Dive Brief:
- Rent the Runway, which gives customers the opportunity to "borrow" high fashion for a smaller price, has completely changed its compensation strategy, and now it's goodbye performance bonuses, hello raises, according to Business Insider.
- Jenn Hyman, Rent the Runway's cofounder and CEO, told Business Insider that the company's 950 or so employees will get a salary boost, explaining that the new system is designed to "underscore the company’s trust in its employees and to streamline its efforts to scale the business."
- Employee raise levels will vary depending on an individual's previous bonus potential — a combination of job level and company tenure plus "performance and contribution." Interestingly, Hyman told Business Insider that the change came directly from worker feedback, as employees reported that bonus expectations were "a distraction."
Dive Insight
This employer's strategy is based on the idea that this type of compensation switch will level the playing field.
Surveys and research have actually shown that bonuses that aren't based on actual performance are likely to be counterproductive. In fact, despite embracing the pay for performance concept, a surprisingly large number of North American employers say programs are not doing what they are designed to do — drive and reward individual performance. Many employers are either trapped in a business-as-usual approach or suffer from a "me too" mentality when it comes to their compensation programs.
By shaking up its pay strategy, Rent the Runway is onto something.