Apr 29

Introducing Level Ups - A replacement for the dreaded Yearly Salary Review

Everyone hates yearly reviews. You have no idea if your boss is going to give you a raise and if so, how much. The boss usually has unspoken frustration with you, but never clearly communicated their expectations and how they would be measured. It’s a mess and usually both of you walk away upset.

I did yearly salary reviews completely wrong for the first six years of my business. When I launched Treehouse, I finally cracked this problem and found a solution. It’s called the Level Up System and I highly recommend you consider it for your Team. We’re now at 34 people at Treehouse so it appears to be scaling fairly well.

Three Requirements for Happiness

I read Delivering Happiness by Tony Hsieh and I discovered their “Pipeline” system. The idea is simple. Everyone needs the following three things to be happy:

Control
Advancement
Positive impact on the World

If you want to read how the Zappos Pipeline works, I’d highly recommend reading Tony’s book. I’ve adapted their Pipeline and renamed it Level Up.

The Level Up System

We give new employees six months to settle in and start performing at 100%. They’re usually spun up in two months, but allowing six gives you time to plug them into the right area doing the right thing.

After six months, you schedule quarterly reviews. You set a static amount for salary raises. We do around 5% yearly, so roughly 1.25% increase per quarterly review. This is clearly communicated to the Employee. They also have a clear salary range for their job roll. There is a maximum amount they can achieve with Level Ups.

Setting quarterly meetings is vital because it creates a constant feedback loop for both you and the employee. You can communicate areas they are kicking ass and areas they need to improve on with more frequency, instead of storing it all up for a huge yearly meeting (at which point you’d probably forget all the good and bad things they did over the year).

Then you choose an atomic, measurable project for them to complete in the three-month period. It has to be …

Measurable - you know for sure if it was done or not
Complete-able in three months
Done in addition to their normal duties. They cannot sacrifice their primary duties to complete their project.
Something that advances the company’s goals

We call this project their Level Up. We enter the Level Up into Asana as a Project with a due date and intermediary deliverables along the way. They are all atomic and measureable.

If the employee achieves the Level Up (and since it’s black-and-white, it’s easy to know this) they get the pre-determined salary increase, effective on the date of theire review.

No guessing if they’ll get a salary increase and how much it will be. Everyone is on the same page.

If they don’t achieve the Level Up, you can give them another month to do so (this has only happened to us once).

In addition to the benefits to the employees, it’s wonderful for the company, as Level Ups are projects that advance the company’s goals. Here are some examples of Level Ups that we’ve done at Treehouse:

E-Book about Web Design. We gave this away on our blog to demonstrate thought leadership.
Managing the build of our new video studio: Sourcing the general contractor, securing all permits and managing costs
Creating an embedabble widget for Treehouse Badges (using an API the Developers supplied)
Editing our blog - securing writers, sending out the newsletter, etc

I’d love to hear your feedback and how you manage reviews at your company. Thanks!