2017/7/11 at ISAO office

Natch! Open Management Opens up the Future.

Part 1 "Holacracy Management and Super Flat Management"
Part 2 "Straight Talk: Payroll and Performance Review"
Part 3 "The Future We Are Aiming For"

Part 2 "Straight Talk: Payroll and Performance Review"

対談写真5

How do you evaluate an employee’s value?

Keiji
Changing the topic...
We were just discussing how irritating it is to work hard on something that has no meaning. I think that in an open environment, truly competent people will naturally start acting like a leader. This isn't hierarchy, it is more the feeling of when someone takes off walking and other people start following. I’m curious, in a flat organization, how do you deal with that leader type of existence?
Kozo
We have a generous basic income at Diamond Media, however, we also have an extra merit based bonus system. That portion is variable compensation, all staff members decide twice a year on what it will be.
Keiji
Is there an upper limit?
Kozo
No. No upper limit. There are two types of thinking regarding salary: pay based on ability, and pay based on position, right?
Pay based on position evaluates the value of the job; pay based on ability evaluates that person's knowledge and skill. I don't think that these are enough to properly do evaluations. For example, a "mood maker" or a personality just somehow manages to skillfully make work progress forward.
Keiji
It is difficult to put into words, but those individuals are referred to as "people with value."
Kozo
Yes, a quantitative number based evaluation of those people is difficult. A performance based evolution is not able to fully judge their value.
Keiji
It seems that God only knows (laughs)
Kozo
We even tried 360-degree assessment, but it didn't fit the company. Finally, we decided to quit the someone evaluates someone else system entirely. So, how do we decide then? Based on the going rate in the market, like a strock price. Putting all salary information in the open, looking at the market value and the difference between each individual, then deciding.

Salary is also Open! "The Money Meeting."

Keiji
What is the salary range? At ISAO, it is about 3.5 to 12 million yen. Strong performers in their early 30's are making around 9 million yen.
Kozo
We are similar, average age is around 28-29, average salary about 5 million yen.
The work requires a high degree of expertise, it starts to become difficult to hire if the salary is too low. New graduates make about 3.5 million, the top earner makes approximately 9 million yen.
However, we do have people working at subcontractors making more then 10 million yen a year.
Keiji
Your way of deciding salaries is really intriguing. Everyone just candidly argues that "hey, this person should be making about 7 million!"
Kozo
Salary is decided at the meeting where all things related to money in the company are decided: “the money meeting.”
We decide based on guidelines that became clear through 9 years of trial and error. First and foremost, salaries are "aligned with market value.” For example, how much would that work cost if you were to outsource it, or how much would you pay a new recruit to do that work. Everyone gets together, individuals with the highest abilities tend to lead the conversation.
Keiji
Subcontractors join in and decide with everyone?
Kozo
Correct, for subcontractors we pay about 30-50% extra.
Keiji
So when subcontractors become employees, the amount they are paid will actually be less?
Kozo
Take home pay is lowered, yes.
However, there are perks to being a full-time employee: easier to apply for housing loans, amount of pension, etc.
対談写真6

Exemptions from Evaluation

Keiji
As for how salaries are decided at ISAO, we have a coaching system to help monitor every individual's growth.
A coach doesn't have to be a senior member, some young staff coach senior staff. Regardless of age, whoever would be the best to support the growth of the member becomes the coach.
An individual's coach or members of the same project can recommend that person for a pay grade increase at any time.
At ISAO, each pay grade has a set salary. What pay grade someone belongs to is based on professional skill, what extra value they contribute to the business, their basic duties and involvement in management. We put someone into a pay grade by adding the pluses and minuses for each category.
You can recommend a pay raise and your salary can be revised anytime at ISAO. Every half period we do evaluations, instead of it being a period where salaries are decided, it's a chance to give staff details. "If you do just a little bit more, a pay grade increase is in sight; just a little bit less, and your pay grade looks like it is going to decrease."
Kozo
I see.
Keiji
If this process is done in an open organization, I feel like evaluations that make you think something isn't right, aren't going to happen.
Because of the fact that it is open, anyone can ask questions on Goalous (ISAO developed internal SNS service) and all staff can see the answers, one person reciving special treatment just isn't going to happen.
Kozo
Great, great. Even if there might be different styles of management in different businesses or industries, it is still vital to guarantee transparency.
When we are debating salaries at Diamond Media, there are four points that we try not to evaluate.
"self-evaluation" "short term evaluation" "evaluation based on a person's future potential" "evaluation relating to changes in job details"
We don't put self-evaluation into the evaluation criteria because it lacks objectivity.
Short-term evaluations can misjudge that person's value.
Evaluation based on a person's potential creates salary bubbles.
Evaluation relating to changes in job do not accurately evaulate someone based on a change in their actual value.
Evaluations are made with those exceptions in mind. There are very few instances of individuals not accepting the evaluation, roles and suggestions are made on the spot. When someone still can not accept it, we recommend a change of companies.
Keiji
That's incredibly similar to ISAO. The part about short term evaluation is also really close to what we have.
We do short term evaluations by using a performance bonus system called AWARD. We don't count salary evaluation into that bonus. We make a clean divide between the two. If we don't properly divide them, we can't evaluate based on someone's real value.
Also, changes in job details not changing a person’s value is exactly the same.
Koso
Yes, that makes it easier to challenge a variety of different jobs.
Keiji
It seems like our way of thinking is similar.
Regarding the self-evaluation part, at ISAO, you can try and make a case for yourself, it makes it easier to provide feedback.
Moving forward, what if someone with extremely high market value enters the company? For example, a 20-million-yen salary is appropriate type of person, how would you handle it?
Kozo
For Diamond Media, we would either pay that salary or would only have them work 2 days a week. (laughs)
As our board members are determined through an election system, it is possible to be elected to the board and receive a bonus for being on the board. Market value is also important, but we decide with an emphasis on gaining acceptance internally.

Huh? An Easy-to-Quit System?

Keiji
Conversely, is there criteria for a person who should not be at Diamond Media?
Kozo
People who don't match with the business that we are trying to do.
Keiji
Does that mean skill-wise?
Kozo
Precisely, we don't really focus on personality that much.
Because really, it is a system where those people who don't fit tend to naturally quit.
Keiji
Which means?
Kozo
If everyone discusses salary together in the open, people who don't fit end up feeling really uncomfortable in that environment and soon quit. (laughs)
We have a Mis-Match system in place for people who quit within 3 months, we provide an extra month's pay on top of the severance payment.
Keiji
So the sense of "it was our bad too" is there as well.
Kozo
Yes, we've made a structure where it is quite easy to quit the company.
We've linked together with other companies and created a system where they can enter those companies when they exit ours, even a system where you can do trial job transfers. From the start, I feel like there are people who are a fit for our business model and there are those who aren't.
Keiji
We haven't made an easy-to-quit system at ISAO yet. But I think it is great!
対談写真8

Slackers: to allow, or not to allow?

Keiji
Changing the topic, overall what type of atmosphere is there at the company? Jockish? Researchers?
Kozo
It is basically one of do as you please... people say it is like a college dorm or club or something.
Keiji
Are there employees who never wake up on time, etc?
Kozo
Yes, yes. (laughs)
Keiji
That's OK? (laughs)
Kozo
Nope, that’s not good.
Keiji
By everyone deciding on the salary, it also means that everyone recognizes this person even if they are late, this person has value. But, if that person wasn't late would they receive more salary?
Kozo
They probably would. It is precisely because those members are genius-like in their abilities: what a normal person would take 2 months to do, they manage to finish in 3 days.
Keiji
This part is a bit different from ISAO. Perhaps this is my personal preference, but I have a strong desire to have people be recognized as adults.
Having staff that can only work at ISAO is not good, I want my team to become individuals that can be recognized by society as a whole.
Kozo
Of course, I have that feeling too, but I also want to see the value of what that person is able to create.
Keiji
ISAO has many employees who don't have experience working at a large corporation, dress code and communications are very lax. Basic education is something that I want to do. May be an overbearing way of thinking though….
対談写真7

Regarding Productivity and Scalability

Keiji
By the way, how you do you manage productivity?
At ISAO there are no departments, and no concept of superiors, we don't manage every individual. Many of the employees span multiple projects, you manage your own resources. At Diamond Media, how do you maximize the efficiency of your management?
Kozo
Diamond Media’s scale isn't that large yet, so that area isn’t fully refined yet.
Keiji
ISAO is also still rough in the area, but by making the way of working open, it should become optimized.
What work and how many hours you have taken can be seen through TADASHI, our company's work hours management system, by making this open, anyone can see the breakdown of anyone else's work hours. If there is something really weird between output and the hours spent, someone will jump in on it.
Kozo
We have a system called LABOR, where we monitor who is putting how many hours into what jobs. At the monthly meeting, we basically discuss problem-solving and new projects. Decide who is going to do what.
Keiji
When you design the system, to what degree do you consider growth in the company?
Kozo
We take scalability into high consideration when designing the system, so we should be able to handle around 100 members.
Keiji
The salary discussion is also taking 100 people into consideration?
Kozo
Currently, we break it up into groups of about 10 people. It is done in two rounds: once with people who work together; once randomly grouped together.
Keiji
Different opinions come out while at the same time you can properly arrange staff as employee numbers grow. In the end, The results from the first round are put in the open?
The results from the first time are put in the open?
Kozo
The results from the first round are made open, then the management team and board members begin adjusting salary ranges. These adjusments serve as the base for the second round. Rather than lowering salaries, most often adjustments are made to increase salaries.
In the past there was a problem with self-evaluations where we had to lower salaries, but since we moved over to the current system that problem seems to have gone away on its own.
Keiji
It is almost exactly the same as what we are doing at ISAO. In Goalous, project members and coaches make evaluations, and the results are then reviewed by the HR committee and adjustments are made. Transparency is kept by allowing anyone to participate in the HR committee meetings.

Part 3「The Future We Are Aiming For」

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