Why Introducing A Transparent Payroll Policy Was The Toughest And Best Decision I’ve Made

By Ivan Borovikov, Founder and CEO of Mindbox

In 2006, I founded Mindbox, the leading marketing automation and Customer Data Platform provider in Eastern Europe. In April 2017, when the company’s headcount was approximately 100 employees, my co-founder (who took over the CEO role in September 2016) and I decided to pursue a risky experiment by introducing a transparent payroll policy. It meant that each employee could publicly apply for a salary increase by simply explaining why he or she deserved it and receive feedback from the colleagues. It also empowered employees to play a bigger role in decision-making and to get full access to the company’s financial reports (P&L), including payroll for all the co-workers at all levels, from junior employees to the C-Suite.

Why did we decide to introduce a transparent payroll policy?

It was for a mix of reasons, all of them ultimately aiming to improve our operational efficiency and transparency. In particular, we wanted to:

  • eliminate the human factor when a person may influence others via salary change or firing decision in a non-transparent (perceived as unfair) way;
  • encourage the team to focus on the interests of our customers, not their managers/bosses;
  • motivate the team to set goals and take responsibility for their decisions;
  • channel the customer requests and feedback directly to the product development team, without intermediates (management);
  • improve communication within the team through feedback and suggestions.

How exactly does the process work?

Any employee – from a junior developer all the way to the CEO, can fill in an online form to request a salary increase, supported by an overview of their achievements, goals and overall contribution to the company. In fact, since everyone could see everyone’s salaries, it helps to compile an objective and relevant request – people could compare their performance metrics to others and thus justify a fair level of compensation.

Next, teammates are allowed to provide feedback over a two-week period. If anyone disagreed with the potential raise, they can veto it, and it won’t move forward. If no one vetoes the raise within two weeks, it will be automatically approved. This made it a clear and transparent process where employees have the right to express their opinions freely.

The entire process can be conveniently and easily carried out via a CRM platform.

Employees are able to submit a request from day one, however that has never happened. Also, while they can fill in the form as often as they want, employees take the process seriously, diligently setting goals and sharing their progress, and only then submit such requests.

Finally, all employees also have access to our financial model and reports (P&L). This is because we believe it is only fair to ask people to make decisions for the company when you allow them to make decisions about their wages. They should clearly understand where money is earned and spent, including on their and their colleagues’ payroll.

What have we gained from our transparent payroll policy? 

To be quite honest, the results have exceeded our expectations. Since Mindbox introduced this policy 5 years ago, the company has seen many benefits.

Our employee retention rate has remained high. In particular, because instead of leaving the company when they receive an attractive offer, employees are able to adjust their pay at Mindbox accordingly.

In addition, the company’s productivity has increased and Mindbox’s revenue per employee metric is 3.5x higher than our nearest peer, according to our estimates.

Also, the speed of our product development has accelerated. Mindbox has been adding several hundred new features every year, mainly driven by operational employees, not management or co-founders. This is because employees at all levels have been more engaged in the company’s activities and decision-making.

Nearly 100% of all applications for a salary increase were not vetoed and therefore automatically went into force. In fact, those very few veto cases were extremely instructional for the whole team, and they also demonstrated the fairness and bullet-proof strength of the process both for the co-founders and the teammates.

For example, there was one instance when a junior support manager attempted to increase her wage by 30%, while customer feedback on her work and general performance, as it was revealed during the mandatory feedback phase, was moderate. The team leader vetoed the raise, and they together agreed upon an evaluation and development plan for that employee to increase her wage successfully. Because of the transparent discussion involving some other teams, some of the performance expectations for that role were improved. No one saw this veto as unfair, because of the transparency and crystal clear motivation of the veto. The employee managed to improve her performance, thereby meeting team expectations and getting her increased wage during the second attempt a few months later.

Also, overall communication and transparency between co-workers has improved dramatically: people have been sharing their feedback and recommendations on a regular basis, not only when a salary increase request is submitted.

Overall, employees have developed faster as managers, and become more self-conscious and independent. They also have become more accurate at making goals and planning.

Was it worth it? 

Transparent payroll policies are still pretty uncommon, so it was a tough and risky decision to make. However, looking back at the past five years, I see that it has helped shape Mindbox’s corporate culture and help the company grow profitably. It was surely one of the most important decisions I have made for the company’s development.