Compensation & Competency Model
The Moment in Time
In 2018, Code2040 went through both a CEO transition and layoffs within 6 months of each other. Layoffs were due to both financial and cultural constraints. Code2040 started as a pipeline organization - the mission was to get more Black and Latinx people in tech. What we started to become over time was a racial equity nonprofit that was pushing a new tech industry - one where Black and Latinx people didn’t just join the workforce but thrived. We would build an ecosystem of tech workers, companies, and entrepreneurs who would carry our mission forward.
In the layoffs and leadership transition - a decision was made that we would become a racial equity and justice-focused nonprofit. We’d work on shifting the material conditions of the tech industry to revolutionize the way it worked and to shift it towards adopting racial equity and justice principles.
In the shift - a division (of sorts) developed within the organization about how we needed to work together to get to our goals.
As the organization rebuilt, our CEO Karla became clear that ushering in a new era would also require building a new culture. It was a moment of reflection. To put a stake in the ground on what kind of culture we were building and what kind of expectations we would have of our employees, of each other as team members, and of us as community builders on our mission.
In that clarity, the new competency model was born. It became the foundation of who we were and what was expected of us. The compensation model was built in tandem so that the framework carried it through.
What We Were Solving For
Building our competency model - and then from that to our compensation model - was about making the implicit expectations of our employees explicit and operationalized within our organization.
We found ourselves asking:
How do we define what "great work" actually looks like at Code2040?
How do we evaluate not only what someone accomplishes but how they accomplish it?
How do we reduce subjective performance conversations and give managers and employees a shared language for growth?
How do we create career paths where people can continue growing both financially and in their career path without needing to become managers?
How do we make compensation and promotion decisions more transparent, equitable, and consistent?
How do we build People systems that reinforce one another rather than operate in isolation?
What We Built
Instead of building a competency model OR compensation model separately, we built a connected system that defined what growth looked like and how it would be recognized - both financially and in career growth - throughout an employee's time at Code2040.
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Our competency model became the shared language for employee growth.
Rather than evaluating only what someone accomplished, we also defined how they approached their work. Rather than relying on vague ideas, we translated our organizational values into observable competencies that could be discussed, evaluated, and coached.
We developed paths and expectations for growth at each level of someone’s role. Expectations for a certain competency would not be the same across levels. And we wanted transparency for employees on expectations of them to grow towards a promotion if that’s what they wanted to do.
We recognized employees' growth when they were able to do competencies: independently, with confidence in their knowledge and deployment ability, and with organizational familiarity within the Code2040 context.
Competencies established clear expectations for every role and became the foundation for hiring, onboarding, performance conversations, promotions, and compensation.
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Our compensation model directly mirrored the competency model.
Salary growth reflected demonstrated competency growth rather than tenure or an employee's ability to negotiate. Our compensation model was internally available and transparent to employees. We didn’t publish people’s individual salaries but if you knew someone’s title and level, you knew what range their salary was in.
Compensation bands were designed to be large enough that employees could continue progressing financially within their role without needing a promotion.
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We separated competency growth from organizational need.
Sometimes someone had grown significantly in their competencies and deserved a promotion for that growth. Sometimes the organization simply needed someone to step into a larger role.
We designed our promotional paths (and in turn our pay increases) to separate those decisions and to explicitly name to people what kinds of promotions they were receiving and if it would be permanent or temporary.
For example, if an employee was taking a sabbatical and we asked another employee to step in; we would temporarily increase their salary for that time period to match their new level of responsibility.
Similarly, if we learned strategically we needed a Director level role to run a Program, we would look internally to see if someone could be promoted to that level of responsibility - even if we knew their competencies were not yet at that level. It meant that a person could expect to be in that same role level and band for an extended period while their competencies caught up with their level of responsibility.
We created these separate pathways so that promotions, compensation, titles, and organizational design could evolve independently.
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We established principles that underpinned our approach to our compensation decisions.
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When the organization was in a strong financial position, every employee received an annual cost of living increase. Whenever those increases were made, the entire compensation model increased by the same percentage to maintain internal equity.
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We committed that no full-time employee would earn less than $60,000 annually to recognize the realities of the harsh cost of living nationally.
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We committed that our highest-paid employee would never earn more than five times our lowest-paid employee and no one (outside of our CEO) could make more than 200k.
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New employees always entered at the beginning of our salary bands (levels 1-3), leaving meaningful room for compensation growth before a promotion was available. Levels 4 & 5 were reserved for people who had experience applying their skills within Code2040. So sometimes the answer to making more $ was just…patience.
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As a nonprofit that worked within the tech industry, in different eras of the org we lost a lot of really all star employees to the tech industry. We made the choice to try to have salary ranges that were elevated within the nonprofit industry but could remain competitive with tech. Could we be an employer that retains nonprofit employees from moving into tech - could we be an employer that could attract tech employees who wanted to make the switch to nonprofits?
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We wanted to place value on our employee’s dedication to being a good team member, doing good work, and being invested in upholding our values. Yes, we wanted you to achieve your goals and do what you said you were going to do and that wasn’t the only thing we were going to hold you accountable to. (we did swing too far here so more on that lesson later!)
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We intentionally challenged the idea that career growth should require becoming a people manager. We developed a separate growth for individual contributors who wanted to continue to hone their skills and deepen their expertise without necessarily managing other people.
Employees could continue developing as individual contributors, demonstrate increased competency, and receive meaningful salary growth.
Putting It Into Practice
The competency model wasn’t designed to live only inside performance reviews. We worked to make it the basis of all of our People & Culture systems. It was a shared language and a grounding framework for understanding what was expected of you, what you could expect from your colleagues, and what we placed value on.
It became the through line for nearly every People & Culture system we built:
Candidates interviewed against the same competencies they would later be coached on.
Managers used competencies during coaching and performance conversations.
Promotion conversations became grounded in demonstrated growth in competencies
Compensation decisions became easier because expectations had already been established
By intentionally using the same framework throughout the employee lifecycle, we tried to create a shared understanding that hopefully would reduce ambiguity for employees, managers, and hiring teams.
What Time Taught Us
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The model fundamentally changed how we talked and moved with each other. The type of language we used in the competency model - like Distribution of Power and Compassionate Accountability - became how we made decisions, how we communicated with each other, and it supported employees' knowledge of what they were working towards. Managers had something concrete to stand on during celebratory and difficult conversations.
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Before the competency model, performance was largely measured by outcomes. We realized we also wanted to hold people accountable for how they worked. How they collaborated. How they gave feedback. How they treated their teammates. How they upheld our values in practice not just in theory.
Making those behaviors explicit changed the culture - so much so that some people ultimately decided the organization was no longer the right fit for them. That was not only okay but exactly what you can hope for. The competency model became a clear statement of what it meant to work here.
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We absolutely believe people should be paid fairly. Compensation recognizes growth, reduces financial stress, and communicates that someone's work is valued. And raises create surprisingly short-lived excitement around an employee’s experience. Meaningful work, healthy managers and team dynamics, clear expectations, and organizational support matter just as much (if not more!)
Compensation is one part of a healthy employee experience. It isn't a replacement for building an organization worth staying for.
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Looking back, we overcorrected. We became very good at evaluating how people worked but not nearly as good at evaluating and expecting high quality work and outcome achievement. We did want people to care about and be invested in how they worked and we wanted to infuse our values and competency expectations into everything we did. And also at the end of the day for the love of ourselves, our teammates, and our community we needed to be accountable to doing good work - excellently.
A healthy performance and expectation system needs both.
What We’d Tell You
Define what growth means in your organization. Before building salary bands or promotion pathways, decide how your organization recognizes growth and what you actually want to reward. Do you want to be outcome focused? Competency focused? Tenure focused? How will someone grow at your organization? How will they know they’re successful in their role?
Write down and operationalize the things you actually value. If collaboration, feedback, equity, or communication matter, make them visible. Be specific about what you mean when you want someone to do them well. Don’t let something as important as what it means to be a successful employee at your organization be something that’s left up to interpretation. Get specific.
Growth shouldn't require becoming a manager. Create meaningful career paths for individual contributors alongside management pathways. Long-term organizational success requires solid managers and individual contributors. Don’t force them out of the organization or into a skill set they don’t have (or want!) in order to grow their career. Respect management as a different skill set.
Transparency creates better conversations. People deserve to know what they're being evaluated against, how decisions are made on their career paths, and what growth looks like. It makes conversations and decisions easier across all aspects when there’s a shared language and framework that people can refer back to.
Balance how people work with what they accomplish. Behavior and how you show up at work matters. Being a good teammate is important. But so does achieving your goals. So does producing high-quality work. The strongest competency models and performance/reward systems make room for both.
Compensation should also be underpinned by your principles. Before you build salary bands, define the principles that will guide them. Whether it's cost of living adjustments, internal equity, pay ratios, or salary floors, your compensation philosophy should be intentional rather than accidental.
Remember that compensation is only one part of a healthy workplace. Pay people fairly AND invest just as intentionally in meaningful work, strong managers, healthy teams, and organizational clarity. Compensation models can’t solve problems those systems create.