We set salaries like this:
A lot of our people belong to unions, and they negotiate their salaries collectively. Everyone else’s salary involves an element of self-determination.
Once or twice a year, we order salary market survey’s and pass them out. We say to people, “Figure out where you stand on this thing. You know what you do, you know what everyone else in the company makes, you know what your friends in other companies make, you know what you need, you know what’s fair. Come back on Monday and tell us what to pay you.”
When people ask for too little, we give it to them. By and by, they figure it out and ask for more. When they ask for too much, we give that to them too – at least for the first year. Then, if we don’t feel they’re worth the money, we sit down with them and say, “Look, you make x amount of money, and we don’t think you’re making x amount of contribution. So either we find something else for you to do, or we don’t have a job for you any more. But with half a dozen exceptions, our people have always named salaries we could live with.
We do a similar thing with titles. Counsellors are counsellors, and partners are partners; these titles are always the same. But with coordinators, it’s not quite so easy. Job titles still mean too much to many people. So we tell coordinators to make up their own titles. They know what signals they need to send inside and outside the company. If they want “Procurement Manager,” that’s fine. And if they want “Grand Panjandrum of Imperial Supplies,” that’s fine too.
Jeremiah Josey's Blog 