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Business Observer Friday, Feb. 5, 2016 2 years ago

Culture club

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Peers decide employee raises at this software company — in an open and public vote. What in millennial-world is going on?
by: Mark Gordon Managing Editor

Megan Singh sought a wide variety of work experiences after she graduated from Florida State in 2010.

First she worked in the social media department at Tampa-based staffing giant Kforce. Next was a short stint at the Clear Agency, a St. Petersburg-based marketing firm.

In 2013, Singh heard about Squaremouth, a fast-growing St. Petersburg software and Web firm where customers compare travel insurance products. But more important than the “what” at Squaremouth, for Singh, was the company's open salary structure and unique raise policy, where pay boosts are a team decision. Says Singh: “I always thought it would be really cool if my raise didn't come down to only one person.”

Squaremouth, with around $15 million in revenues in 2015, does that for Singh and the company's other 32 employees. The raise policy is one of several unique culture-building features at Squaremouth, co-founded in 2001 by insurance software entrepreneur Chris Harvey.

There are standards, such as matching 401(k) and health care. There's also unlimited vacation, coupled with quarterly profit sharing. The company gave just-because Apple Watches to all employees last year, and it bought iPads for everyone in 2011 and 2013. Then there's the mandatory birthday day off, with a $200 bonus for beer.

Group decision raises, says Harvey, are good for employees and the company because they create a productive and transparent business that complements the Squaremouth Way. “For us, it's pretty straightforward,” says Harvey, Squaremouth's CEO. “We've done it this way ever since it was two or three of us.”

Here's how the raise process works: An employee can ask for a raise anytime. When someone puts in a request, he or she gets a pitch meeting. That's one employee speaking in front of 21 colleagues and supervisors, including Harvey, in a Shark Tank-like process. The raise-seeker gets 30 minutes to make the case, for a percentage and why. (The company has 11 employees in Fort Wayne, Ind., mostly software developers, who have the same raise opportunities.)

The raise-seeker leaves the room, and the others go over the presentation, and what they know and have seen from the employee. Every employee has access to the company's financials for guidance. A public vote is posted by the end of the day, with an explanation of denials.

One thing the process isn't, says Harvey, is touchy-feely. “We encourage everyone to be brutal,” he says. “If they are worth it, great, but we make them earn it.”

Squaremouth approved 88% of raise requests last year, with an average salary increase of 20%. The company also approved 88% of requests in 2014, with an average increase of 34%.

Harvey and Singh say the high clearance rate isn't from any kind of collusion among employees. It's more because employees feed off each other in work ethic and productivity, and the transparent environment means employees self-police and know who's doing raise-worthy work.

A project management director who started in marketing at Squaremouth in October 2013, Singh was awarded a 22% raise in 2014 and a 12% raise last year. Singh says a pleasant surprise in the open raise system is there's no resentment in the tight-knit Squaremouth workforce — at least in the open. “We don't sit around and open spreadsheets and see what everyone makes,” Singh says.

Harvey, a native of England, says it would be hard for an established company to switch policies from traditional to open salary and raises. But it could be a motivational tool with significant lasting impact at the right startup, Harvey says.

“You are on show to your co-workers at all times,” says Harvey. “Everyone knows everyone's value to the company, and at any one time you have to be able to explain what you are doing. Otherwise, why are you doing it?”

Follow Mark Gordon on Twitter @markigordon

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