First and Best
Below is an internal memo I shared with the company about an update to how we give offers at Carta.
I’d like to implement a First and Best Offer compensation framework where we:
- Give our best offer to each new candidate
- We pay employees the highest compensation we are willing to pay them
Why First and Best
There is plenty of data (see below) that says negotiating offer letters disadvantages women and URMs. And independent of academic studies, intuitively we know that negotiation rewards the aggressive over the earnest. If we continue negotiating with candidates we are knowingly complicit in perpetuating pay inequality and rewarding those who come for money and penalizing those who come to be one of us.
Additionally, negotiation sets the employee-employer relationship up to be a distrusting one from the start. If we offer an employee $100K, the employee counters with $120K, and we agree on $110K, the employee will be happy for five minutes. Then they will wonder if they asked for $130K would they have gotten $115K?
For every future raise, bonus, promotion, the employee will wonder if we, as their employer, are holding out. We will have taught them that, at our company, they need to fight for what they get. They will never trust us to do right by them on our own accord. Why should they?
On top of the gender inequity in negotiating, there is unfairness in companies, with their vast resources and access to information, negotiating against an employee with neither.
First, most employees only negotiate an offer once every few years. Companies do it every day. We have an army of professional recruiters that are professional negotiators. Employees are not.
Second, we are a multi-billion dollar company with an enormous balance sheet. We buy market data, we talk to other companies, and we have 800 employees with many more coming. From their perspective we have unlimited resources to advance our interests. They only have themselves. We are Goliath, they are David.
Third, they are negotiating for their livelihood. We are not. It is a supremely unfair negotiation when one side is negotiating to put food on their family’s table and the other side is negotiating to keep someone within a salary band. We have little to lose. They have lots to lose.
Earn their trust
To do this candidates and employees must trust us. With that trust comes responsibility. We must constantly be looking at every employee and make sure we are paying them our best. No one can be forgotten. Otherwise it becomes the employee’s responsibility to make sure they are being paid fairly. That means we broke our promise to take care of compensation for them.
We can never waver. If we make an exception for even one person we will lose the trust of everyone else. Employees must believe in our integrity and in the integrity of the system. Otherwise this doesn’t work.
Once we make an offer or give a raise, we can never change it. Even if it means losing the candidate or employee. There are no exceptions.
So let’s give our best offer first.
A moral decision
Lastly, it is important to understand that this is not a business decision. Critics will say this is a bad business decision. They’ll say that we’ll lose candidates we could have won or pay some more than we needed to, that we’ll overspend on compensation data and resources. They might be right.
Because this is a moral decision it doesn’t matter if they are right. We are not optimizing for the business. We are living by our values. If we believe in fairness, transparency, and always doing the right thing, we don’t have a choice but to give our best offer first.
First and best goes into effect January 27th 2020.
Data referenced above: LeanIn, HBR, Small, Gelfand, Babcock, & Gettman, Bowles & McGinn