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Would You Let Your Managers Choose their Own Salary?

August 26, 2009  |  from Construction Equipment Owner's Blog

This is precisely what one Skyline Construction Inc. of San Fransisco is doing. Ok, there are a couple of limitations to this, but basically it boils down to the following: Select employees of the company chose their own salary from a selected range. Then here is where it gets interesting. Those who chose a lower salary had an opportunity to receive a larger bonus at the end of the year if the company turned a profit. Of the 15 employees who were offered to set their own salary, 12 decided to go on the lower end and roll the dice on earning a larger bonus at the end of the year - bonus amount was not disclosed, but the employees who chose the lower up-front wages reported being happy with their decisions. The result? Skyline’s revenue grew from $42 million in 2004 to $76 million last year. One belief for why this is so far has been a successful venture is that when employees are more directly in charge of their compensation they will be additionally motivated and more likely to produce profitable results because as the business succeeds so does their monetary return.

Filed: Strategy