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Heads and tails of the fire-breathing Compensation and Benefits dragon (Part 2)


In my last post, I compared compensation and benefits to a fire breathing dragon. The tail is all the essential but basic stuff that we all need to reach our goals: benchmark and percentiles, promotion guidelines, mobility, pension and benefits. But we all have the same goals (attracting and retaining top talent, rewarding business results and acknowledging individual performance). And we all have the same benchmark data and use the same consultants. So in the end, all our dragon tails look pretty much the same and it’s virtually impossible to differentiate your company within that realm.

That’s where the impressive fire-breathing dragon head comes in. The dragon head alone will not win you any battles. But it can catch attention and show off who you are.

How to let your true colours show

It’s very simple: Step away from the benchmark report and let your company culture be your starting point instead. Benchmark only tells you what everyone else is doing. If you stick to that you will look exactly like everyone else. So turn around, look at your own unique culture, then design compensation and benefits that mirror and support it.

At Spotify, people are innovative and collaboration is super important. We know we are stronger together.  We hire the most passionate people around and then trust each other to do a great job. We tell it like it is, we don’t micro-manage and we remind each other not to take ourselves too seriously. The company is also in hyper growth – so speed is important.

This is our culture and it is much more important than any benchmark. Our founders didn’t look at benchmark for the music industry 10 years ago and decided to build a company at median. They challenged and reinvented the music industry. So that’s what we need to do when it comes to compensation and benefits too.

For example, benchmarks say we ought to have a company-wide bonus scheme – but we choose not to have that.  Bonuses incentivise short term behaviours which we believe are bad for the overall success of our company. We just don’t see the ROI of a bonus structure at Spotify.  

Or, look at equity. Benchmarks say that equity is for a few people in the top of the organisation. But we want every employee to contribute to the long-term goals and be able to take part in the Spotify success. So we grant equity to everyone we hire.

Benchmarks also say we should tie benefits to grading and have company cars from director level and above.  But we have a flat organisation where it’s the best idea that gets the most attention, regardless of who came up with it. And different benefits for different levels doesn’t support that flatness. So we have the same benefits for all employees (plus, people should use cars less anyway).

In conclusion: compensation and benefits need to match and support your company culture, or it won’t get you where you want to be.

It’s not complicated

Have a dialogue with your leaders – what culture do you want? Then design the compensation and benefits that support it. “Everyone has it” is not a valid argument. You can build a great dragon head at no additional cost if you dare to spend less time with benchmark and consultants and more time with your own unique company. That’s where you find your competitive advantage.

But remember it’s still the dragon’s tail that will ultimately get the job done.

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