Set salaries with guidance from peers
In traditional organizations, compensation is typically determined according to the organizational hierarchy. Generally, a boss can decide on a pay raise for his subordinates, often subject to HR (or institutional) guidelines or approval.
In the absence of bosses, the process to determine salaries and other types of compensation must be reinvented using the power of peer input.
Wage increases are self-initiated, calibrated by the advice of an elected wage committee and, if necessary, by the conflict resolution process.
Our colleagues are remarkably good at assessing fair compensation on their own. In any given year, about 1/4 of people choose salary increases above cost-of-living increases. Only a handful of people throughout the company receive feedback indicating that they may have aimed too high.
Performance contract with our team
We conclude individual contracts one year earlier with our colleagues at CLOU describing all relevant data on the performance indicators for which we are responsible.
Write a letter of intent
Once a year, with all your colleagues, we write a letter indicating the salary increase we think is fair to ourselves and why.
In a year without incidents, we are likely to stick to a cost-of-living adjustment.
But if you feel you have taken on more challenging roles or made special contributions, you can choose a higher percentage. You support the letter with the comments of your CLOU colleagues (the people with whom you concluded individual contracts a year earlier) and all relevant data on the performance indicators for which you are responsible.
Send the letter to a wage elected committee
You then share your letter with a handful of colleagues who have been elected to a compensation committee (there is one at each of the company's four sites).
The committee's task is to review all the letters it receives, calibrate them and provide feedback. This might tell you that you have been too humble about your accomplishments and that you should consider getting a bigger raise. Or he might tell you that, compared to your peers, the salary increase you have granted yourself seems to be on the high side.
The committee has only advisory power and cannot impose its decision, but the wage setting process is understood as part of the conflict resolution process. If you choose to ignore the committee's advice to reduce your pay increase, the committee may choose to enter into the conflict resolution process with you to create space and time to explore further where your assessments and those of the committee diverge and to help you and the committee reach an agreement.