prioritizing inclusivity, right? The wrongful termination lawsuit is an extreme example but you know, if all of your culture events are revolving around alcohol for example or they all happen on weekday evenings, then who is it really for, you know?
Does someone have to like hire a baby sitter or abandon their spouse and also like drink on a Tuesday to be a part of your culture? That doesn’t seem fair. So this makes all the sense in the world, just prioritizing how this affects multiple people. It is just empathy like you said earlier and that’s perhaps also the importance of mixing-in soft skills. Also in the interest of indexing on inclusivity, you have what somebody consider revolutionary compensation strategy and that it’s very transparent.
Would you mind just sort of walking through that whole process? I know I am not really asking you a question, I am kind of making you do my job seeking interviewer but can you just share I guess the whole lifecycle of that like from ideation to execution, what was the reason for this approach to transparent compensation? How did it roll out and what that’s the fall out?
[0:21:16.7] NC: Yeah, absolutely. No, I love to talk about compensation. The first thing I’ll say is a phrase like DEI, diversity, equity and inclusion. Equity and inclusion I think are my job, right? That is what I’m responsible for, diversity is the outcome, right? So if we want a group of people who are diverse and who reflect the populations that we’re supposed to be representing in our healthcare product, then we need to make sure that they are going to be treated equitably and they’re going to be included in our organization, right?
So that is like a foundational principle of DEI for me. You can’t just start with the diversity and hope that people join and then work out how to force everyone to be inclusive for them. Compensation is an indispensable building block in my mind. I think there is absolutely no way that you can be fair and equitable to the people who work for you in any way, shape or form if you cannot promise them that their compensation is equitable.
If that disparity is there, no number of pizza parties and finger traps is going to save you. So the compensation is super important and this was not easy. Even at a small startup when you only have a handful of people, there is a lot of buy in that you have to get. If you want to try and change your compensation strategy, do something that is a little bit unorthodox. So we started from, I’m really thinking back to my early conversations with myself and the CEO.
We started from the principle that I established was like, “What do I want to be able to say what our compensation?” I want to be able to say that it’s transparent, that it is equitable and that is competitive and I tell folks compensation has to be – like transparent kind of comes from equity. I can tell you until I am blue in the face that you are being paid fairly but if you don’t have any data to back that up, it’s just faith.
So I have to be transparent about how we are paying everyone or you just can’t believe that it is not equitable and then competitive, that’s just recruiting. You know, you can’t exist no matter how mission driven you are. In the right mission driven company maybe you could recruit people with non-competitive compensation but you are asking folks to sacrifice and that’s not where we are. It is the part of the luxury you have of being a VC funded company is you have the money to spend on salary.
So competitive compensation that was the easy part, what did I do? I went to get data about what people were being paid. We established the metrics that we were going to use to ensure we were competitive on the market, so essentially I just take the high-quality audited payroll data that we get from this thing through Morgan Stanley and I look at startups that are our size or bigger up to kind of 200 people that are in the Bay Area and they’re at information technology broadly.
Use a pre-determined set of leveling categories, you need to first lump all your jobs into the right categories and then level them often by seniority, kind of junior, senior, et cetera. But we took our competition and we set the range for each level at the top 20th percent of the market for the Bay Area even though we recruit geographically in the US pretty much everywhere. So we don’t look around and try to say like, “Oh, well you know, you don’t live in San Francisco. You live in St. Louis.”
Like that would add a lot of complexity to my job. It would also, the way that I can tell the comp is fair is like we’ve attached pay to work, so your pay skill exactly nor is about performance, which is the other I think very unorthodox thing that we have done. We have separated the base compensation from performance. We’ve also done due performance base vanishes as a general rule for most of our folks.
Sales people are always their own thing but extrapolating variables like that and geography, you know it is a direct look. It is like “Hey, maybe you pay fewer taxes if you live in a different state, maybe you have a kid, maybe you own a house,” you can’t be fair about what people need to live on. You can only be fair based on, “Hey, this is what the market says that this category of job is generally paid. We are going to pay you at the top of it.”
[0:24:54.8] RS: So you make such a great point that true equity starts with compensation and that no one can really deep down feel comfortable unless they know for sure that they are being paid fair and the thing is what they might think is good compensation, it may not still be fair, right? If you were underpaid earlier in your career and you’ve still got raises, right? You’re like, “Wow, I am making more money than I was before.”
Yeah but you are still making less than you should have because you started so low down. So the point there is like this is the base agreement upon which we do work, right? I am selling you my skills and you are paying for them in money, so it is inescapable, right? It’s easy but, “Oh, we talk about culture and pizza parties and whatnot but look, I do the work, you pay me” everything is downstream of that is what I’m getting at.
[0:25:43.0] NC: You really put your finger on something too. I’m surprised that you realized the issue. As the Head of People, when I sit down and have negotiations with people, so if I have offered you a job and now we’re going to try and figure out what terms that you’re getting accepted on. Before we implemented this compensation strategy, I mean, there is an enormous amount of variation that might happen on an individual conversation.
Maybe you are particularly – perfect engineer for us, maybe you have all the right experiences, check all the right boxes, so maybe I feel like we really need you or their need is as urgent on our end, right? So I have maybe less negotiating power and you wind up with a very generous offer that is really at one side of the market and then someone else comes in and they’re just, “Oh they’re a great fit too.”
You know, we definitely want them, they’re still giving us their 40 hours a week, they are still high skilled, they’re in the same role technically but you know yeah, they only have the one offer on the table. They haven’t been out kind of marketing themselves or as you pointed out, they came from somewhere where they were underpaid previously and what you see when you are in a role where you do this again and again and again is you see exactly why that also harms diversity, equity and inclusion initiatives.
Because people who come from privileged backgrounds or privileged spheres, they have more power in that negotiation and you wind up with diverging salaries.
[0:26:54.5] RS: Yeah, even if you yourself are not, you don’t view yourself as biased in these conversations, you are still operating off of previous biases, right? If someone is coming to you with that and I think it all is in service of, I am getting ahead of myself because I do want to talk about the fallout a little bit. Can I ask you, why do you think this is non-standard? Why do you think we’ve spent so long keeping our salaries a secret from each other and why have companies encourage that I guess and then you know, get as ‘Che Guevara’ with your answer as you want.
[0:27:23.1] NC: I think companies mistakenly believe that they save money in this way and maybe overall it’s true. When all corporations behave like this, it’s hard. It calls information so then you have an entire workforce that doesn’t have the knowledge that it needs to negotiate well. Individually as companies, I am pretty convinced that a strategy like this even paying pretty generous salaries.
When I make offers to people now, I can say very confidently like, “You are not going to get a much better offer from any other startup similar to your position to us” and not even kind of bigger and better than we are currently. You know, maybe you can get an extra five grand here but you know, in addition to the compensation that you are being offered that’s strong in the market that you can have confidence is fair and also you can know your five colleagues are getting paid exactly the same.
No one is out making you, no one is out earning you and no one is under earning you, that’s a huge thing to tell people. And I think a lot of people when they negotiate, the real fear is that they are being undervalued. So that in corporations, I think corporations think they lose money. They think instead of paying everyone in this role a 150k a year, I could pay some of them less and then the average work out to be only like 132k a year.
I think even in real math, real finance that’s not true. I think if we’re going to be able to do particularly in the current environment has built a team with longevity, with stability that genuinely works well and sticks together and where we have very, very low turn rates, which of course is a huge financial benefit for corporations and it’s not just about money, it is also about the institutional knowledge that’s lost when people leave your team.
So you can build a huge amount of loyalty and stability. It is good for you, good for your people and I think even financially it is going to work out but it is a long tradition of not doing this. Honestly it blows me away and on LinkedIn, I look at jobs and I think, “Really like still the overwhelming majority of these jobs don’t even have a range of salary.” I’m like, “Why would I interview with you, talk to you before you even had a conversation just to make sure we’re in the right ballpark?” it shocks me.
[0:29:14.0] RS: I think you are absolutely right that companies thought it was a good way to save money because the problem though is that it’s only a good way to save money provided that you keep people in the dark about what they really should be making, right? Or that your co-workers are doing the same job and never share that with each other, right? Because it is only going to last as long as say Natalie you and I were doing the same job and I was making more.
That is only going to last as long as still as we have a drink and you find out how much I make and then you’re like, “Well, what the hell? I do the same job as Rob.” Important to point out that it’s equal pay for equal work, right? If I was at a company where there was compensation and I could go to a spreadsheet and figure out how much everyone in my company makes, which I assume that is kind of what you have going on but then I was like, “Okay, our principal engineer who I know build the entire product and knows everything about it and everyone loves, I understand why that individual makes more than me” right?
I am not going to squawk about that, what I might squawk about is someone with the same title with less experience being paid more than me, right? Which is a different kind of conversation. So I think you’re right, if companies thought it was a good way to make money but it is only a good way to make money if you are okay with just lying to a chunk of your employees who you are deliberately underpaying. Can we get into the roll-out process of this? I assume it wasn’t just completely seamless.
[0:30:22.4] NC: It wasn’t. So you’re correct, first of all, we do essentially have a spreadsheet as if these are all the categories of jobs we currently have at room, here are the levels for those jobs, here is what we are paying this year, next year we will update. And so you can see not just where you are but also where you might go in the future like, “Where is my step-up, what if I go and imagine this is what it looks like?” So all that information is available.
We have two categories, so we have our US salary rates and our Canadian salary rates too. This was one of the problems, so this is probably the biggest sticking point that I have run into. We cannot pay Canadian salaries or we cannot pay Canadian engineers for example, US salaries just converted to Canadian dollars. It is not possible, there’s not a company in the world that’s well run that does such a thing.
So people often have this pin in their mind where they look in there like, “Whoa, I would make 200k a year USD and you only want to pay me 200k Canadian?” according from the current exchange rate, that’s 250k Canadian and exchange rates and then you start having these boring conversations like haven’t really figured out how to sell somebody absolutely on this. Some people get it and some people do not.
Those exchange rates measure other things, they are not about, “Oh what is equitable to pay for this piece of work?” exchange rates are about currency markets. The way I can be fair, the way we can be fair is again, transparency and the equitable piece is, “Hey, we just base on market data so it is about what your role is typically paid in your market and then we pay you at the top of it.” So we are still very easily able to recruit.
We’ve done so very successfully in Canada because we do pay a very, very generous salaries based on the local markets but I have run into this problem where people feel the unfairness of that. I understand it as an emotional issue that I don’t really know how to solve the problem like I think it reflects on our digital world that we live in. We all think like, “Oh it’s top of mind” here we are in the computers like to talk to everybody.
And we forget that especially like, I don’t know, younger folks, we forget that nation states are a real thing. You know, labor markets are a real thing. There are different working conditions, different benefits, different retirement, different healthcare let’s not even get started. So we try to be upfront as possible in the process and that helps.
[0:32:29.6] RS: Yeah, the buying power of the US dollar in Des Moines versus San Francisco is different than the buying power of a Canadian dollar in Toronto versus a US dollar in San Francisco. Sorry, maybe I am not clear for United States hires, do you have different pay based on locations or no?
[0:32:45.8] NC: No, we don’t. This was kind of a point of contention early on. If we’re not going to have different rates for the US when they are radically different cost of living, absolutely. You know, why do we have that in Canada? Again, currency markets are very different like that initial measure isn’t really measuring. I think it has to do with employment. In Canada also we establish the salaries based like assuming you live essentially in a high-cost of living metropolitan area with lots of tech, same kind of thing.
The reason we don’t do it in the States, you know, I think it’s wrong honestly. There are too many variables to try to be fair about it. In what state do you live, what’s the local law? Then once you start looking at things like, “Okay, well cool. So it costs less to rent an apartment in Missouri than it does in California.”
Are we talking about people who rent? Do people own homes? So essentially we just, I think we’ve aired on the side of open and flexible and what it means is you know what? I live in California, I pay whatever, 10% tax rate is what we pay into the State of California on top of all my Federal Taxes and maybe that feels unfair to me because if I live in Florida, I wouldn’t pay any State Taxes but you know what? I can move to Florida.
That is an opportunity that’s also opened to our employees. So if you relocate to Georgia, I am not going to try to change your salary. You know what you could make, you can plan your life. It is all that freedom is there for folks. This is sort of a sticking issue.
[0:34:03.7] RS: Yeah, I think you’re right. There is a macro issue there with the relevance of nation states and you know, we’re building off a foundation that never considered you would be hiring Canadians to do this kind of work frankly, right? Maybe there is other literature on multination compensation bands. If there is, it definitely hasn’t been featured on this podcast. I mean, that is an opportunity but was there any fallout from the team?
Maybe from leadership pushing back and wanting to do this or people getting into that spreadsheet and being like, “Hold on, something doesn’t end up here” what did that look like?
[0:34:32.3] NC: Amazingly, I had an enormous amount of support from CEO from the beginning. A CEO is the function that you look too, to oppose such an idea that Brian has been behind it from the get go. Other type in general, the managers are relieved to be separated from compensation decisions, right? It gives everyone such clarity especially at a startup where half the time people are trying to have it in this responsibility that is go to the hiring manager and they are trying to guess what this person is worth, what this person needs to be competitive, et cetera.
So it takes a lot of that away and also changes the nature of our performance reviews and for us this was like absolutely pivotal. Performance reviews should be about helping and enabling people and rewarding them for good work and pushing them forward with their career, with what they want to do, where do they want to grow and develop. It should not be about checking boxes or gamifying how to increase your compensation.
Then there’s all the subjectivity that gets attached to performance reviews as well, so now you can have legit conversations about, “Hey, where should your engineering career go?” instead of, “On Thursday in this meeting you did this and so we’re going to say that you’re underperforming in this area” and it’s terrible, waste of time and energy.
[0:35:35.7] RS: Great point, that just takes that lift off of the hiring managers, like they are no longer going to be in a conversation where someone is like, “Hey, it’s been a year. I’m due for my raise. I need to be paid more” and they can kind of shrug and be like, “Look, the compensation bands are done. This decision has been made and we know it’s competitive and you have access to that same spreadsheet.”
Also as well pointed out that that’s a great way to just kind of make clear to folks what their own career trajectory can look like at least at this company or if they want to change jobs, right? It’s like the conversation if you are good enough at your job, you will inevitably be asked to move into management and it is not right for everyone but there’s this I think bias towards taking it just because you think you ought to move up the career ladder.
But look, it is a lot more work and different work for a little more money. So maybe you shouldn’t necessarily always take it but if you can just kind of click and be like, “Okay, here is what I would actually make” right? That is a different kind of story, so I am glad to hear that, that there is support from leadership and makes sense why the hiring managers were on board. What about the employee level?
Was anyone frantically clicking out spreadsheet and like, “Oh my gosh, Tom makes this much money?” Was there any drama there?
[0:36:40.5] NC: It is true, there are so many different things that again, it is true if you want everyone’s attention, all you have to do is start talking about compensation. Everyone gets real curious real fast, you know? We lost no one. So no one made a decision to leave the company. When I initially did this back in December, we gave a whole bunch of people pretty significant raises just to bring them up to levels.
We didn’t – I don’t think we de-leveled anyone. So everyone was being paid a bit more like they kept making more and we brought everyone else up to that level. So we lost no one and nor do I think we will because this is the other advantage for me. We get to be upfront, which means we get to find people who are happy with the terms that we are offering and then we get to the offer stage it will be like, “Yes, this is what I was told. It is still true and I am happy to join at this rate” you know?
The one issue, it really has been the Canadian salaries. If you can’t tell, I haven’t quite solved this problem. Rationally I know it is the right answer but I do also understand why people just have this feeling. I’m like, I don’t know and I do tell people. If you are a senior backend engineer in Canada and you relocate to the US, I am going to pay you US senior backend engineer salary just like I do everybody else.
These are the rules but you don’t, you live in a different place, with a different labor market, different retirement, different social programs, different tax structure and I can’t account for all of these things. All I can do is just pay you at the top of the market where you are.
[0:38:03.1] RS: Yeah, that seems reasonable and I mean also, it is just helpful that you are sort of admitting. You’re like, “Look, it is imperfect. We’ll figure it out but for now, this is what it is.” That to me is better than just drawing a hard line and being like the decision has been made, end of conversation, you know? So it feels like you are open to those either way.
Natalie, this has a fantastic conversation. I don’t think we’ve ever gone this deep into transparent compensation strategies. So at this point I would say thank you so much for your candor and for sharing all of these with me. I loved hearing about it and I am sure the folks out there in podcast land have as well. So at this point, I would just say thank you for being here. I’d love chatting with you.
[0:38:38.3] NC: Thanks, this was really fun. I’m happy to talk about compensation anytime anywhere.
[0:38:42.4] RS: Love it.
[END OF INTERVIEW]
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