Believe it or not, companies with better culture make less emotional compensation decisions. When you have a weak culture and you’re desperate to attract and retain talent, you only have one tool in your toolkit, and that is compensation. You pay people more or you let them go. Companies with great culture can lean on more than just compensation to attract and retain. They’ve got flexibility, growth opportunities.
People that the employees care about, that they don’t wanna stop working with because they’re intelligent and they have relationships with them. Meaningful purpose, autonomy and mastery of their work. All of those things attract and retain talent, which allows leaders to make less rash knee jerk decisions about compensation. That is why when you have a bad culture, you could be standing next to someone who’s got the same job description as you and the same amount of experience, but they make 20 % more than you. Why? Because a leader who was feeling trapped, threw money at that person to get them, but they didn’t throw money at you.
It’s a really unfair way to lead. And because the labor market lacks transparency, it’s totally possible for companies with bad culture to get away with it. So if you want to actually not use compensation as your only tool, work on your culture. It is the key to having fair and reasonable wage adjustments as necessary because people don’t only care about compensation when they care about their jobs.