The current standard deviation between our salaries is less than $5 and we’ve improved our profitablity since implementing this over a year ago.
It sounds more like this policy is to guilt their employees to accept less money (thereby improving profitability) and less about keeping employees happy...
This isn't something I'm so nuts about. It's hard to look your coworkers in the eye and say 'I should make more money than you'. Seems like that's a problem there.
OTOH I could see myself saying, "I'm sure I could get $X elsewhere, so I would like to be paid that here. If I'm not paid that here I will likely leave." However, that makes you seem like a bit of a jerk.
I agree that it's hard, but I don't think that's the end of the conversation.
Why is it hard? Keep in mind that the results are filtered through a discussion with the boss, so once salaries are public, you're saying "The boss and I agree that I should make more money than you", so there's a shared accountability.
I figure it'd be easier just to hire everyone at my startup with the same salary. Standard package, same as everyone else: $X/yr, Y options. Need a raise? Whole company gets a raise. Of course, the primary differences between earlier hires and later hires are 1) current company valuation affects the amount you pay for options and 2) vesting dates.
I am not an expert in theses things, but from my perspective this looks fair.
The current standard deviation between our salaries is less than $5 suggests that everyone is paid about the same, but that would seem unlikely.
I'd be interested in the salary distribution, and what sorts of things are discussed during the reviews- relative ranking (am I more/less productive than Joe?), improvement from last review (am I 10% more productive than six months ago?), company profitability?
It sounds more like this policy is to guilt their employees to accept less money (thereby improving profitability) and less about keeping employees happy...