General People Operations with Kyle Maurer

Transcript

Gaby:
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Hi, this is Gaby Galea and welcome to The WP Mayor podcast. In this week’s episode Mark and I speak with Kyle Maurer from Sandhills. It’s important to note that at the time of recording, Sandhills still hadn’t been acquired by Awesome Motive. In this episode, we discuss general people operations, career progression frameworks, the best way to handle compensation, and organization hierarchy. 

Hi, Kyle. It’s nice to meet you.

Kyle:
Hey, Gaby. It’s nice to meet you as well. Thank you for having me on the show. 

Gaby:
It’s great to have you on. Today, we’re also joined by Mark. 

Mark:
Hi, Gaby. Hi, Kyle. I’m glad to be here. I’m looking forward to this discussion with Kyle, actually. 

Kyle:
I’m really excited about your show. The WP Mayor Podcast is a pretty exciting new introduction to the podcast scene for WordPress. It’s pretty exciting. 

Gaby:
Yeah, I’m pretty excited too. We’re going to be talking about general people operations. It’s not something I handle day-to-day, but I’m really interested in the topic and I’ve done a bit of research. I’m really excited to see what you have to teach us today, Kyle. Before we get started, maybe you can tell us a bit about who you are. I know you work for Sandhills. What do you do for the company and how do you help the team and the company itself grow?

Kyle:
Yeah, happy to. I’m the Director of Operations at Sandhills Development for a plugin company here. We have a handful of different products. We’re mostly WordPress plugin brands like Easy Digital Downloads, AffiliateWP, and so on. I’ve been with the company for a while, full time for maybe four and a half years or so, and have served in a variety of different roles, but currently Director of Operations is my primary function. 

Also this summer, I’ve been serving an additional role as the Product Manager for Easy Digital Downloads. That’s something I’ve immersed myself in quite a bit this year, and I’ve had a lot of actually interesting conversations with Mark about the topic too. 

As the Operations Director, my responsibilities are to help, at the end of the day, make this company function as efficiently as possible and be a fulfilling place for our team to work. I have invested a lot of time into making sure that we have frameworks for growth for employees that we focus on developing a positive culture.

Here we hire the right people, we help give them opportunities to do what they want with their careers, and then make this a rewarding place to continue working long term. I work on culture stuff, hiring stuff, compensation, benefits, things of that nature—anything that our team needs to be happy and productive. 

Gaby:
You touched on frameworks there for a minute, can we get into that? I know a bit about career progression frameworks, but not that much. I know it’s very good for employees to have an idea of all the roles that they can get to and progress to. It’s supposed to be very, very good for them to not feel stagnated in their role. What are your thoughts on that?

Kyle:
I think that progression frameworks are a really, really valuable tool for organizations, and maybe ironically under-emphasized for small businesses like ours. I think one of the things that seem to be the mentality a lot of us have as small business owners is that a career progression framework is something that is appropriate for larger institutions. This is maybe a corporate thing. Maybe we’ll get to a certain level one day where that sort of thing applies. When we need to lay out frameworks for growth and clear paths for ascension for everyone at our company. 

The reason this is ironic is because career progression frameworks are one of the most proven and effective tools that we have for attracting talent, for developing our talent, and for retaining that talent. These frameworks really are appealing to people looking for a new job that want to see what opportunities exist within an organization. 

It’s amazing for us to have something like that to get the good people that we need. It’s important for motivating people to continue to grow and giving them the clear steps that they need to rise within your small company, and to keep people around, which is where it’s critical for small businesses because turnover just hurts us—hurts us really bad. 

When we’re small, we need to do everything that we can to get the right people in our organization. We can’t really afford to keep hiring the wrong people consistently. We need those people to step up and take responsibility for stuff, and we really need those people to stay and not find ourselves with a revolving door of employees. 

Those are things that will just kill small businesses. Since this is one of the most effective ways for improving in all of those areas, it’s something that I find to be a little underappreciated at the small business level.

Gaby:
Here at WP Mayor, we have a sort of idea of the progression framework, but it’s not really defined. I know a lot of small businesses have this issue, and it is sort of something that’s more associated with the corporate type of business. I do understand how important it is, especially those three things that you said—attracting, developing an employee, and also then keeping them there. 

What would you do then if you’ve got an employee who doesn’t really want to ask or doesn’t aspire to have a managerial role or a leadership role, but then still wants to progress within that role that they’ve got?

Kyle:
Even to step back just a little bit to hit on what you’re talking about, another challenge that we have in these conversations is this idea that if you don’t have a full comprehensive framework for growth for everyone that maybe it’s not what it should be. But really, we need to think about frameworks as something that are things that are alive and continue to evolve as the company evolves.

For even very, very small organizations of just a few people, I recommend that you don’t need to have a framework that is as comprehensive as the one that’s at Microsoft. You should have something that is just a very, very basic description of whatever the next steps are. Maybe all you have is a single developer on staff. What is it going to take for that developer to earn a Senior Developer title?

Simple steps like how long do you expect them to work for you or what things do you expect them to be responsible for? A few sentences written somewhere that they can access and that’s enough. You have a career progression framework that suits you at that stage of your business. Then as the company grows, you expand on that to be more inclusive of more titles and have more detail for different dimensions of the jobs. 

It’s something that should be constantly evolving as the organization grows, so it’s never ever really done, but it is going to suit whatever stage you’re in. Going back to the question that you asked about different paths that people can take and the reality that not all people are going to end up being managers, not everybody wants to, and not everybody needs to manage other humans.

Now, it’s not just about climbing ladders. There are definitely ways for people to grow and ascend. There should be different paths or streams, as other people call them. Now, while people management is very common and a natural step upwards is not the only way to progress. 

Instead, employees can take what I tend to refer to as specialist paths. They can ascend by developing very high-level expertise in a specific discipline to the point where they can function as a valued adviser to company decision-makers and assist in solving very complex problems. You’re rising by increasing the complexity of the problems you’re able to solve and increasing the level of expertise that you have in a given domain. They can also take over the management of specific functions like areas of responsibility, or projects as well, even if they don’t involve people management.

Mark:
I think this is sort of the growth phase of small companies. Even looking at ourselves, we’re still a small team, currently […] single developer as we’re hiring more developers. This kind of idea comes into play because the existing developer is hired just as a developer and they will think if there are one or two people, how am I going to progress in this company? 

It needs to grow exponentially for me to have the opportunity to be on top of even more people, potentially, over the traditional vertical hierarchy. If you go from Developer to Senior Developer like you mentioned then start covering other areas and potentially take care of the technical side of website management within the company, for example. You go further than just developing a single product. You start contributing to multiple areas when that typically exists in most organizations.

Kyle:
Yeah, exactly. This is where you’re the business owner and you can kind of envision that, Mark. You have a lot of experience, you have a team, and you have this imagination. You have a vision for what the company could be. 

The challenge that we face as most employees, they’re not mind readers. They can’t tap into your vision. They don’t have that imagination about the future. Before we had a framework, I would talk to employees and ask them what they envision for the future? What does career growth look like for them? What do they want to achieve and they just can’t see it? 

I’ll talk to somebody in support, for example, and they would say, well, if I want to make more money, the only possibilities for me are I learn how to code and become a developer because developer salaries are a premium these days, my boss (the manager of support) quits and I try and get her job, or I go to another company. 

I’m sitting here thinking, of course, those are not the only possibilities, absolutely not, but that’s all you can see in your seat. You don’t have the imagination or you’re not tapped into the vision that we have for the growth of the company. I know that there are lots of opportunities for you to grow within your discipline to get higher, more prestigious titles, to become more specialized within this. I know that the company is going to continue to grow. 

As the team increases, we’re going to need other middle level managers, and so you’re not imagining all these potential scenarios. A lot of employees are left thinking the only way for me to grow is to leave. 

Mark:
Yeah, I think what sort of pressures on the leader, the manager, or whoever is leading this planning of the future of the company, the vision of the company of where it’s going to be. Just how to get that message across to the employees, with the team members. Because it’s so easy to explain this and the idea that in two years’ time we’re at this particular stage, you have many more people, and the structure changes in this way. We’re launching new products, we’re doing new things, and it’s sort of ideas in midair.

For the individual who’s actually good in one particular role, it’s hard to imagine how that’s going to be implemented if they’re used to working in a particular way. Getting that message across and there’s almost a level of trust that there has to be between the employee and the owner, the CEO, or whoever it is to understand and believe in the project that someone has set up for them and for the company as a whole.

Kyle:
Yeah, that’s true that trust is very important. At the same time, I think that that is the job function of the company leader. This is not a nice thing to do. If you’re the CEO or whatever the title is for the leader of your company, your job is to communicate that vision to your team. That is the primary responsibility. You have to come up with the vision, you have to lay out the vision to your team, and communicate it as clearly as possible. That’s what your job is, not the number one priority. The more clear that message comes across to the team, the more effective they’ll be at acting upon it. 

Mark:
It’s like […] the highest said the progression framework evolves over time, the same as a division of […]. It’s important for communication not just be sort of one time. The first month you’re in the company, we explain how things are going to work in that […]. Take last year, […] COVID, things changed a lot in that time. Some companies really grew, some companies ended up closing down.

There are a lot of things which can come into play that you don’t expect so things change all the time and you have to keep on top of them. The team needs to be made aware that even with whatever’s happening, there are plans for the future. There are contingency plans if things go wrong, and everyone feels safe in whatever role they’re in. 

Kyle:
You got it.

Gaby:
I’ve been mostly on the receiving end of this conversation. I’ve always been the employee being asked where do you see yourself in five years? Yeah, it is a bit of a struggle to see where your path can lead to. It’s not only in WordPress. I’ve worked in other sectors, so it’s a pretty common thing to have.

I feel like some managers sort of look down on these progression frameworks only because they’re sort of attributed, like we said, to larger companies. I feel they’re super important to have especially for employees, even for employers to know where you’re missing out on certain people or expertise in that company. 

Kyle:
Exactly.

Gaby:
How would you start going about this? Is it just like you start with an Excel sheet, listing down your roles, and then seeing where they can go?

Kyle:
Yeah, I’ve seen frameworks in so many different forms. It was not that long ago, just basically a couple of years ago, the one that I was tasked with putting something together for our team and didn’t really know what a career progression framework was. I just immersed myself in the topic and looked at hundreds of them at this point before developing our own. 

Every company is different. This is one of those things that doesn’t seem to be very standardized. We all completely reinvent the wheel and make our own framework from scratch. I wonder if that’ll ever change at some point. From what I’ve seen, it’s all over the place. 

I’ve seen career progression frameworks that are just Trello boards. I’ve seen them authored in GitHub Markdown files. I’ve seen Word Docs, Google Spreadsheets, and custom web pages. Just everything that you can use to publish images and texts on the web is used to make a framework out there. There are even special apps out there that are designed to more or less handle this. 

To get started, I would not overthink the tool. That’s, I guess, the advice I give all the time, regardless of the question. Just start typing in text into whatever your publishing platform is internally and try to describe in words what your expectations are for someone, whatever the next step might be, and prioritize whatever is most relevant at your company. Prioritize the roles that you have and the people who are looking to ascend. Describe it as concisely as you possibly can and that’s what our framework is, basically. 

We wrote a framework that has a series of levels for every different title, but we wrote generic descriptions that are applicable across the organization. There’s not a unique level one description for every job title. There’s one that works across the company, and it’s really only a few sentences, essentially a paragraph for each level where we verbally describe what we expect from a person at this level. If all of these sentences are true for you, then this is the level that you are. It’s fairly straightforward.

Gaby:
I guess this would be shared across the company. Every employee would know which progression path they can get to. I guess you can also switch from one role to another, right? It’s not only in your role that you can progress. 

Kyle:
Yeah, that would certainly be true. We would be different. We have different levels. Whatever my level is for Director of Operations is a different level than my level as a Product Manager, which is my secondary responsibility right now.

Mark: When you’re setting up a firm for the first time, taking your company, as one example, do you come up with the descriptions and the levels yourself and just handle those yourself? Do you discuss them with company owners? Do you discuss them with the employees themselves as to where they see themselves now or in the future and then basing certain things on that?

Kyle:
I’m a proponent of trying to put things into practice as early as possible and let the results speak for themselves. In our case, I authored everything and then put this initially to our founder, and then to top leaders of the company, and then mostly to everyone who’s a manager because the managers are the ones who have to use this on a day-to-day basis. It’s most important for them to understand how to use it. 

They’re the ones who have to read the descriptions, evaluate someone’s performance, run it through this rubric that we’ve provided them, and generate a number, a title, or something, however, yours works. Then submit that to upper management or to me in operations and say this is the number that I think is appropriate.

It starts with me writing these descriptions, and in our case, we decided to go with, as I said, generic descriptions that work across all titles. Many organizations don’t do that. They have descriptions specific for every title. There’s a unique description of expectations for Senior Developer 1 One or Director of Technology Level 4. That’s pretty labor-intensive, especially if you have a lot of titles and it could happen that we evolved to a framework like that in the future. But for now, this is working pretty well. 

Then I provide these descriptions to the managers and say, try to come up with a number that you’re really confident about based on these descriptions, and that becomes just an exercise. When all the managers are able to come back consistently with a confident response for every direct report that they have, then it’s working pretty well. 

When I have managers coming back and say I can’t decide which level this person is at, then I keep working on the description a little bit more. I ask why? What is missing? Are there other dimensions that are not included? Are there sentences that you’re struggling to interpret correctly? I iterate on the descriptions based on the feedback I get from managers until everybody can come back with confident responses and say, these are all the numbers that I have. 

Mark:
I think the more detailed descriptions for a role per level become even more important than at scale rather than smaller teams.

Kyle:
Yeah, that’s correct. 

Gaby:
Then I guess the next step would be how to compensate for any changes in title once an employee is progressing down one of these paths, I guess, is one of the most difficult things to do. I’ve never done it myself personally. I can only imagine. How would you go about applying? Do you go for something like a multiplier effect or something whenever you progress to a new stage? What has your experience been like?

Kyle:
This is another thing everybody seems to kind of do in their own way. Similar ways still in the end where in most cases, some change in level or title results in a change in pay. What we’ve done is we made a compensation system that connects to the career framework, and we’ve designed ours so that there are fixed salary amounts for every level within every job title. 

As I said, all job titles to the company have six different levels. That’s a number that we went with as it seems, not too few, not too many, but something that we can really work with. For example, you could be a Junior Developer Level 4 or a Director of Marketing Level 2. We share with the entire company what the salaries are for every level so that everyone knows exactly what they’ll end up making if they earn level upgrades. 

When they do earn those upgrades, we adjust their salary to the new baseline immediately. Those amounts are calculated by retrieving data from a collection of sources, averaging those numbers, auto calculating a minimum and maximum range with the average at our midpoint, and then splitting that up into six different levels.

Gaby:
This thing is shared across the company quite transparently. That’s something that I guess most people aren’t used to this framework. Another thing is that I find that some smaller companies don’t really give this change in salary with every step. I feel like it’s more common within larger companies. From my experience, I don’t know if this is the case. Mark, I don’t know if you want to jump in here.

Mark:
It does depend on the state of the team as well. Taking us, for example, at this point in time, we’re growing the team and we’re expanding into different areas. We’re hiring the roles that we’ve never had before. There are new people joining the company and also people switching roles within the company itself. 

When you’re switching roles, although it might seem like it’s called promotion so you’re leveling up because the role is new because maybe your experience in that role is not at the level that someone you’d bring in would be asked, for example, the salary won’t necessarily increase substantially. It won’t be leveling up at the same scale that you had five people on the team, and then there are people moving up the ladder. It does depend a bit on that for sure.

Kyle:
That’s true. I think certainly pay is more commonly linked to job growth than anything else, but it isn’t always the only thing. Companies can attach other benefits which are motivating in their own right.This actually can be quite interesting when done well. 

For example, first job title changes can be meaningful to employees just on their own. Typically, pay raises do come with vertical changes, but even if they don’t, going from (say) junior developer to senior developer—an example I keep using here—is a big step. That is a significant moment in an employee’s career.

For those with high aspirations for themselves and who want to continue moving up in their career, the sequence of titles that they progress through really matters. Future employers do look at that and it’s not unusual to have questions asked, like why did it take you seven years to move up from junior to senior? Explain why you worked as a CMO for this company and then a Marketing Coordinator at the next company. This is confusing stuff. Job titles really matter. 

Companies can also link privileges or responsibilities to specific levels within the organization. This can be actually interesting. You could have a rule for which levels get commit access, which levels attend strategy meetings, which levels attend leadership retreats, which levels can have subordinates, which levels deliver reports, which levels get to fly business class, which levels get a company-branded hoodie, and so on. All these things you can bake into the framework, use as additional incentives for employees, and also provide clarity.

This is when such and such applies to you, so you don’t have to ask about it. It is not going to be a judgment call or something subjective. There’s not going to be any favoritism about this. It’s going to happen at a specific point in your tenure here. 

There can also even be other financial incentives beyond just simple pay raises. You could have different annual percentage raises based on levels. You could factor in levels when paying bonuses or profit shares. You could increase budgets for learning or travel based on levels. So many options besides just a salary bump.

Mark:
You even have to do project budgets in a way. When you have a new project and you have someone taking it on, they can progress to the level that they have control over a certain amount of money to invest in that particular area versus whatever they had before. It gives them more sense of responsibility as well as more control. That is making your way up on the leadership side of things without leading people, but you have more control over the company’s future.

Kyle:
Sure. This is really valuable because as I was alluding to, pay is the primary motivator for moving up in these levels. 

We talked earlier about one of the reasons to have a framework like this. It’s to motivate employees to grow, to continue to improve, to work on their flaws, to learn new skills, get better at their job, and help you more. We want to motivate them to do something.

In some cases, an increase in salary is not going to happen as a part of a level change or is not a motivator enough for someone. We’ve had that in cases where, for example, for legacy reasons, someone was paid higher because their pay was set before we had a framework. Now, technically, according to our framework, they’re overpaid, so an increase in level will not bump their salary because the new baseline is lower than their current.

For other reasons, you might acquire another brand and the pay that they come with is not going to cut their salary even though they’re paid higher than your wages. But sometimes, you can’t use the salary increases as the only motivator to get employees to grow. A little creativity in this department can help.

Also, employees just love that clarity, love not having to ask the questions, or just use their imagination and wonder when will this happen for me? What do I need to do? You don’t want to leave employees using their imagination.

Mark:
You probably shouldn’t even just go risk on salary because that’s just financial. You’re working a job to earn a salary and to make money comfortably, but if you’re only doing a particular job or striving to get the promotion because you want $5000 more a year, for example, it’s just financial gain. You’re not necessarily wanting to help the company work.

You make the person feel more like he’s part of the team or part of the company’s growth and future through all the methods we’ve discussed. That’s going to be far more beneficial to the company than just this person being happier because he’s getting paid that much more.

Kyle:
100% agree.

Gaby:
I guess it gets a bit tricky when you’re hiring people who have come from another company with a higher salary. You really want them to come, but for example, their expertise is not at the level of someone who’s already within the company itself. How strict would you be with these salaries attributed to each role? Is there space for a bit of change?

Kyle:
This is a topic of popular debate. For company owners, HR professionals, and the like, this is the kind of thing that could start a lot of arguments. How much discretion is allowable in this context?

This is where we’re stepping into. We’re not in a textbook anymore. We’re just an opinion. This is Kyle’s personal opinion. I believe that as little subjectivity as possible should be included in what is really the most important of all topics. 

There’s nothing more important than the pay, the money for the employees. All the rest is gravy. This is the number one expense for the business, and this is everything to the employee. There is no room for bias, unfairness, mistakes, errors, and so on. I’m generally of the mindset that it should be based on data. It should be as objective as possible. It should be the same across the board, no exceptions. This can be difficult. There are consequences of this, but sometimes, those consequences are acceptable.

One consequence is there are going to be people who don’t end up fitting at your company if you take this stance. That’s the reality. If people want to make significantly more than the pay ranges that you have to find, well, I’m sorry, you have to work somewhere else. That’s just it. There’s no wiggle room here for us to say, well, we’ll just make an exception because we really like you, we want to keep you, and we’ll work with you on that.

There are a lot of other companies out there willing to pay whatever it takes, a lot of bigger companies. It’s a consequence that I think is worth living with. But in the end, you get a system that is fair, there aren’t ridiculous pay gaps, and everything is objective, reasonable, predictable, and works.

Gaby:
It also provides a level playing field for all people on the team. It beats differences in gender, race. You don’t have any bias there as well.

Kyle:
Exactly. It shouldn’t be a surprise to anyone at this point. Those are major problems in many industries, but we know in our industry that this is a serious issue. Across the industry, we’re not consistently paying people very fairly, and we’ve got to do better. A key solution here is having data-driven objective systems with no exceptions.

Mark:
That applies to location as well because we’ve seen many cases where people in certain countries are paid a certain amount and people in other countries are paid a different amount.

We’ve had that problem ourselves. When hiring—especially developers, for example—you’ll find someone brilliant. They love your company, they love your team, they love everything that you’re doing, and they want to be part of the team, but they’re demanding a salary which is more than you have planned and more than the company can afford.

You might think it’s worth paying a bit more for this person because they have more experience and they have that much more a higher skill level, for example. But even if you do that, within a year or two if you’re going to try to expand it even further, then you’re going to run into problems. 

The team’s not going to be happy. Their colleagues are not going to be happy. You’re going to have to adjust pay. Are you going to base it on that higher salary that you gave that person, or are you going to base it on what you’re doing before? It’s not going to be worthwhile long-term. It’s going to be potentially a short-term fix, but if you’re trying to grow the team and try to keep everyone together, it’s not going to work. 

Kyle:
That’s really true. We have to get past this point where we are rewarding so greatly the people who have this one skill and that is negotiating for higher pay. That’s a skill that some people have and many people don’t. It’s a skill that is not technically a requirement for every job at your company. 

I don’t really need everyone who does some content-writing for me, runs our system admin, or something. I don’t need them to have this skill. They’re not better at their job because of having that skill. But across the workforce, they will make a lot more money if they have that skill. That’s just not going to work. We need to neutralize that. I do everything I can to eliminate negotiation as a factor in these conversations.

Gaby:
Yeah. I have been in situations where employees would say, give me the results and then we’ll talk about it. This eliminates that as well.

Kyle:
Isn’t that so great as an employee to just use your imagination and imagine how that’s going to go?

Gaby:
I understand both sides of the story. You need the results to be able to afford to give you a higher compensation, but then, on the other hand, it’s a bit tricky as the employee to give that data.

Mark:
Progress is also tied to some sort of numbers in one way or another. Whether it’s revenue generated, whether it’s traffic increases, whether it’s SEO improvements, or whatever it is, those are tied also into your progression. That would be tied into the progression framework in terms of what levels you go up into and how you progress from one row potentially to the next.

It’s performance, but it’s not solely performance. That will be part of your progression, part of the descriptions of each level, and part of the descriptions of each role. It will include what the expectations are in terms of the results that come from that. 

It’s not just the case of improving your skill level, but improving your skill level, implementing it in the right way, and then stuff resulting in any improvement for the company. It’s all pretty balanced in terms of the progress that the individuals are making. If the individual’s improvement and skill level are also helping the company grow in one way or another—whichever applies to the role that they’re in—then that’s the combination that’s going to result in the quicker progression for that employee.

Gaby:
I guess the salaries are revisited every so often. They’re not fixed for a number of years. There’s something that’s continuously changing with time and as the company grows.

Kyle:
Yeah. We revisit those. As I mentioned before, we get our data from what we believe are pretty reliable, trustworthy sources, and we update our data from those sources. At this point, we do it twice a year. If any baselines go up—higher than what anyone’s getting paid—then they get an automatic raise in proportion to that.

Mark:
As a remote team, how do you handle that in terms of having people living in different countries, different costs of living, and so on? Is the data you collect something global or is it specific to certain areas?

Kyle:
This is one of the key forks in the road that we all have to navigate. Are you going to be a company which does factor in location when determining compensation or a company which does not? Are you going to use a fixed location or a variable location? This is a very divisive topic as well, and companies are all making their own choice on it. 

We have decided to use a fixed location for our compensation. I understand the argument for variable location. We’ve decided not to do that, though many companies do. We strive for a system which is equitable and also simple. It introduces a lot of complexity to your system when you begin sourcing data from a lot of different locations, especially when those locations do not have equal data. That can be challenging. 

You might be able to find a lot of data to support your figures for a big city—for New York City or something like that—but for someone who lives in a very small town in Kenya or even the town that I live in—it’s a pretty small city, I’m not that close to a major city—you’re looking at data sources that are not that reliable. Even the best salary surveys might have only a couple of entries at best for someone with my job title here, and that’s not very trustworthy data.

For reasons like these, we’ve come to the conclusion that it’s best for us, for now, to use a fixed location where we can get reliable data for every job title, and the company uses that across the organization that we do have employees in a variety of different countries and all over the US. 

The location we’re using right now is Chicago. We were using a different city before that, and we decided to upgrade to Chicago. Chicago has a higher cost of living than the location of every other employee in our company. No one lives in a city with a higher cost of living than this base at this time. There’s no one who’s in our current organization—somewhat by chance—who’s making less than they could if they worked for some other company.

This has given us highly reliable data because Chicago is a major city, and there’s no title that we can come up with where we can get reliable figures. It’s made it so that everyone is getting paid fairly or really well depending on where they live. It’s made the system pretty simple to navigate and use.

Mark:
I agree with that. We’ve done pretty much the same thing based on data locally […] and going a bit around Europe in certain cases.

When I was not a leader at all—I was just an employee in a team—I remember seeing certain figures from companies within our industry in terms of how they handled salaries. With one company, I actually saw the entire salary range that they have for their employees and it was based on variable location. 

That was actually off-putting as an employee to see someone getting paid, for example, $3000 more a year just because they chose to move cities. I was like, why should they get paid more just because they decided to go somewhere where they’re going to have to spend more? Why not choose to go to, for example, Thailand with a lower cost of living, enjoy my life, live by the sea, and then pay the same amount as I would pay in California? Why do I get paid less just because I made that decision in my personal life? You avoid that entire conflict.

Kyle:
You’re absolutely right. When it introduces complexity, it really introduces complexity mostly because people move. If I’ve got a large team of 50 or 100 people, and I’m having to keep track of every time anybody changes cities and adjust accordingly—adjust whatever their base is, their multiplier in the future, or what their new baselines are going to be because they keep moving around—it gets ridiculous.

Mark:
If they want to move to a more expensive city and they need to earn more to live there, then that’s their decision to make. That’s a decision on whether they want to continue working the way they are now or they want to move to a company just for that reason. You essentially have no control over what their future is. It’s their choice on a personal level.

Kyle:
Yes.

Gaby:
I guess the next thing I would ask you is how important are titles in an organization? Do you see any mistakes that companies make?

Kyle:
This is a funny topic to me and one that I enjoy. I think it’s possible to overthink and even overemphasize titles in our industry. I more often see titles being handled too haphazardly. They really do matter and mishandling them can result in some serious consequences. There are a few things that I see come up a bit. There are three main problems. I’ll try and break them down. 

The first is without commonly-recognized titles, you can’t do salary benchmarking—which we were just talking a little bit about before, getting that data from those sources. If you don’t have a title, you can’t get a number. It’s a requirement. I’m a firm believer that compensation should be supported by data and done as objectively as possible—we talked about that—to minimize or eliminate inequities and unfairness.

In order for us to get comp data though, we need clear titles. This is the principle of reason that using common standard titles for roles in your company is a really good idea. If you’re making up your own titles, there will be no comp data available for you to check your employees who absolutely are researching industry salaries will be left guessing, and you really don’t ever want that. Again, titles are required in order to have a fair compensation system.

The second problem that I see is inflated titles, which hurt you, the business owner, and employees. It happens a lot and it’s a classic small business blender. Many small businesses start handing out titles from the top-down when they should be working from the bottom-up.

The first person in the company who’s leading the charge gets the CEO title, the first technical person is awarded the CTO title, whoever does most of the marketing becomes the CMO, and so on. C-suite titles as we know are the pinnacle. Since we’re the people at the top of our little organization, we just use the titles which we know are the highest. That’s actually a really bad practice. There are a few reasons why. 

First, it’s bad for employees to be put in a situation where there’s almost no possibility for growth. They can’t even dream of any promotion within this company. If they leave the company, they will almost certainly have to take a title which is less prestigious. That’s a problem.

Also, when you’re a small business, you will not be able to afford to compete with the entire job market on pay. You’re more likely going to end up with lofty goals. […] of the industry’s pay distribution. Given the choice between being an underpaid employee with a fancy title or a well-paid employee with a certain title, you’ll have higher employee satisfaction with the latter. Does it make sense?

It does limit your options as the business owner. As your company continues to grow, you will constantly encounter new challenges. The business needs will evolve because your leaders may be a great fit with the team […] people, but might not be so great with a team of 25 or 75 people because everything is different.

If you start with maxed-out titles from the beginning, then you’ll eventually be stuck in a situation in which appointing new leaders becomes hard. Your CTO may have been great up until now, but at this point, you need someone with more experience, for example. Your only options are to effectively fire or demote the current CEO. 

But if you instead start with more modest titles and then rise up as the company grows, you give yourself options down the road. When the time comes and you need people with new skills and experience at the top, you could add another level up in the hierarchy. You can introduce this higher-level title scheme and then either promote current employees or hire externally to fill those roles. There’s no awkwardness.

Then, the last reason that titles do matter is that organizations without clear title schemes are just confusing to navigate. Titles do communicate a lot. That’s both internally and externally. If your titles don’t really make sense, then you’ll have a lot of problems with people not knowing who to go to with their questions, important people being inadvertently left out of conversations they should be in, and just inefficient flows of communication.

Mark:
We’re struggling with this ourselves at this point because we are filling in new roles and we’re not entirely sure exactly what that person’s going to be responsible for long-term. We know what they’re doing now, but we don’t know necessarily what their progression is yet going forward because we don’t know how the project will evolve.

Be it a new product, a growing website, or whatever it is, so it is a bit of a struggle to figure that out for each individual. […] the importance of having those roles set out, plans on the way, and then necessarily always going for the high-end title just because you don’t have anyone else to fill in the lower titles.

We have even seen CEOs who demote themselves. Sometimes, when a company scales enough, there is that option as well where the CEO decides that someone else needs to lead this company to take it to the next level because I’m not that kind of person.

I think we saw it even with […]. I believe he was CEO. Now, he’s no longer CEO. It was his decision to bring in someone else to take on that role and take the company to the next level. He took on a lesser role to a certain extent, but just as important for the entire company because he knows he’s better in that role and someone else can take on the higher leadership role.

Kyle:
That’s true. There are a lot of good examples of doing that. I think that the founder case is unique because they can volunteer to do this. The situation that is best is one in which you’re using the most modest title that you can get by with. 

Then, as the company grows and the needs change, increasing new levels of hierarchy and introducing new titles above, at every step of the way, you can say, okay, the company has evolved. We need another level of hierarchy. Right now, we have just one level of management, but we need another level of management to introduce above that. Let’s introduce a higher-level title. Maybe it’s the director, VP, lead, or something like that.

Then, we have the option as the company for all of those roles. Are we going to promote someone at the current level to fill that role, or bring in someone with experience and skills to help us at that role? That’s the same for the founder. The founder could be like, I’m just the product lead, the company manager, or something like that. We’ve used a managing director here at Sandhills. 

At a certain point, if we decide to introduce a C-suite level of hierarchy, then at that point, we could say, okay, our managing director, is that person the right person to become our CEO? If so, we will promote them to CEO. If not, if the company needs a new CEO, we’re not having to demote that person. 

They’re not being forced to abdicate that role. We’re just saying, we need someone at a higher level, and bring that person in. Everybody else can remain unchanged. There’s no demotion or anything like that. It gives you all this flexibility as a business.

Mark:
It makes sure that everyone continues to play to their own strengths. If your current managing director is better at a particular role—not necessarily the CEO—then keep them there, get the most out of them from there, and then a new CEO will come in, take on that role, and use their experience in that particular role to help the company grow and develop further.

Kyle:
Exactly.

Gaby:
I think we’ve covered quite a lot today. We’ve spoken at length on progression frameworks, compensation, and also titles and hierarchy. It’s a pretty good basis to start off with. 

I’m excited for our next episode with you, Kyle. We’ll talk about other things such as culture, hiring, and benefits, which we’ve spoken about briefly today as well. Kyle, it was great having you on. I don’t know if you want to add anything else from your end.

Kyle:
I just want to thank you for having me on this awesome show. Keep doing what you’re doing. You got some great guests. This is a cool, promising podcast. Podcasting is the number one way that I consume everything about our industry, so I definitely tune into shows like this as much as possible. Thanks for making this great content.