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How to Get Pay Right with Matt McFarlane · Disengaged

• Matt McFarlane: rather than going, James, you've had a standout year, we want to reward that. We're gonna do that through whatever mechanism. how can we get everyone else to deliver at the same standard as you? How can we use this as a learning moment to bring others up to to to your level and make that the standard, rather than just go, cool, you've had a great year, here's some money, Okay, thanks, bye. James: Hello and welcome to another episode of the disengaged podcast. Today I'm joined by the LinkedIn mogul Matt McFarlane who runs FNDN which is a compensation consultancy for startups based in Australia. Matt started last year and just completed his second year of the Startup People Summit, which is an APAC event built for people leaders inside high growth companies. Before going out solo, he led people operations at Oyster. where he built the pay structures that help the company scale from. 200 to 600 people across 70 countries. He also hosts the FNDN series podcast and newsletter, both of which I recommend checking out and we refer to today in our discussion. As always, if you enjoy the podcast, please remember to rate it and if possible, tell a friend that is about the best way to share these conversations and help me get more interesting guests like Matt on the show. without further ado, I give you Matt McFarlane of FNDN we have struggled to get this on the calendar. We've been trying for two months to get this, so I Matt McFarlane: We have been, yes. James: finally, at last, can say, Matt McFarlane, welcome to Disengaged. Matt McFarlane: Thank you. I'm excited to be here. Yeah, it's been it's been a long time in the making. This might be fourth or fifth time is the charm, I think, but we've made it. James: I can't, yeah, and there's a whole laundry list of excuses that you came up with as to why we couldn't record. You were ill, you're busy, I forgot. Matt McFarlane: It's true. I've been trying to get out of this for so long now and I'm just James: All kinds of reasons that we haven't done it that you forgot to read. Matt McFarlane: I've exhausted the list. So here we are. James: But grades are finally chapped because the last time we spoke was, let's see, when was this? This was early in the year in a somewhat Matt McFarlane: Mm. James: adversarial setting. I know I had a lot of hatred for you when we last spoke. And it was because we were together on a debate on a debate on pay for performance. Now I've got my notes here, which your team won pro pay for performance. You won the 62 to 38 in front of apparently 300 people leaders joined that one live And a week later, you published a piece saying you weren't a fan of pay for performance. So you've been flip-flopping along with this. is Matt McFarlane: I've recanted my position. Yeah, it's true. Yeah. Yeah. James: that so? talk me through that. where do you stand now on the whole issue, the whole topic of pay for performance? Matt McFarlane: look, I think I've always even before and and after the debate, I've never been I've never been a huge fan, I would say, of like the traditional pay for performance practices. So this is, you know, you go we've all been there, right? You go through your performance review, you sit down with your manager, they give you a rating, you feel like you have to negotiate it. expectations and expectations or your exceeding expectations and that kind of goes into a into a formula somewhere and that spits out a a pay increase and then you kind of look at it and go, yep, cool. It's like rarely exciting in the moment. It's maybe sometimes exciting in the moment. Otherwise it's kind of like, yeah, cool, 5% if I'm exceeds, maybe 3% if I was I was meets, you know, it's it's it's no big deal in the grand scheme of things and you just get on with your work. And so I have I've always been critical of that approach to to pay for performance. Now I I think like part of the reason obviously we were I think you're saying you you hated me is that I kind of reframed paper performance a little bit in my opening as to what it actually was. I appreciate it. James: was very clever. I want to interrupt because I will say, when you did that, I just laughed because I knew exactly what you were doing. With your opening statement, you reframed the debate in your favor That was very clever. And one other person thought it was a little bit disingenuous. I thought it was just somewhere in Matt McFarlane: Bit shaky. James: that gray area between disingenuous and very clever debating technique. Matt McFarlane: Yeah. And I think like for me, this is this is a thing, right? Like I think I am I'm critical of the you know, if you think about what pay for performance is trying to achieve, it it's in the name. Like it's trying to solicit solicit increased performance. it's trying to reward people for maybe a year or a half year of of great performance, something like that. But I think so often it's broken in so many ways, so many parts of that value chain is is broken for me. I mean, one is that just the the inconsistency and the bias inherent in just the performance pro process, you know, the fact that many times in my career I've had to negotiate what my performance rating is. There's no like, you know, there's no real like tried and true approach to it. It always it always feels like adversarial. And, you know, I'm I'm someone who feels like, you know, I'm comfortable going to bat for myself, but not everyone is. And and why should they have to be if they've put in a great year but it's been done in a way that's maybe a little more under the radar. So I think that's one aspect of it that's broken. I think, you know, i I saw someone post the other day about a roundup of all of the salary surveys and and the different you know, forecasts they're giving for the comp increase for the year. And y and I think I said to Hers like, honestly, every time I see these things, it feels like Grandhog Day. It's always three percent. It might be three point one percent or two point nine percent, but it's always three percent. Like, can we stop pretending that these mean anything anymore? And and if it's three percent for meets expectations, it's almost always five or six percent for exceeds expectations. And it it just doesn't really like it's not meaningful. James: If that, Matt McFarlane: If that like it yeah, James: if you're lucky, right? Yeah. Matt McFarlane: exactly. And so like I I I have a lot of issues with that approach to pay for performance. And I think where I obviously did this reframe, I was like, but there are other ways to to pay for performance. And I think you and I probably agree a lot on the fact that when we think about people who are in salaried roles in you know in in a in a knowledge work type of environment, you are rarely responsible for you know, solely for the outcome of I don't know, the work that you're doing or the team or where the organization is. It's we're we're working in such like highly collaborative environments. And I think the fact that we try to narrow it down and say you as a person have, you know, have achieved this or are responsible for this. I think that's quite that's quite difficult. And so I think, you know, when we are working in this this collective, I think a lot more of the mechanisms that I prefer to see are the ones that that recognize that. So I'm a big fan of, you know, revenue shares or profit shares or something like that, that way we can go, Hey, we as a company have achieved this. I'm also a fan of mechanisms like if we say we pay for performance, actually that just means we pay really competitively because we have high standards and we expect a lot from our people and we're aiming for the best people. And so that means we're going to, you know, pay more than the 50th percentile. That that's a pay for performance mechanism from my perspective. So I think there's these other things that I prefer, because, you know, either I've been either I felt I've been the victim of the traditional pay for performance mechanisms or I've just seen them adopted and they just don't really don't achieve what they're they're set out to do, but they're they're comfortable. It's been around for a long time. People are familiar with it. They've gone through it themselves. there's an element of the unknown with some of these other approaches, I think. And so it just amounts to people going, well, let's just keep doing what we've always been doing. James: Yeah, you don't you get kicked out of a room for suggesting a pay for performance philosophy. Well, yeah, that's great. That's great. And of course, in theory, it is. But like you say, it's practice difficult. And there are two parts. There's one that's the sort of carrot approach, like we can create additional performance, which, again, like the research really doesn't back any of that. The other part is fairness. And this is something I notice a lot, particularly in corporate America. There is a notion that fairness only comes from individualized pay outcomes. So I've straw polled this in presentations and said, who believes that you should have your individual pay calibrated to individual performance? And everyone puts their hand up. Everyone agrees that Matt McFarlane: Course. James: that's fair. But to your point with collective work, that essentially makes those two things irreconcilable because the unit of work then mismatches the unit of pay and you just end up pitting colleagues against each other. Matt McFarlane: Mm. James: Which is why I think this idea of fairness, fairness is this huge word, unless you're the person paid most in a group of people doing the same work, you don't feel that you're paid fairly. You're always looking for reasons to catch up with the person. Why don't I earn as much as that person? And then if someone gets paid more, why aren't I getting paid more? So it's interesting, this concept of fairness and reconciling that with individual pay in collaborative environments for me. Matt McFarlane: Yeah, yeah, I would agree. And I think like, you know, the there are elements of of the argument that my team mate that I agree with, which is that, you know, it can be difficult when I I think it sounds nice in theory. Like I think it sounds good. And you know, I agree with the idea that if you are someone who is producing significantly more or You know, and and there are ways, whether it's it's an imperfect measure, there are ways to kind of go, hey, like I've had a you a standout quarter or a standout six months or something like that. you know, I think I've I've put in the effort or I've made this accomplishment or something like that. But I think the other pieces that like that gets broken. Actually, let me finish that thought thought first. So I think that it sounds nice in theory. I like I I natively go, of course I deserve to be paid more. And so I think in that in an environment where people maybe only understand or or haven't really reflected on pay for performance a great deal, it can be difficult to tell people we don't have a pay for performance program and and and expect them to to stay or or to feel like they're being rewarded effectively, even though we've got, you know, this traditional mechanism that doesn't really doesn't really work that effectively. So I think that's James: Mm. Matt McFarlane: what that's that is one of the challenges. it is difficult, right? Which is that because it is such a prevalent just mechanism, I think again, it's like yes, companies are comfortable with it and familiar with it, but I think so too are candidates. And so I think that can be a difficult, a difficult mindset to shift for people as well. for me it's like the the the missing sort of mechanism for organizations when they think about performance as well is like rather than going, James, you've had a standout year, we want to reward that. We're gonna do that through whatever mechanism. how can we get everyone else to deliver at the same standard as you? How can we use this as a learning moment to bring others up to to to your level and make that the standard, rather than just go, cool, you've had a great year, here's some money, Okay, thanks, bye. Like that's that for me is something I rarely, if ever, see. I think there's a couple of companies I've spoken to recently actually who who surprised me with how well it seems this is working for them. but particularly with AI adoption, I think some of the the like the rituals and the routines that they're starting to build around championing excellence in AI adoption and going, hey, so and so has just built this incredible thing. Here's how they went about it, and they might do like a little masterclass or something. And it's about bringing the collective along with them rather than just going and rewarding the person that's done something excellent and and then sort of, you know, end of a story. James: Yeah, I like that. Again, yeah, like the defaults use money as a reward or something, Matt McFarlane: Yeah. James: as opposed to more of the work. So good work, ideally should be rewarded through better work. And that's one way to do that is to say, well, if you're someone that's done good work, then help us do more of that good work and the reward becomes. helping other people do that and good work and then it it ceases to become a do this and you'll get that type of arrangement which is where I just think so many companies end up falling down. Once you've said it once you can't unsaid if you say to some hey do this and I'll give you that they go okay I've done this and I give me that and I go great now what else do I need to do to get the next that you know so and you end up just coaching this mentality of just you know. Matt McFarlane: Yeah. Always in pursuit. Yeah. Yeah, exactly. Instead of like actually what's the cool, interesting challenge that we've got or the the next thing we're trying to overcome or like that should be like I think we all know that's that's the space where people are working best is is when they're actually just focused on the mission and and what it is they're trying to accomplish and they're they're thinking about the challenges that are ahead of them to to get to it and and that's kind of where all their focus is. James: Yeah, which brings me onto your career. So I want take a bit. I want to start off with that debate because that's where we left off. But I want to go back a step because you were once in-house. So you were doing this merit cycle management and all that kind of Matt McFarlane: Mm. James: stuff that comes around it. And then you decided at some point to go off and do your own thing with foundation, FNDN. So talk me through that transition and why you did what you did. Matt McFarlane: Yeah, I think I had always I'd always had sort of entrepreneurial ambitions. I'd always been interested in building something of my own. I think like many people I romanticized the kind of tech founder you know, pathway. Didn't have a a technical bone in my body when it came to to coding and things like that. Obviously, who needs that now anyway? But yeah, I'd always been interested in in pursuing something that I had built and and was for myself. And so ironically it was at a point where you know, if I reflect on my career, it was I I left the job that I've enjoyed the most in my career to pursue this, which I think just says like or it speaks to how how keen I was to go and do my own thing. And yeah, like I I so I I left being an in-house, you know, people operations HR professional. that that had been my career, and and started foundation, which was to help, you know, startups and scalers build compensation practices. So it was a a bit of a jump. and I don't know, do you want me to go into like the why, the reasoning, all that sort of stuff as well? Is that James: The Y of the company, crazy, or the Y of the... Yeah. Matt McFarlane: Yeah, like why well, you know, that, and I think that one of the most common questions I usually get asked is like, why comp? And you've you come like I've come from a background that's people operations, right? James: Why can't I mean, yeah, we can ask. mean, as I kind of start stuff in comp as well as I forget to ask that question. Okay. Why comp? What is it about that? Seamlessly weight working that question into the podcast. Matt McFarlane: Thanks for scratching that in. We'll cut a step. Yeah. I just you know, I'm a one man interviewing machine here. James: Yeah. Matt McFarlane: So for me I you know when I when I sat down and went, okay, well I'm not gonna go and build a a product, I'm not gonna go become something people or HR related. And if I sit down and and and you know list out everything you do within the HR function, which is enormously broad. you know, everything from I mean, some people do or don't include talent acquisition, but there's that, there's, you know, there's onboarding, there's leadership development, there's engagement, there's learning and development, there's all of these sorts of things that you can you can tackle, systems, you know, now AI, all these sorts of things that you can tackle under the the sort of umbrella of people operations. And when I sat down and really reflected on like, well do I want to build all those things to the kinds of companies that I want to work with, my answer was very quickly like, no, I don't. There's so many things about being in the Field that I don't like doing. there's many things, and when I sat down and thought about what they were and then what the things were that I did enjoy, one of the ones that kept coming up the most for me was compensation. So it for a number of different reasons. One is that it's I just find it intensely interesting as a as a as a subject matter. It's like deeply analytical which I like. There's kind of like this rigor to it, which is hilarious once you really start to get into comp you realize how actually there is. Yeah. Sometimes, sometimes not. James: was going to say rigger, ready? Matt McFarlane: Which is because they just spend all this time telling people how paper performance is crap anyways. James: Yeah. Matt McFarlane: But no, but th there is like it it is it is really analytical. It is I like how commercial it is and and to be fair, I liked how important it was because of the fact that you were often talking about these large sums of money which on a a company's, you know Balance sheet and and and and expenses is is up there. It's quite a big one. so it always kind of had a a room for conversation when you wanted to talk about compensation. So I I appreciated that importance. but I also really loved how like human it was, how emotive it is for people, everyone receives comp and benefits and those sorts of things in different ways. it really is something that you know you can have the most polished spreadsheet in the world and it can count. If you can't explain how it works and what it means, or say to someone, hey, you've had a standout year, this is, you know, this is we're giving you this in recognition of it. And like that for me is ultimately the, you know, that's the pay-for-performance thing that that that gets missed a lot, is actually just it's the conversation. so yeah, I really, I really like that about it. And then, like, rather ironically, the company that I had been working for, or fortuitously is probably the better word, the company I had been working for. oyster was a was a HR tech platform and so I had the good fortune of of being able to kind of kickstart my brand a little bit with with that company. They wanted to champion you know what a great HR team and and and function can look like. They gave us an an incredible opportunity to kind of champion that as part of our roles. And one of the things that I kept being sought out for was what we talked about with respect to compensation and how we had thought about compensation well during my time. And so I, you know, I had these kind of convergence and things of things, which is that, you know, comp was one of the most interesting things that I enjoyed about my role and that I thought I would enjoy helping other companies do. I kept being asked about it by my community and by my network. I think it often felt like something that for others like me, so generalist HR professionals was a little bit of a like a blind spot for a lot of people. Not a lot of people felt really confident or comfortable with respect to compensation. And so I was like, well, I c I you know, I don't I don't know what a sort of gap in the market looks like or or what you know what an opportunity looks like. I didn't sit down and write some elaborate strategy or anything like that. I was like, that feels like a good, you know, a a good approach to take. And so without James: Mm-hmm. Matt McFarlane: much more than that, I was like, okay, I'm gonna go help companies do this and and help them understand how pay can work for them and and how they can build some of these structures and you know and build some of the human elements that I care a lot about in work. It's how they can build a workplace that has trust and and kind of just make pay not be this pain point, make it not be this thing where people go, you know, I I don't believe in being paid fairly, or I, you know, I'm I'm not even sure where our company comes up with these numbers. Like there's so much baggage that I think comes with pay that really doesn't have to if you just put a few like fundamental or foundational practices in place and and that was kind of it. So James: I see what you did there, very clever. Matt McFarlane: FNDN.com.au I think is the website if I'm not mistaken. Yeah. James: It's so true, it? think part of that definitely comes from an assumption of being able to fix everything with comp, I do think. And that intertwining results in a lot of those problems. Like, we're losing people, it's a pay problem. We're not motivating people, it's a pay problem. People only feel they're paid fairly. It's a pay problem, not necessarily, but that's what the assumption. So in many ways, I pay... I think it sounds like for you as well as for me, it's a bit of a Trojan horse into the broader world that we find interesting, which is human behavior. Matt McFarlane: Yeah. James: And pay is so powerful that prodding human behavior that you can kind of see and evaluate the role that it has. when you get queries, when founders like you work a lot with startups, when they get in touch with you, is it predominantly a pay problem that they come to you with? And what kind of problem is it they usually have? Matt McFarlane: Yeah, say Yeah, let me let me so the one of the learnings I had when I first started in business, I kind of went into this going, I'm gonna help companies with between fifty employees and five hundred employees. And my thinking being, you know, fifty is about when they start to, you know, you're kind of at a point where you you can kind of preface a lot of the pay problems that I think start to creep in. Maybe you're starting to hire more than one of a certain type of role, so pay equity becomes an issue. you might be starting to scale, so you want to be able to forecast for that. All these sorts of you know, use cases I kind of came up with. and I thought, okay, well, I'm gonna And then I'll cap out of 500 because that's when they start to go. Actually, we probably need our own full-time dedicated compensation personnel. I probably don't need a mat. I need someone to come in and work with us full-time. And what ended up happening in the first year or two is that I found actually where that window kind of shifted a bit was more around the like 100, 150 headcount and still up to 500, but that that kind of entry point lifted. And I think Not for everyone, but for most companies, yeah, it's a pay problem. They they come to me and they're like, my god, like we've you know, things are not working here. this is a big issue, it's taking up a lot of our time and attention, it's distracting us from what we're trying to accomplish as a company. and I think all those other things are still true, like we can't forecast very well, we don't know you know where our market. Position is we can't talk about it, those sorts of things. I I think the the original things that I kind of thought I would be building for and and problems I would be solving for are still true, but they were just like they're exacerbated and I think they're at a point where the company is is generally like, Hey, we probably should have done this at fifty people, but we're now at 150. so we're feeling the pain associated with that and and we need you to come in and help, you know. build something and then inevitably retrofit the people that we've got into into this new framework and kind of go from there. I will say that that being said, there's been a couple of companies that have surprised me where maybe I would say in the three years that I've I've been doing this, it's probably been three or four where, you know, that were quite small, that were around that 50, maybe 75 head count and they're like, We know this is gonna hurt in a few more people's time. We need someone to come in and just build something that's gonna, you know, ensure that as we grow, we're not growing into these problems, we're kind of able to to, you know, facilitate that growth in a way that's not going to going to cause any issues from a pay perspective. So I've seen both ends of the spectrum. but nine times out of ten or eight times out of ten, it's it's definitely a case of like, you know, it's on fire. Come and come and help sort sort this out for us, please. Because It's just a a dominant issue. James: Unfortunately, I find the same thing. tends to be when things have caused problems that you get that call, right? It's like Matt McFarlane: Mm. James: I had one or two as well with people saying, we just want a scalable framework in place so that we can grow into it. I think that's because they've had that problem before somewhere else and have learned their lesson, but it does tend to be when pay goes wrong that they seek out a specialist in the area. Matt McFarlane: Mm. Yeah, and I think there's just like a lot of like I don't know, I think sometimes people underplay what's involved in in comp a little bit as well. And and you know, an example of that is like a company that I was doing some work with that was like, well, we pay we pay 90th percentile. this is that's the that's the position we've chosen. but we're finding with this certain kind of role that we're not clearing candidates and and all this sort of stuff. And, you know, thinking about and this is something I grapple with early on in my career as well, is around the sort of, you know, being too defensive of your of your pay practices and actually ultimately missing what they're in aid of, which is that they're there to kind of attract and retain and and do all these sorts of things. and and not defending them to the point of them actually being counter to what you're trying to accomplish. So again saying, you know, hey we're paying ninety percentile, but if you can't hire anyone then you're probably not paying 90th percentile. Like there's something wrong. You know, don't don't put all of your eggs in the basket of okay, well, this data set's saying that we're we're paying really competitively, but okay, but if your short list is asking for a higher number, then obviously you're not paying 90th percentile, right? Like that's where the rubber hits the road on on reality. And so I think there's just a there's a lot of those sorts of things as well around understanding how how pay ultimately needs to work in service of of, you being able to find and and bring in and hold on to the people that are going to help you deliver on your your goals. James: this notion that benchmarking is the beginning and end of many of the answers, I think we both find somewhat frustrating. Now benchmarking is, of course, useful. It's information. And though information is lacks any, lacks complete value. But people do tend to align it very heavily. And you mentioned earlier, the 3 % budget, what are other companies doing? Well, my first response is who cares? Like you're trying to deliver the value people create back to the people that create it. Who cares what other people are doing? Like just because someone else is paying Matt McFarlane: Yeah, what are we doing? James: for empathy and you can afford 10, doesn't mean you shouldn't pay 10 % and go above market. If your people have created that value that you can now then afford to pay out to somebody, give it back to the people who created it. So I do get a little frustrated with this market benchmarking. Matt McFarlane: Yeah. James: rather than what is the value of the people you have? Like, yeah, Matt McFarlane: Yeah. James: what other people are doing is relevant, but it doesn't dictate what you should do as a company. Matt McFarlane: Yeah, I completely agree. I actually came up against this with the the concept of a like a living wage or a living salary. I remember writing about it and I've had I've been surprised actually. I've had two clients in in the time that I've been doing this that have have wanted this concept of a living salary, whether they floated the idea with me or through our discussion thinking about their approach to to pay, that it came up and they were massive advocates of it. But yeah, as I've talked about it in in you know on places like LinkedIn or in a newsletter or something like that, I've been surprised the mixed results. Some people are very big fans of it for obvious reasons. And then I think there's a lot of interesting pushback on it. Because again, there's this kind of preference for well, the market says that this role's worth this. And it's like, yeah, but if someone's coming in and they can't, you know, they can't afford childcare or they're they're thinking about where, you know, their rents too much, or you know, do you think they're fully committed to what it is that they're working on at work if they can't if if they're wondering what's gonna happen at five o'clock when they clock off and and these other issues that are kind of creeping into the into the day, it's it's a really sort of prescient issue or whatever it's. in Australia at the moment, which is that like we've got a very real kind of decline in real wages in Australia at the moment. I think we're at like, I think it's actually like 0.1% growth or something. It's it's been in the news a little bit. whereas for the majority of the OECD countries, it's like nine or ten percent or something like that. And it's becoming a a really big issue here, which is that like a lot of the you know, the companies continue to Their profits. I mean, we love to hate on the banks and the supermarkets here because it's like a a relatively small pool of companies. but their profits year on year just continue to grow and grow and grow. And and meanwhile, there's people that are increasingly struggling to afford things. And I just think like, again, what's what's your pay practices in service of? They're designed to, you know, attract people to want to work for you. They're designed to you know, pay them enough that they can focus fully and and completely on the role. Obviously they're designed to be competitive for that set of skills in the market and things like that. But I I think there's these like hurdles that a salary or a rate needs to clear before you start to think about its role in in the market and and what the benchmark data is saying. And I think one of those things is like, is this actually something somebody can realistically live on and not be kind of worried about everything? And Yeah, I just I just don't think that often comes into the kind of the mindset of of how we think about pay, unfortunately, amongst many other things when we when we become over reliant on benchmarking James: Yeah, it doesn't. I've seen the same thing. If you look at any given survey data, you'll very happily go and find numbers that don't make any sense. No one should be earning that amount of money. Or if you want to be a good worker, then you shouldn't be paying that amount of money. So there are companies that deviated. PayPal was a well-documented example where they basically said all the things you'd have said. And then they started saying, we're going to set a wage floor based on the area of what we believe is an appropriate amount of money to earn once you've... taking into account all these kind of costs. And they said, yeah, it completely exceeds the benchmark data, way higher. So we're Matt McFarlane: Mm. James: going to pay way higher to ignore the benchmark data, which is very honorable. I don't know if they're still doing it. These things tend to come and go with the people officers that implement them, of course. Matt McFarlane: Yeah. James: But at least it was an example of a big company recognizing that exact problem. Matt McFarlane: Yeah. Yeah, I think there's there's a lot of great examples. I think Carter's another one where it was like they had this stance of like best offer first, or I think it was like a no negotiation approach. I remember their founder or something James: Yeah, yeah. Matt McFarlane: published it and it was, you know, I I loved it. I think it's like, you know, we expect the best, we're gonna put our best foot forward and and you know, that's that's how we're gonna handle this. Like why why do we have to kind of have this backwards and toing and froing and backwards and forewardsing around pay when it's like we know what you know, your role is worth to us. You have an idea. Our idea is going to be infinitely better than yours because we pay a lot of money to know what it's worth in the market. So the the power balance is already off. James: Mm-hmm. Matt McFarlane: you know, the company always has more leverage. And it's like just just take it away. Just let people know up front how much you value the thing that they're going to be coming and doing for you is. And, you know, don't don't try to capture the upside of, okay, they their expectations are lower than what we were prepared to. So we get to pocket the 20K, you know, for the year, James: Right. Matt McFarlane: or conversely, reward the people that are just happy to go to bat for themselves and and not actually the one that can do the job excellently. So yeah, it's there's a lot of these sorts of things that I think have just, you know, like pay-for-performance We've done them forever, they're they're comfortable. and I'm curious actually like what your thoughts are around this sort of like attachment to benchmark data and this like obsession with like, well, what everyone else is doing. Do you think it's just the simple fact of we're humans, we're social creatures, you know, there's safety in numbers, like Like is is it as simple as that or what is it? Like we because we're outsourcing our decision making, right? James: I mean, think it's, to me it's like yet another example of cognitive closure. It's a number, and it's reported down to the dollar implying that it's an accurate number, which it isn't. We all know it's not, like, know, between the... benchmark data collection process, the methodology behind it, the need to understand and interpret different levels at the submission point, at the review point, at the interpretation point, the output point. There are various junction points that show you that it shouldn't be held up on some kind of pedestal, but it does give a number. And like you say, most companies are not owned by the people that drive the values. This is one of my fundamental issues with... PLCs and also VC backed companies, the people that own the company are not the people doing the work, which means that it's an extraction machine. It's extracting as much value as possible from the people that generate it to the point where you then lay off the people that created the models that are giving you the value that you're now called to a capital in your balance sheet. And it's completely perverse. to me, benchmark data gives you an excuse to do that. And it gives you a certain amount of cognitive ease in doing that. Well, it's a benchmark, it's defensible. It might be defensible now that you have a number to defend against, but is it socially defensible? Is it morally defensible? Is it defensible in the sense of long-term company performance? These are big and more complex questions. And that's why I think it stands the test of time. It's an easy, quick answer. So it provides that psychological closure. People can say it, get on with it, and move on. Same as the 3 merit budget. it's 3%. It's always been 3%. Everyone's doing 3%. Let's do 3%. doesn't make it bright, doesn't mean it's going to get you the best results. It's just a number that you have that you can lean on. So I think I do think those psychological forces play quite a big role in that. Matt McFarlane: Yeah. And I guess in an environment where it increasingly feels like the pace of work is speeding up, any you know, any time saved in having to think about this stuff more deeply because the James: Mm-hmm. Matt McFarlane: answer seemingly is there is is taken, right? It's an opportunity taken. James: Yeah, yeah. And speaking of this, so we're speaking of like, you mentioned negotiation. I hate negotiation because negotiation and the pay that you get tells you how good that person was at negotiations. It Matt McFarlane: Mm. James: happens in, to a certain degree in the merit cycle, what's happened with promotions when you're having people working against each other, promotions comes out of politics and negotiation skills and the ability to present yourself well relative to other people. So implicitly you are now competing, you're having people compete with one another, but. You mentioned one example, Carta, and there are other examples, 37Signals and Buffer, the two that I go to a lot. Examples of very transparent, very non-negotiable pay models. And you mentioned a piece about RUN, if I remember this correctly, R-U-N-N, right? Matt McFarlane: Mm. Mm-hmm. James: Well, so you remember it. So tell me about that one and their model and how that's different. Matt McFarlane: Yeah, all right. let me reflect on it. It was a no, I I James: I've got a few if you can't remember I've got a few notes but I'll let you talk through a first if you can't remember. Matt McFarlane: I mean i in essence, and I think I'm remembering this this correctly, it was it was definitely one of the most interesting chats. but with Rowan Savage, who was their he was their former CTO. And in essence, there was a rate and the rate was what it was. it was the same rate for the role no matter where they did it. And the way they set the rate was yes, through market data, but you know, through through having conversations with the kind of people that it was that they were trying to hire and what needed to be true for them to want to come and work at at So in essence, that was kind of the the basis of it. and yeah, there was, you know, the it was very much one of those things where it was like, here's what we pay and and if it works for you, great. If it doesn't, that's okay. And I think there's all sorts of things that that need to be true for that to be successful. but that was that was kind of the crux of it, if I remember correctly. But you it sounds James: Hmm. Matt McFarlane: like you've you've listened to the podcast more recently than I had it. So James: Well, yeah, I had a scan through it. A very enjoyable podcast, the Is it called the Foundation Podcast as well? You match the name? Yeah, Matt McFarlane: Foundation series, yeah. James: Foundation Series Podcast. Very enjoyable, very approachable podcast. I recommend anyone goes and listens to it. But that was very interesting because that was a nice pairing with one I did with Andrea of 37signal. So it's Matt McFarlane: Mm. James: a very similar approach. And they both said the same thing. It just stops pay becoming a conversation. It just goes away. This stops being a thing that you negotiate over. So to all those people out there, they get fed up with them. Everyone complaining, and I say this with heavy inverted commas, complaining about their pay, which usually means they get paid less than someone else doing the same work. I'm not sure that can be considered complaining. But it can be solved by just really, really, really simplifying the structure and just having a non-negotiation policy. And of course, it does mean that pay needs to be reasonably high to begin with, because you can't run the risk of it being non-competitive. But that's where benchmarking data can answer that question, is it competitive Matt McFarlane: Yeah. James: or is not? But my question from this is, if you've got other thoughts on that, by all means jump in, but my question is, to what degree do you recommend that system for clients? Have you built that approach for clients? Matt McFarlane: Mm. James: Are you able to get clients shifting to those models? Matt McFarlane: Yeah, so so another bit of context to that conversation that I really enjoyed as well, as I get to your question, is that the other thing that they did when we talk about, you know, three percent budgets and how much pay is increasing by one of the things I really liked about it was that they had mapped that out. They knew how salaries were going to grow, you know, whether Two out. obviously they had defined pay structures for promotion. So let's just say someone's a level two, they knew what the salary for a level three was. And and what I particularly liked about this and and how this showed up for for Rowan and for Run was that when someone tried to speak to their employees, so another another employer tried to poach or you know hire some of Run's employees away. They would say, Well, the salary for the role is this, and the employee would be able to say, okay, but what's it gonna be in year year two or year three, or if I get promoted? And they couldn't answer that question because they hadn't done this work. Whereas run had, and so they can go, Well, I know that if I stay in my role, my salary trajectory is this. I know if I get promoted, my salary trajectory is that. And it created this defensibility, for for your people being promoted, which was actually not something I had heard before. So to answer your question, yes, I have definitely put these practices in place. I'm a big fan of them. and I think we can get into a lot of the like I'd love to get into some of the like why I don't think this happens and and some of the things that are are challenging about these approaches. but yeah I I you know there's there's so much for to be said for this approach quell discussion and and and you know issues from cropping up because it's just known, it's documented, it's understood, the rationale behind the number, you know, is is generally documented as well. Like where has it come from? How determined it all these sorts of things people understand where they are in the pay system they understand how they can move within the pay system they understand what the future holds for it all these sorts of things that inherently aren't the case in the traditional pay format which is that you know what you're paid you probably know very little else about how pay works at your organization you might know that there's an annual cycle of of Which you might get, you know, zero, three, or five percent, but you don't really know like where you sit in a range, if there even is a range, how the range is determined, you know, how others doing the similar job are sitting in their range relative to you, like all these sorts of things that just ultimately create and seed mistrust in my experience. Like I've James: you Matt McFarlane: been in a number of rooms where I've talked about pay, and usually they're HR people, which is interesting because they're often the ones that are involved in some respect in the pay decision. And one of the most fun questions I love to ask is like put your hand up if you've ever Like you've been paid unfairly, and everyone does. And these are HR people as well, you know, and and I've been a HR person too. I've certainly felt, you know, paid unfairly plenty of times in in my career, despite you would think, having more of a say and more influence in in how that works. But my point is that people just inherently mistrust pay practices. And so the bar is so, so, so low that by just coming up with a set of like, here's how we think about pay, here's how it shows up, here's what the number is, here's how it works. You can just take away a lot of that concern, a lot of that mistrust. And again, people don't sit there going, huh, I wonder if I'm being paid fairly, or I just heard that, you know, Timothy or Jane sitting next to me is being paid that. And suddenly it's just causing this angst for you. So yeah, I I'm a big advocate of it. a client I'm working with at the moment is is implementing a no negotiation approach. Certainly other clients in the past that I've done some work with have taken that approach. And yeah, I think there's there's a lot to be said for it. I think it's when I've when I've seen it implemented and implemented well, it's like, you know, the response from employees from the the the workforce is generally quite positive because th again, it's it's quite rare to have this level of thought and and explanation put into something that people have traditionally just, you know, mistrusted. James: Yeah, and it lends itself to transparency pretty easily as well, because if you're all getting paid the same amount in the same role, then it's not a difficult leap to then be transparent Matt McFarlane: Yeah. James: about the different pay levels. And transparency is such a big part of perception of fair pay. And we should talk, Matt McFarlane: Mm. James: I do want to go into how you implement it and why companies sometimes don't, but we should also talk about fairness. Fairness is a relative concept. If you get paid $100,000 straight out of college, that's great. I maybe think that's great. It depends on what unit we're talking about. But let's assume it's a good number. You say, that's great. If you then find out that you're working with 10 people and they're all paid $110,000, all of a sudden, that's unfair. You're not satisfied. So it's always a relative concept. Yeah. Yeah, yeah. Matt McFarlane: Mm. Yep. And it literally happens that quickly too. Like I've seen it, I've seen the transition happen that quickly from someone thinking I'm being paid a great salary because it's what I asked for and it's what James: Yeah. Matt McFarlane: the company's given to me, to, I've just found out everyone else doing the same job as me is being paid more. What the hell? Like it's that quick. James: Yeah, exactly. So the same way you go onto Amazon and buy something and then walk down the street later and see the same thing in a window for 20 % less. You thought at the time Matt McFarlane: yes. James: you bought it, it didn't occur to you that you weren't paying a fair price. But then if you see it's available cheaper somewhere else, you've just been shafted. You just realize that's completely unfair. It's exactly the same way with pay. So transparency is so important because you're either going to create mistrust for a lack of knowledge, which is that people Matt McFarlane: Mm. James: will assume you're hiding something. Why else wouldn't you be transparent around pay? Or if you are transparent and people are paid more, then immediately you're going to make those people who are paid less than the top paid person in the given role believe they're paid unfairly. regardless of whether, no matter how much you explain, you're both within range, no matter how much you explain, you got a slightly higher merit increase than them because you were behind them, no matter how much you explain or it's market benchmarking, you're all above the 60 % or anything like that, it's all internal and relative to your peers that you make that judgment for. Matt McFarlane: Yeah. Yeah. James: So I was gonna go on to ask as well, then... Because I haven't, I've really struggled to persuade US companies, I'm predominantly a worker at Silicon Valley companies, to move away from individualistic models. When I Matt McFarlane: Hmm. James: say like no more merit cycles, okay, no more performance ratings, well, you can do them if you want, but they're not gonna impact pay. No more individualized equity awards, no more individual bonus components. There is just a kind of look of horror because it's Matt McFarlane: Mm. James: very rare. It really is quite rare. in America and corporate America to do that Matt McFarlane: Mm. James: approach. And they'll nod along to all the arguments and all the research that shows that they say, yeah, everyone hates it. Everyone hates it. So we'll try that. Why don't you try this? And not sure about that. So I'm Matt McFarlane: Yeah. James: curious, like, you know, is there a level of persuasion that you have to go through to get companies to come onto this or are they more ready for it? Matt McFarlane: Yeah, I would definitely say so I haven't I haven't seen it happen with with US companies, US based companies by any means. I think for the same reasons that that you've said, it's just inherently like not seen as as being, I don't know, workable, solvable, doable, whatever. but I've done it for so Oyster to a degree. it was a very narrow I would say it wasn't like a pay point, you get this salary, or it's nothing. It was a very narrow range. That was the first exposure that I had to to this almost like fixed sort of no negotiation approach. And then there's been a couple. So one one company based here in Australia, actually, no, two companies based in Australia, one based in Europe. And yeah, I think for me, like there's a couple of things. So They have to definitely be open to it. So I think there has to be a degree of like, we're not locked into, you know, we haven't we haven't already kind of designed the pay structure in our minds and you're just coming here as someone to rub a stamp it. I think that has to be true of like the relationship that that I've had like come into with a client that I've had. so you have to be a genuine, you know, partner in the room with them and they see the the opportunity to to build something that's right for them and and going to hit their goals. I think one has definitely come from a like how do we think about pay fairness and and how do we ensure that we're kind of, you know, solving for for some of the concerns we've had around the traditional pay practices that that exist in most company. another one came from an administrative perspective and and to the example that you gave earlier with with run, I think I remember the podcast out and I called it something like, you know, this company has a a five minute compensation cycle. And it does, right? Because it's so formulaic and it's it's not something that, you know, we have to umm and ahh over, we have to do calories. We have to get the CEO to sign off with and they inevitably fiddle with the numbers as well. Like it's none of that happens, right? They just go, here's the the pay rates that we have. We're going to move them by this much. you know, if you've been promoted, you get this much of an increase. It all just happens and it's it's done. There's no like Long ass process, you know, months on end. It takes up everyone's time, everyone hates it, and it kind of it doesn't achieve anything except just remind people that it's it's shitty. So that just goes away. So that was that was actually the the justification and the rationale behind another organization that was just like, actually, yeah, we just don't want pay to be this massive headache every twelve James: Mm. Matt McFarlane: months where we have to go through this process. we just want it to be simple. And again, we want people to understand it and and we want to be able to stand behind it and and speak openly about it. And so that was you know, that was the basis for for some of those decisions. but I think on the flip side where companies are resistant to it, there's there's this real like perception of like it limiting your ability to do what you need for the business or or something like that. I think like I you know there's a lot of companies that really like these big wide loopy bands that basically, you know, they all have these massive crossovers and they they or overlaps. They they kinda they don't really tell you anything because they're so wide. And I kinda laugh at James: All right. Matt McFarlane: like I've I've loved watching the pay transparency rollout across the states in the US where it's like, you know, they all kind of have largely the same requirements, but how companies are getting around it and it's like, Yeah, sure, James: Hmm. Matt McFarlane: I can put a I can put a pay range on a job ad. It's gonna be a hundred to three hundred thousand dollars. It's like, okay, what does that tell you? Literally nothing. So, you know, there James: Zero to a million. Yeah, right. Matt McFarlane: there's some companies that go, Yeah, we've got pay pay ranges and that's what they've got. And it it it's you know, i it kinda ser it it serves no point. It's it's kinda pointless. James: Nah. Matt McFarlane: So James: It's funny, I remember early in my career, we were singing the praises of broadband discretion. And it was your work, know, managers can make decisions, they can work nimbly, they can direct the pay to the people who deserve it the most. And that was all part of the sales spiel of being a consultant a few years back, at least when we had broad ranges. Now it just feels like there's no real place for them. Like it's just, it works against all the, if you think, I mean, take the ethical considerations of fair pay to one side, the legal exposure of getting Matt McFarlane: Mm. James: pay wrong to me is starting to say you really can't use broad ranges anymore like the broader the range the wider your legal exposure at that point so it's interesting to me that I feel like the broad ranges are now probably going to be a thing of the past fairly soon Matt McFarlane: well I don't believe in my company's ability I don't believe in my company's ability Yeah. And I think the reason that that companies again prefer not to have these kind of really narrow, quite structured pay approaches if they're against them is is I see it as they fundamentally don't trust their hiring processes or they don't trust their performance approaches or you know, they there there's something there's a weakness in the chain there where they're going to surface great talent. And again, I think there's also this like I don't know what if if it's if it's a paradox or a fallacy or whatever it is where it's like we attribute higher value to something that is, you know, worth more. It may not actually be worth it. And so so when someone comes to you and says, well, you're offering me $100,000, but I think I'm worth $150, you go, well, hang on. You must be worth 150 if if you're asking for it. There must be some something about you. And I'm not gonna go any further and ask about what it is that you you know makes you think you can command $150,000, but I like your confidence. Yeah, exactly. And so I go, well, you must be worth it. And so I think people James: Right, yeah. You just, just anchor high. Matt McFarlane: feel like it's limiting their ability to get these these sorts of people, even though those sorts of people are just great at saying the biggest number. And it's that's James: Yeah. Matt McFarlane: it. It doesn't translate to them being excellent, it just translates to them being confident and able to extract James: Hmm. Matt McFarlane: more money. from you for for very little actual effort and I I think that's often one of the biggest like that's one of the biggest pushbacks I see is that it's like yeah well we still want to be able to get you know get the right talent when actually often the the biggest issue I see when it comes to like someone coming in with more money is that it's like you know a it's been someone's been referred someone by a VC or by you know someone and they're like but they're they're really expensive they don't fit within our salary ranges and it's like James: Thanks. Matt McFarlane: okay but like what makes them worth that or they're they're trying to bring someone in, you know, they're trying to bring someone who's a a senior into a role that's a mid level role. And it's like, well we've we've you know who who it is who is it that you're trying to hire for? Like are your headcount forecasting processes like not working, your headcount planning processes like there's all these other things that they just go, yeah, but I just want the flexibility. I just want the discretion to to be able to do this and you know your your your compensation ranges are preventing me from doing that. So therefore let's widen them or you know do whatever it is. So it's it comes from that I think a lot of the time. James: Yeah, and you could argue there is a benefit to that. The question is whether that benefits outweighed by the costs of doing so. And to me, it's like, that's the pendulum swing is like at one point, maybe that helped. But with transparency, I think it's becoming, if nothing else, too much of a liability to justify arbitrarily all these differences in pages because someone turned up one day and like you say, just demanded a high number, You refuse to use the phrase bad hire. You wrote about this in one of your blogs. got this note. Why? Matt McFarlane: That's good question. You're gonna have to remind me of the context of me writing that so I don't contradict myself, but when did I use that? James: All right. I might edit this bit out to make it look more intelligent as well. Or I might leave it in to make it less intelligent. Who knows? Matt McFarlane: Yeah. We might only have two minutes of podcast with Mina, but yeah. James: So I think where you're going with this is that it's rarely the individual's fault that they do or don't do badly in their job. it's a lot of times to do with the manager, the circumstances, just plain old luck. But we have this tendency to label the individual as the one responsible Matt McFarlane: Mm. James: for the success or failure of that role. And it interested me because this plays very closely into something I've been writing a lot about, which is this fundamental attribution error, which is that we have this tendency to look up somebody and blame them or praise them for their success or their failure. Whereas the vast majority of that success or failure comes from all the other conditions around that situation. So Matt McFarlane: Mm. James: that's why I picked up on it because I felt that we kind of share a view. Matt McFarlane: Yeah, so I definitely I do I do hold the belief that I think we get really obsessed, certainly in in my circle and and in, you know, startup scale-ups and and in the technology industry, I think we get really obsessed with hiring people and then just kind of being like, Okay, you know, you you're in now and and your success or failure is entirely dependent on you. And It's you know if if I really think about the places that I've worked, I actually there's there's an article I really like, and I'll I'll find it and share it so you can put it in the show notes, but it's called The Myth of the A Player. And the idea being that you know, and this this term gets slung around all the time. We only want to hire A-players, we only want to hire High performance talent, talent density, like all of these buzzwords. And if the second you ask someone to define it, they won't or they can't, because they haven't thought about it beyond that, but they just think that they're supposed to want this thing. And and look, we all are, of course. Of course, we want the best people and we want to, you know, to to to see the highest performance from them. but I often just see performance kind of outsourced to the individual and and a lot of companies, because of I don't know what reason, just don't seem to to to carry the responsibility sometimes for creating the environment or the circumstances, the culture for lack of you know, for ultimately what this is, that actually that enables that. And so I think this is where like this term bad hire can can often just get caught up in like, well actually, you know, have we even equipped our leaders to to lead effectively? Have we done a great job of actually defining our goals as an organization. I've woke for plenty that James: Hmm. Matt McFarlane: haven't. have we created the the systems and the routines that enable people to to be successful. Like there's so many things I think that go into it. So I really I liked this book, Extreme Ownership, and it it kind of went into a a bunch of different ways basically that that like essentially said like you know the leader has ownership for for the the performance and and the outcomes of their people ultimately like if someone is doing the wrong thing it ultimately stems back from them not you know knowing what the right thing was that they should have been doing or the standard to which they should have been doing it. Like all of these things come back to the leader who's ultimately like setting the vision, helping you know determine what work where you know people are doing who's doing what, the standard which it's it's to be done by and I really I quite like that as a as a way of sort of framing something that I think is increasingly feels like it it's it's missing or under threat a lot within organizations which is that this like there's this leadership role. I've seen this under threat a lot recently with this kind of concept of the player coach has sort of been has been banded about a lot lately and for me it just seems like Or I'm I'm concerned that it's being used as a means through which to essentially give leaders more direct reports, but also expect them to do the same amount of like individual contributor work as what their their team are James: Mm-hmm. Matt McFarlane: doing as well. And I just I see that role just continue to be stretched. I mean, this feels like an evergreen topic, right? Which is that that James: Yeah. Matt McFarlane: leaders are are just under so much pressure. I think we're seeing so much evidence through Gallup and other surveys that shows that they're just leading the decline in engagement. and and performance and everything because they're just being stretched so thin. And so yeah, I think, you know, off nine times out of ten, don't get me wrong, there's there are people that come in that just, you know, don't want to do a a great job and have just, you know, they've decided. But I I think, you know, if I if I can put a bow on this essentially is that we invest so much money into hiring, trying to hire great people and and ensuring we're really nailed down on that point. And we spend so little in my experience in going, actually, we've got this person, they've got all this organizational context, they've got the relationships, they understand how our business works, they're just not perform. where we expect them, we you know so many companies would rather go, okay, on on a pip and see you later and we'll hire someone in to replace you rather than go actually what's broken about this and and how can we get this person to to where they need to be and and save on having to hire them in, save on the inevitable like onboard of bringing somebody else up to speed and and and and giving them all of this context that the person we've just let go had, we don't we don't set tend to you know to to have the same level of focus and I I think it it probably should have a bit more James: Yeah, yeah. Yeah, and of course a lot of people, know, this term quiet quizzing, you won't know if it's a bad hire because people cover their tracks if they're afraid for their livelihood, which many people are. So we don't make it very easy for people to admit that they're struggling or making mistakes or maybe made a mistake with a hire or maybe they took on a job that they now realize isn't right for them. We make it, we incentivize essentially being quiet and quiet quitting because it's safer to be quiet and just go look for another job and coast for a bit. then it is to raise the issue and risk being laid off, which is infuriating for me. I think a really good counter example is Zappos who had the offer famously where they Matt McFarlane: Mm. James: said, I can't remember what it was, maybe a month or so, we'll pay $2,000 if you leave. And so it was basically saying. Matt McFarlane: Yeah. Yeah. You really know who wants to be there, right? James: Yeah, right. point was that, and it's also a clever psychological tool, because you're essentially then investing in that decision. You work like the person that says, I turned down $2,000 to be here, does not simultaneously think, I don't want to be here. But we should come back to the role of the leader as well because you have Matt McFarlane: Mm-hmm. James: for the second time now and I've walked straight into this setting me up for almost certain failure because tomorrow I am taking part. In a debate where I'm I'm arguing that we don't need managers So this podcast will probably go out before the startup people summit, which I do want to come on to Matt McFarlane: Yeah. James: and talk about however, the role of the manager as you pointed out is you know, it's increasingly stretched increasingly expected to do so much more than is reasonable Matt McFarlane: Mm. James: and The the one point I was gonna make I don't make too many points because we're gonna get into this end of the debate itself But I I think it's interesting if you think about The role of the manager is in many cases one of control. And that's Matt McFarlane: Mm-hmm. James: the stuff to me that stretches people, all the administrative stuff that they have to do with all those direct reports, not the actual nurturing and coaching bits. Those are fun and that makes people feel good and people enjoy that stuff. But they become so overloaded with one, the day job. If you're a player coach, you still gotta do your day job in theory. And two, just being the bearer of bad news. Like do this course, fill out that survey, input your Matt McFarlane: Mm. James: 360 results. Don't forget to solicit your feedback. Don't forget to put your self-reflection, whatever it's called, in for your annual review. So I think that's the biggest problem with it for a player coach for me is that, Matt McFarlane: Mm. James: yeah, if you're expecting to do all that nasty stuff with management, then the chance of them getting to the actual good high value stuff is pretty minimal. But yeah, thanks again for setting me up for that. Matt McFarlane: Yeah. Yeah. And and look, maybe maybe our conversation has has shown my hand a bit around where I think, you know, the role of a leader plays. Obviously I still think it's it's important. where I think this topic is interesting though, is that you know, there's there was and I feel like I've used this example a lot lately, but in in my own writing, but so click up is a is a company that quite famously a couple months ago let go of I don't know, 40% of its workforce, something like that. and rather than just being like, well, we're just going to capture the upside of that, we're going to actually create these what we're calling million dollar salary bands. We're creating these these these salary ranges that are designed to represent the immense value now that we place on the roles that we have because of AI enablement and and sorts of things. And don't get me wrong, I'm rarely supportive of a of a layoff, but it was one of the few examples that I saw in a flurry of AI based layoffs that actually genuinely seem to be like we can realistically do what we need to do as a company with fewer people now because of AI. Here's how we're kind of putting our money where our mouth is as a as a result of that. And rather than just going, well, all that extra profits, you know, profit for us, it's going, well, no, the people that we hire now are I think, by the way, this is a reckoning coming to many companies. And then they were hiring for a CMO, and the CMO had no direct report, no human direct reports. They had James: Mm. Matt McFarlane: AI agents, they had, you know, they they reported into the CEO, obviously. and I guess you could say, well, the CEO's still a manager in this case, but you know, what is this world that we're we're going towards where you're gonna have these people who are kind of leading a a team of AI agents, you're not having to have a lot James: Mm-hmm. Matt McFarlane: of the the awkward conversations that you're talking about, you're not having to have the hey, you need to do this survey, hey, this is your pay outcome, etc. you are just you know focus on the work. And I'm I'm curious as to whether or not that's one James: you Matt McFarlane: path in which we're going to see the role of the leader, you know, continue to be evolved or changed or or squished or whatever it is, like stretched, James: Yeah. Matt McFarlane: all these sorts of things. But yeah, I think there's there's a few things that that you know that certainly make me think, well, you know, what is the role of the leader going for? Do do we even need them? And actually there's there's evidence that suggests that there's companies out there at the moment that that don't see them having a place anymore. James: Yeah, mean, the big companies have been doing it for a long time as well. And it depends again, what problem you're trying to solve, doesn't it? Like the role of the manager is over 250 years old at this point. And the whole point was coordinating a group of people. To your point. like an entire org structures are built on this, you the American railroad Matt McFarlane: Mm. James: roads built the original org chart and they look basically the same now for most companies. And it's all built on the assumption that one person controls a bunch of other people and they control a bunch of other people and they control, control, control. But evidently the direction of travel is flatter, more nimble, collaborative organizations. And that control component is diminishing, but the coaching component is not going away. Matt McFarlane: Mm. James: So I think like, you know, one of my favorite case studies is has always been Buurtzorg the Dutch Home Healthcare Company. And they've got a team of 14,000 nurses, no Matt McFarlane: Mm. James: managers, completely self-organizing autonomous units. So it can be done. And they do have coaches, but the coaches can't issue orders. They can only Matt McFarlane: Mm. James: coach on invitation as well. They're Matt McFarlane: Mm. James: there to be invited to help, not there to tell people what to do. So to me, the models are out there Matt McFarlane: you know, I guess time will tell, but it's you it's potentially these sacred cows that kind of prevent organizations from being nimble enough to to evolve to suit the reality, right? Yeah, yeah. I mean what was the there was a stat James: Well, that's a thing competition will start changing like. Matt McFarlane: in your book somewhere or one of your books about how many of the Fortune 500 companies from, you know, a hundred years ago still exist today, right? Or James: Yeah. Matt McFarlane: or are still in the Fortune 500. So it's you know, it's very few. James: Barely any. Yeah, right. So we've already mentioned this, the debate that you've set me up to lose at. Again, thank you for that, Matt McFarlane: Ha ha. James: tomorrow. So I'll be looking forward to that one. Matt McFarlane: We'll give you a winning topic next time, hey? James: So that is part of the Startup People Summit. And am I correct Matt McFarlane: Mm-hmm. James: in saying this is year two of the Startup People Summit? Matt McFarlane: It is, yeah, yeah, yeah. So last year was the inaugural year. James: Thank Matt McFarlane: it's yeah, it's exciting. I'm looking forward to it happening. It's it's been a big shift. I've decided that anyone who wants to get involved in running events is either a little bit mad or it's at the very least will be crazy kinda after having run it. it's a big undertaking. But yeah, it kinda came from you know, my whole career I'm you know, I've I've my whole career's been in Australia. I've always had a relatively global kind of role or or outlook and I think Have looked for you know my community in the kind of work that I do. And within a sort of Australian or APAC concept context, I always felt like there wasn't any place for the kind of work that was being done in HR teams in startups and scale-ups. So I would always look abroad, I would see other, you know, other events that were were catering to that kind of a need. And yeah, I just kept asking people in my network, you know, where people in my community, where where do we go? these sorts of events where, you know, it's not the kind of enterprise HR, it's not the kind of you know, HR from from a decade ago where where people are talking about, you know, the the the heavy sort of industrial relations or personnel type of of HR of of of Yesteryear and more around these the progressive things that we're talking about now. And yeah, it kept coming up empty-handed and and so decided last year, well, why don't I try and create that space? And and so that's what we're doing again for the second year this year. So we've got something like I think. at forty-five speakers. Most of them feel like they're in this debate that you're a part of. James: Yeah. Matt McFarlane: But it's yeah, it's a big lineup of you know, of pr of of largely of practitioners, people who are doing the job. They're they're chief people officers, they're heads of HR, they're specialists in some respect and they're tackling some kind of thing to do with like whatever it is that's a a modern component of building the the people function inside a scaling company. So yeah, I'm I'm really looking forward to it. James: Yeah, and it's actually like you mentioned before, I think about the loneliness of the job, particularly in a startup, if you're in HR. So I do think that events such as these, they are a way to address that loneliness. If nothing else to make it make you realize you're not going crazy, if you're out there in HR on your own, and you're dealing with all these problems, chances are that everyone else is as well. That's what I've noticed about these meetups, these events is then someone will say something and we'll go, yeah, yeah, yeah, that's a real problem. And you kind of just at least least then you know you're not alone, right? So I do think Matt McFarlane: It's an acknowledgement, yeah. James: it's good that you're building that. Matt McFarlane: Yeah, yeah, and that's another big part of it, right? Which is just create a wa a way for others to kind of, yeah, not feel like they're they're tackling alone or to build a relationship with someone that they can lean on to, you know, to to overcome some challenge with. James: It really does help as well. I haven't done it very much for the last few years, but when I was at Radford, we had these events. And Matt McFarlane: Mm. James: one of the things people really appreciated was just being connected with other like-minded people, whether it's for a future hire or someone who bounced ideas off or someone that Matt McFarlane: Mm. James: is doing something that interests them and they want to try out and they maybe want to. And what was really nice for me is how willing people were to give up their time to do that and help one another. Again, we're led to believe it's a dog-eat-dog world where your success means someone else's failure. But when you get people together, either virtually or in a room, then you do find that people are incredibly willing to help one another when it comes to sharing ideas and easing the Matt McFarlane: Absolutely. James: stress of someone else's job. Matt McFarlane: Yeah, yeah, I couldn't agree more. James: And so this episode is going to go out after the Matt McFarlane: Mm-hmm. James: People Summit. But how long is it running for in total? Is it a week that you're doing that? Just one day? OK. Matt McFarlane: No, it's one day. So there's there's five tracks. Yeah, yeah. There's there's four tracks of content. and then there's one track which is designed for this like community building side of things. But yeah, it's all happening on one day. So a lot of speakers I James: sorry. Matt McFarlane: think it's like eight thirty AM till till four thirty PM or something like that. James: is there going to be recordings and things available by the way in case people are tuning into this afterwards? Matt McFarlane: Yeah, a big thing that I always found with other conferences was that you would go to one session and then realise, dang it, this isn't as you know, maybe not tackling the topic James: Alright. Matt McFarlane: that I thought it was. So, yes, all the sessions and Startup People Summit are recorded, and James: OK, and I'll drop a link in the show notes for the start-up people, Matt McFarlane: Amazing. James: so people can go and find that. So both of us have moved from or have moved into consulting either as part of a firm or as an independent consultant. I we're both now pretty much independent at this point. There are a lot of people out there that like the idea of making this move, but it does seem quite daunting if you're in a salary job. So what advice do you have for anyone that's starting to think, maybe I can hang up my own shingle, maybe I've been doing this enough Matt McFarlane: Mm. James: such that I can create my own brand and I can find my own clients and I can do this work myself. What would you say to those people? Matt McFarlane: Yeah. I think the the thing first and foremost I would say is don't do what I did, which is go completely cold turkey into it. I left the job that I was in the salary that I had and and and and dove headfirst into okay now I'm gonna be a a consultant that does this work with with startups and scale-ups I think, you know, the the best advice from a purely from a risk management perspective, also just like even knowing if this is something that you really do want to do full time is like see if you can find a way to dip your toe in the water. whether it's reaching out to former places of work or people in your network or something like that and just saying, you know, hey, I'm thinking about doing this. You know, it's not not a a full time thing, but you know, I'm looking to give it a go. If you ever hear of anyone that's looking for a a piece of work, let me know. And I think that's the best way to just get a sense for like what's involved in it because it is a very different life, I will say, to James: Hmm. Matt McFarlane: to what it is working in-house. you know, if I rattle off the biggest things to me that that stood out since I've gone out on my own. One of the one of them is the insecurity. And this is another reason why I think like you shouldn't just dive headfirst into this, is that you are going, depending on the kind of work you're doing, you're going from a a stable, steady paycheck to you know, either project-based or whatever it is based invoicing. There's always inherently an end date to it as well. So you're kind of always thinking about what's next. I I joke to other consultants that you tend to ping pong between I've got so much work on, I'm so stressed, I'm overwhelmed, and you I can't. Till I can take a break. And then the second that you are not doing work, you go, my God, I'm never going to get another job. And suddenly you're just wondering when the, you know, when the next invoice is is coming in. So that that is something that I still grapple with a little bit, but is something that you have to get comfortable with is just the sort of, you know, the uncertainty of it. I think another thing as well is that it really does test your. your what I'll call like your consulting skills. So your ability to like listen deeply, understand what it is that someone's trying to achieve, but also like how it is that you set out to solve that problem for them as well. They're paying you for your expertise. They're kind of paying you to to come and bring a solution. and there's this kind of threshold between just like solving the problem for them with, you know, an approach that you used versus solving it for them in a way that's really going to to to hit the kind of results that that they're trying to have. So I think there's there's that, you know, there's that the project management skills. I feel like mine have never been tested to the extent that I they have been in in this sort of perspective or in this this position, which has has been interesting. And just like the amount of like forethought, like one of the things that you can't really do as well when you're in this role as you could when you're in-house is you could kind of iterate a little more freely, I think, in an in-person role. Whereas when you're being paid for a a solution or an outcome, something that's like largely pretty good to go. And so I think that's where again prefacing it with those really strong listening skills and understanding what it is that they're trying to to solve for is is is critically important. James: Hmm. Matt McFarlane: One of the things that I've really liked about it is actually the separation though. And so when I say that, I mean I used to get really hung up when things, you know, when I wasn't successful either influencing someone or getting someone to make a decision that I thought was the right decision. and partly because I think I had to live in it. I was in that environment, it, you know, it had an impact on me. You get a degree of separation from that with, you know, being a consultant. You can kind of say, Hey, I think we should do that and and here's why. James: and Matt McFarlane: You can make your case. And if the client says no, then you can just go, okay. Like it's, you know, there's a there's a degree of like, well, it's not going to impact James: Yeah. Matt McFarlane: me. I've I've, you know, I've I've put forward my thinking around why I think they should do this and what the impact of it might be. But actually there's kind of this, you know, there's this there's something nice about just being able to go, well, you know, I've let you know. James: Is it that you get to say, told you so later on at some point? Is that the nice thing that you think? Matt McFarlane: Yeah, I I don't know that I've had like any follow-up work from an I told you so moment, but yeah, I'm sure there's been moments where I've been like, okay, well I I told you this is gonna happen. It's happened, so okay. James: Alright. Matt McFarlane: It is what it is. But but it's also like, I don't know, there's a little bit of freedom in that, I think, which is James: Yeah. Matt McFarlane: is kind of nice. It's it's not it's not a weight that you have to carry you know, as you would have if you were working internally. So yeah, there are a few things that come to mind that are like for me are like the the things to think about when, you know, before making a move like this. James: Yeah, I what we should say is that, of course, if you're in a house, you can just about do it. If you're working for a consulting firm like I was, you can't go off and do bits of work. So be careful about that if you Matt McFarlane: Mm. James: are thinking about it, because obviously you've got non-compete clauses and all kinds of reasons as to why you can't go and work privately with the clients that would otherwise go through your employer. Matt McFarlane: Yeah, James: So you wrote a very, very popular blog about how you got right. think, was it your most successful blog? How to move into independent? Yeah. Matt McFarlane: Yeah, I think yeah, I think till this to this day it's still probably the most read piece of work, which I I don't know what that says about the other things that I write, but yeah, it was my it was a recap of my first year in in in becoming a a consultant. James: Yeah, yeah, and I read that one. It was a lot of good advice now. I think it shows that a lot of people are interested. And I do think a lot of it comes from the fact that people do get that frustration from being in-house. People do want to have a bit more control over their destiny. And it shows that a lot of people are interested in a different model of working. And I do think we're in a world where we can be more flexible in the way that we work and gig working and freelance and... that wonderful term, is it, fractional? Everyone loves that word fractional as well. Matt McFarlane: No, yeah. James: A lot of fractional going around right now, which is a fancy way of saying part-time, which I like. They would probably argue there's a bit more than just part-time. I totally get that. But Matt McFarlane: Yeah. James: clearly the way the model of work is shifting and companies are willing to experiment more with different ways of doing things, there is a bit of a, I still think a bit of a them and us mentality when you're not a full-time employee and you are a contractor, of course. But that's got, like you said, it's got positives as well as negatives. Matt McFarlane: Yeah. James: So yeah, it was very interesting to me, not just the article, but the degree of interest you had with that article as well. So again, we'll put in the show notes, that article specifically, in case anyone's interested in that, as I recommend reading through that one. Matt McFarlane: Yeah, no, I appreciate it. It's look, I think, you know, there's probably a whole other podcast in talking through this, but I do think it is going to become a contemporary part of of how people think about work. I think this whole concept of job for life is, you know, dead and buried. I think there's a real lack of of of certainty in in in traditional employment. James: I mean, when you think about it, like you've got work to be done and people that can do it. And the idea that you only have the available pool of talent to match up that work with those people is a very, very archaic way of thinking. Again, if you look at this, this hundreds and hundreds of years old, this model at this point. So I do, I do like the idea that we can innovate. It does come with this interesting problems like the gig, know, the gig economy is interesting, but it needs Matt McFarlane: Mm. James: to be regulated most likely to protect people from abuse. And similarly with contractors as well. and Europe's done a better job of legislating against certain treatments and providing them with the benefits that you get as a full-time employee as well. But Matt McFarlane: Mm. James: then it gets complicated, of course, and then it starts becoming less attractive, et cetera, et cetera. So legislation probably needs to catch up to enable a more nimble way of working. And I hate to say it, but you are very good on LinkedIn. You are quite entertaining. if someone is looking for someone both informative and entertaining to follow on LinkedIn, I suggest they follow you. So Matt, thanks so much for your time. Hopefully we can do this again at some point. But I appreciate everything you've shared. I'm sure, again, in particular with regards to how you built the career that you have, think you've done something very wonderful, very helpful. So I think a lot of people are interested in how they can build something similar as well. So again, check out that blog to hear how you did that. Matt McFarlane: Yeah. Good to be here, mate. Thank you. I appreciate it. James: All right, see you soon.