It also avoids hard conversations. Now they do not have to tell Joe that he makes less than Suzy because Suzy is a better performer.
But, maybe that's a good thing. Since we all lie to ourselves and think we are better than we are, Joe probably thinks he's killing it. And, since many people lose whatever maturity they have when talking about their performance vs. someone else particularly when there is money involved, that whole conversation can be skipped.
The problem as you say though is what happens to Suzy. She will not be happy making the same as Joe since she will also think (and be correct) that she is a better performer. So either they only hire the same level performers (which is possible in a small company), or they start inventing job title/levels.
At the end, it's trading one set of problems for another. I applaud them for trying out new ways to structure company wide compensation though.
It also avoids hard conversations. Now they do not have to tell Joe that he makes less than Suzy because Suzy is a better performer.
But, maybe that's a good thing. Since we all lie to ourselves and think we are better than we are, Joe probably thinks he's killing it. And, since many people lose whatever maturity they have when talking about their performance vs. someone else particularly when there is money involved, that whole conversation can be skipped.
The problem as you say though is what happens to Suzy. She will not be happy making the same as Joe since she will also think (and be correct) that she is a better performer. So either they only hire the same level performers (which is possible in a small company), or they start inventing job title/levels.
At the end, it's trading one set of problems for another. I applaud them for trying out new ways to structure company wide compensation though.