Friends,

Every now and then I’m reminded about how important flexibility is to a successful work life. Case in point: Tuesday was my partners 40th, and we went kayaking with dolphins 🐬 (we saw hundreds, and it was magical)

It’s nice to break the mould of M-F, 9-5 every now and then, so much so it was a great reminder to better at consciously blending life with work (instead of just the other way around).

So to help inspire me, I’d love to know, what is something you’ve done recently that exemplified the power of workplace flexibility?

In the meantime, you’ll note the irony to this weeks edition.

Last week I talked about the great debate on pay for performance, and how I fought for it. The irony is that I’m not actually a big fan of individual pay for performance.

And the reason I debated against James Seechurn (and knew he’d be such a great fit for the opposing team), was actually because I had read his excellent book, What Pay Costs. Immediately after which, I reached out to say hey, that I enjoyed it, and what followed soon after is now the latest edition of the podcast.

So today’s edition is a breakdown of just one tiny 🤏 part of that expansive conversation (which I encourage you to listen to if fair pay is something you care about).

Let me know what you think! ✌️

Matt

In case you’re new here (or just missed it) here’s the past three editions of the FNDN Series:

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Know a startup Head of People looking for answers 🙋 why not forward this to them for some instant karma? ✨

This edition is based on the latest episode of the FNDN Series podcast, with James Seechurn.

James Seechurn is an author and advisor who specialises in sales compensation, incentives, and reward system design. He works with companies on how pay, job architecture, and performance systems shape behaviour, culture, and long-term outcomes. James is the author of Nothing Left to Take Away and What Pay Costs, where he challenges conventional pay-for-performance thinking and draws on research, history, and real-world examples to rethink how organisations motivate people.

Roughly one in fifty S&P leaders believe their own performance management systems actually work.

It’s astonishingly low.

And these aren't the people on the receiving end of the system. These are the people responsible for rolling it out.

The architects, and the sponsors. And even they don't trust it.

Yet every year, most companies run the same ritual: rate people on a scale, calibrate across teams, and hand out pay rises that differentiate top performers by a couple of percentage points.

The entire exercise is optimised for a spreadsheet, not for the humans inside it.

The uncomfortable question is whether the merit cycle is actually retaining your best people, or just training everyone to think transactionally about their relationship with the company.

James Seechurn put it to me in a way I haven't been able to shake. I'd asked him how you reward someone who's clearly outperforming their peers.

His answer wasn't a number. It was a question: if one person is thriving and everyone around them is struggling, is that actually a success? Or have they just surged ahead and left the team behind?

I've run the merit playbook. I've built the matrices. And I've started to think he's right that it's doing more harm than good.

The idea that high performance should be personally monetised isn't a natural human instinct. It's learned behaviour, and James traces it directly back to Jack Welch.

Welch's rank-and-yank philosophy at GE turned individual results into the only metric that mattered. The result?

Engineers fled. A company that invented the modern washing machine and the fridge stopped innovating and became a financial services company. 

The individual reward system was central to that decay.

Compensation practices (merit cycles, individual bonuses, calibrated 1-5 ratings) are the mechanics through which that Welch-era thinking gets reinforced in every organisation that still runs them. Every time you tie a bigger pay rise to individual outperformance, you're training people to think of success as personal extraction rather than collective progress.

James put it simply: a great leader's instinct when they're outperforming isn't "I should get paid more because I'm brilliant." It's "how do I pass on what I know so we all win together?"

And the research backs him up. Teresa Amabile's The Progress Principle found the same thing Gallup found repeatedly: when you ask people what drives their best work, the answer is always trust, autonomy, and purpose. 

It is never "because I might get a bigger raise."

Most of your startup is made up of knowledge workers. And for knowledge workers, the merit cycle has a fatal flaw: you can't objectively measure the work that matters most. 

Three famous examples evidence this.

Nobody could have goal-set the digital camera into existence. Steve Sasson invented it at Kodak in the late 1970s, and the company shelved it because it threatened their film revenue. 

Gmail came from a Google engineer who got bored with his inbox and applied the search algorithm to email. 

The Post-it Note came from Spencer Silver at 3M playing around during free time. 

None of these groundbreaking innovations were an OKR.

The most valuable contributions from knowledge workers (the collaboration that sparks a breakthrough, the process redesign nobody asked for, the idea that changes your product roadmap) are invisible to a rating system. 

You can't quantify them in advance. You often can't even identify them until years after they've happened.

Roughly one in five S&P leaders believe their own performance management systems actually work. These are the people responsible for rolling them out. If the architects of the system don't trust it, that should tell you everything.

Psychologist Arie Kruglanski has a term for why we cling to these frameworks anyway: cognitive closure. 

Humans naturally prefer a measurable answer over an abstract one, even when the measurable answer is wrong. 

A merit matrix feels like you've solved something. In reality, you've just introduced another system that people will game.

When a high performer gets an extra $10k, the reaction is "yeah, cool, but now what?" The money is absorbed instantly. The restlessness remains.

What actually retains and energises skilled people is progressively harder work. Not a career ladder with predictable rungs every two to three years (that becomes meaningless), but actively recognising when someone is capable of more and finding them the next challenge, even if it's in a completely different function.

Startups have a genuine structural advantage here. 

Fewer layers, more ambiguity, more unsolved problems. You can give someone a challenge nobody's cracked before. That's worth more to a driven person than any percentage-point bump.

I've seen this from both sides. 

I've been the person offered more than my salary expectations and felt the outsized impact of that trust signal. I've also seen the pattern where the first thing a high performer does when they hit a ceiling is start the money conversation, and that's almost always a sign the career conversation should have happened months earlier.

If this resonates, here's a practical starting point.

Set a single pay point for each role based on market data, cost of living, and a conscious values-based decision about what's fair.

At one company I worked with, we set customer service roles at the 90th percentile because we believed 50th wasn't right for such a critical role.

At another, we defined a living wage down to specifics: could someone afford things like a one-bedroom apartment and save a set amount monthly?

These are values decisions vs benchmarking exercises.

What's the next challenge? What skills are they building? Where do they want to be in 12 months? Have this conversation before your high performer starts having the money conversation.

The people who work alongside someone daily know who's ready for more responsibility far better than a skip-level who sees them monthly.

So use peer to peer feedback and ask them.

Adjust pay only when the market moves or someone progresses into a bigger role.

The merit cycle gives you a spreadsheet. Career progression gives you a culture where your best people stay because they're constantly being challenged, not because you outbid the company up the road by 3%.

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