A few months back our company publicly published its financial data on our website. We made every sale and every cancellation on our SaaS (Software as a Service) platform available for all to see. We wanted to share this information because it reflects the way we do business: Internally, we disclose detailed financials so everyone understands how we’re doing. We share salary information so that everyone knows what their colleagues earn. In place of competitive sales commissions, we distribute a portion of our revenue among team members according to a transparent and equitable formula. And we give every employee a voice in big business decisions.
As a privately held company in a competitive space--developing innovative ways to curate and display social media feeds--this transparency may seem foolish. But the advantages are worth the risk. Indeed, our focus on a transparent and fair culture is a secret of our success. It allows us to innovate, to recruit talented millennials who appreciate our values and to keep our employees motivated. Our clients, too, seem to appreciate our candor.
Although we adopted some of our disclosure practices against the advice of family, friends, mentors--even investors--it’s hard to argue with our results: In the past year we’ve grown from four to 20 employees, quadrupled the number of customers using our platform, and enjoyed 7 percent to 10 percent growth in monthly recurring revenue to reach more than $3.5 million in revenue.
We strive to be different: Startup companies in the tech space these days are often viewed as arrogant and, with abundant funding, entitled. We’re eager to be seen another way and want to inspire other entrepreneurs to challenge the status quo. We aren’t the first company to embrace openness as a guiding principle. Buffer (bufferapp.com), another social media SaaS startup, is an inspiration to us. It reminds us that we aren’t crazy--or alone, at least--in operating this way.
We believe transparency in compensation is a key to employee happiness and will be adopted more widely in years to come. For one thing, it means employees don’t have to wonder if a colleague negotiated a better deal. Most importantly, they want to know they’re getting paid fairly, which is why we use a clearly defined incentive structure and a formula that spells out how we calculate salaries and total compensation. It factors in skillset, experience, and cost of living so that the compensation package offered is equitable and less likely to be questioned in hindsight. This helps our teams to focus on innovating and collaborating. It also builds trust in the organization and a spirit of openness and honesty in the way we communicate with one another on a day-to-day basis.
The people who are the right fit for our organization appreciate this ethos. The young adults on our team--at 24, I’m one of them--have experienced companies that do not practice transparency. We’ve worked in atmospheres that lack trust, don’t value our opinions, or rely heavily on politicking. I hated the feeling. When I decided to become an entrepreneur, I wanted to build a company that would do things differently--challenge norms.
People we interview and new hires are often stunned to see our transparency and democratic decision making in action. Recently we hosted a potential recruit at our office for a day so he could see how we roll. Over our weekly all-team lunch, a question arose about whether to offer a stipend to defray moving expenses for new employees. Everyone with an opinion was able to chime in about whether to offer a stipend, and how much it should be. We decided, as a group, to offer up to $5,000 for new hires who relocate to San Francisco. For us, this was decision-making as usual. But our visitor was astounded. “I’ve never seen a company make decisions like that,” he said during his interview. “That was amazing.” When we offered him a job later that week, he accepted.
Radical transparency isn’t without its challenges. One prospective client who saw our financials decided we were too small to handle their business--not true, but this prospect assumed we were larger enterprise. (Going forward, we’ll probably keep the open books off our blog.) Many decisions take longer and our emphasis on culture sometimes distracts from product and sales development. We sometimes lose out on exceptionally smart talent if they are more interested in making money than being part of our team ethos. Indeed, hiring often becomes more about taking the time to find good “fits” than aggressively enlisting skilled recruits to drive growth.
The good, however, outweighs any downside for us and I’m looking for other ways and places to be transparent. If, along the way, we can inspire others to experiment with practices that empower employees to work in the most effective way possible, while making higher-ups less prone to pull rank behind closed doors, so much the better.