BR: Holacracy doesn't tell you specifically what you should do with compensation. But most companies that adopt this structure soon find out that they really need to rethink the way they do compensate. If you're in a system with a management hierarchy it's pretty easy to say compensation will be decided by bosses. But once you remove the bosses, who's going to decide pay? So there's no one right answer to that question. But I can say that the companies now that are really, that are the furthest along with their journey into this system, have pioneered some really interesting approaches to doing pay in a more peer to peer decentral way. For example, one of the ways we often coach our clients on using is a shift to a, we call it a badge based compensation system. Instead of bosses deciding pay, your pay is based on these skills you've earned badges in that your colleagues, your peers, have seen you contributing to the organization with.
So it almost gamifies it. Your pay is going to be based on the collection of badges you've earned. And you earn a badge in a skill by showing, look I'm adding value with that skill to peers that are also gifted at that skill and have already earned that badge. So you end up at the end of the day with a transparent compensation system where everyone can see this set of badges equates to this level of pay, and if you add these badges you're going to get that pay. And there's any number of possible badge sets linked to different pay so there's lots of growth paths, you can earn badges and lots of different skills that are useful to the company. And you're going to get paid by them, but no one person is deciding that pay, it's up to you to demonstrate the skills and there's lots of different peers that can acknowledge you have that skill once they see it in regular use. And there's some processes around that, and some committees to make sure that the levels of pay per badge set are fair and balanced with each other and all that. There are processes to allow you to propose new badges, new skills, if you think you're bringing a skill that's useful to the company and no recognized yet.
So it's a really interesting distributed compensation model that still stay fair and yet allows people to drive their own pay more, and kind of find their own growth path instead of just a linear climb up the management hierarchy to get more pay. And again that's not required by holacracy, it's just one way to do it. And there are some other unique approaches out there as well. Whether it's holacracy or not, I think most companies could probably do a better job of finding really good fair transparent pay systems, and holacracy just forces that need.
Rob: Well you've talked in the book about these massive CEO pays, is that something you're going to see in holacracy?
BR: Well again it doesn't mandate a company do anything in particular with it's pay so it's possible, but my own take is, it's really hard to justify this massive delta in CEO pay, when you have a system where everybody is leading their part and adding more value and being more entrepreneurial, and there is no superhero leader at the top who's looked at as nearly an infallible single point of success or failure for the whole business.
I'm not saying you won't see multiples, I think you should, I think hopefully most CEOs are in that position because they bring a lot of skill, a lot of wisdom, a lot of experience. But it's one thing to see smaller multiples, it's another thing to see these astronomical CEO pay scales. My own take is it's just going to be hard to justify when we have systems that are more self organizing, self managed, and where everybody is stepping up and being more entrepreneurial and leading their piece of it.
Rob: Okay. We're getting to the end of the interview, and I wanted to make sure I covered with you, your work is doing consulting for companies that exist, is it possible for a startup to begin as a holacracy?
BR: Yeah in fact there are many that are doing just that. In fact we certainly do do consulting for companies that want support getting to this system. But we also try to make sure we have as many free resources out there on the website as possible. We have trainings that support companies that want to kind of do it themselves, for smaller business that can work quite well. We really try to have an array of offerings. Frankly our purpose is to help get this out there to any company that wants to do it and use it so we try to make sure that theres lots of different ways that people can get into this.
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