Salaries are a pain for salaried people and for the bosses who have to face them. Not only are they a pain, but the system is way too centralized, in the hands of bosses who have no idea what anybody really needs and have only a fuzzy, biased idea as to anybody’s contribution. There is no way for bosses to be fair or for the employees to feel they are being treated fairly.

The alternative is to let people set their own salaries.

Salaries Are Debt

Responsible adults know what they need, and every person you hire is a responsible adult. They are quite capable of figuring out how much they need to take home regularly; or put another way, they are quite capable of deciding how much to extract from the wealth that everybody helped create. This is what “salaries” should be: predictable and regular wealth extraction. But they are a form of wealth extraction, but at a market-driven price, same as pees.

The owners, on the other hand, get to extract wealth from everybody’s work,

• People do the work.
• This shows in the books as debt.
• The boss pays it.
• The debt is erased.
• Eventually this goes to increase the owners’ equity. “Labor” creates present and future value.

Even the six-figure salaries that software developers can demand today,^∇ are just cost to the business.

Give Everybody Stock?

Giving everybody stock is not the answer.

I’ve worked in high tech my whole adult life and I’ve seen this movie many times: early employees get stock; later new people get less and less stock; finally the business stops giving out stocks. The “employee pool” is a fixed size and after a while it dries out.

In any case, regardless of the stock class they get (e.g., founder, common), employees don’t get anything other than stock-as-a-financial promise. Only the Officers and the Board (i.e., capital investors) have any 1) control of the business itself and 2) get to extract real wealth from it (e.g., a sale, loans against stock, sales of their stock). For example, patents belonging to the business, gets converted to owners equity; the employee(s) who came up with it doesn’t get any value out of it.

Other facts about stocks,

• Stocks are given.
• The amount of shares given is a fixed number.
• Over time these can be diluted (e.g., 1% today but 0.1% tomorrow).
• Employees have no control over the stock price. Bosses do and they usually decide on the side of what is good for them, not employees (or even investors).
• This “gift” is either arbitrary or the employee level determines the amount. All Jr Engineers get the same amount of stock and all Sr Engineers get more stock. This is true regardless of their individual contributions. A Sr Engineer who contributes a lot has the same amount of stock as another Sr Engineer who barely does his job.
• There are exceptions and more aggressive people get more shares, but this is based on their aggressiveness, not their contributions.
• Cooperatives, Unions, B Corps, etc., are Fiat organizations, too, and they see and use stocks the same way.

Stocks are a 400 year old instrument and not a fix to the salary problem. We think it is because we think in terms of you are going to be richer than your peers.

Decentralize Salaries

If the big pain for managers is deciding salaries and raises, then let somebody else do it. In fact, let everybody do it,

• Let every person recognize other people’s contribution.
• Salaries and raises are then based on these recognitions. If this man got 10% of the recognition and this woman got 20%, then the woman gets twice as much as the guy.

Everybody does a little bit of the recognition, which they enjoy, and money gets allocated according to that. If there are any complaints or questions, anybody can ask anybody else. The only work that managers have to do is to train people to not come to him with those complaints and questions but to go ask their teammates.^∇

Eliminate Salaries

You can’t eliminate salaries. People have to pay their bills on a regular basis and they have to know how much they are going to take home so they can plan. People need a predictable and regular income (PRPRII). But, how to do this?

Well, we already know what people are bringing in: we know their contributions and based on that we can calculate what their piece of this revenue is. We now need to know what they need to take home on a regular basis. So we ask them (more below). If there is a difference, has to come out of somewhere. Given that there is no magic or a trunk full of treasure, we need a fund to be ready. We can budget for that, or we can borrow a few months’ worth of PRI. For example, if 10 people need $10,000 per week, we need $260,000 in the PRI fund, just in case,

Anybody who is due less that $10,000 per week, the difference comes out of the PRI fund. People who contribute a lot will probably get more than their share of the $10,000. For the people who don't contribute enough will take the difference out of the PRI fund. Whatever goes out of the fund to pay these folks a predictable regular income every week, they owe. Later as they start to bring in more than their share, the excess goes to pay what they owe until it’s all paid out.

The end result is that,

• People get paid regularly, just like a salary.
• Since the amount is what they asked for, the employee pain is gone.
• Managers get a lot of time to work on value producing things.
• Since they don't have to deal with any aspect of this, the manager pain is gone.

ENDNOTES

1. August 2022.

2. For more info, take a look at our Frequently Asked Questions (FAQ) doc. <https://radicalcompanies.com/2022/05/04/radical-companies-faq.html>