Shopify changes employee compensation model: “being a manager now has no effect on compensation”

A pair of hands holding a mobile phone which has the Shopify logo on it
Shopify employees are now either managers or crafters, but not both.

First, it eliminated meetings. Now, Shopify is altering how it views and pays its managers.

In a new announcement, the e-commerce giant has changed how it pays and evaluates employees, and being a manager “now has no effect on compensation.”

“Our new talent approach flips this antiquated management thinking on its head.”

Under the new compensation model, Shopify employees will be labelled either a manager or a crafter, and evaluated on their capacity to manage direct reports or deliver on products and projects, respectively. Shopify claimed the distinctions will eliminate confusion, create clear responsibilities, and lead to “unlimited growth potential for crafters,” noting that the goal is to incentivize more than one group of employees.

“Management shouldn’t be a thing you have to do just to get ahead,” a Shopify spokesperson told BetaKit, adding “our new talent approach flips this antiquated management thinking on its head.”

Shopify employees are being informed of the change today. In response to questions from BetaKit, Shopify’s chief human resources officer, Tia Silas, said the changes will come into effect “mid-month.”

Shopify did not confirm how many direct reports will constitute a manager in the new system, or if employee’s current compensation will change as a result of the restructuring. Responding to why Shopify decided to make the change, Silas said it is about “better aligning our talent system with our priorities.”

“We’re clearing even more obstacles from crafters so they can focus on what they do best: building world-class products,” she said. “Previously, the only way to grow your career at Shopify was to move into a people lead role – basically, becoming a manager. Under this model, some of our most talented crafters were burdened by the managerial tax, which distracted them from building and shipping. By removing the burden of management from crafters, they can now focus on what they and we value most – shipping products – while at the same time having a path to advance and grow their careers.”

This change follows Shopify re-thinking its meeting policy earlier this year where it eliminated thousands of meetings across the company by barring any meetings of three or more people. Recently named COO Kaz Nejatian referred to meetings around the time of the change as “a bug” that “destroy [a] maker’s schedule.”

The changes to Shopify’s compensation model also follow the rollout of a new compensation system last year. In September, Shopify introduced a compensation system that allows its employees to adjust the breakdown of their pay between cash and equity.

The pay system enables Shopify staff to choose how much of their compensation they would like to receive in cash, restricted stock units, and stock options, based on their individual needs “a few times” per year.

These changes could be seen as attempts to add operational substance to past messaging from Shopify’s leadership, but that leadership has also been subject to significant change, with the company losing three different C-Suite executives since September and at least 12 senior leaders since March 2020. The most recent departure, that of CTO Allan Leinwand, resulted in the company retiring the CTO position entirely, with CEO Tobi Lütke taking on an additional role as head of R&D.

Whether these changes allow the e-commerce giant to regain its pandemic highs remains to be seen. After its stock price rose to its highest level since April 2022, Shopify has come back to earth somewhat after announcing its fourth quarter and full-year earnings results. Shopify generated revenue of more than $1.7 billion USD in the fourth quarter of 2022, marking a 26 percent jump compared to the same period in 2021.

As for Shopify’s claim that its flipping antiquated management thinking on its heads, multiple human resources experts that BetaKit spoke with called this type of compensation model common among other companies. “Nearly every major tech employer develops a senior technical track for staff who want career and salary growth without people management responsibilities,” said Raw Signal Group co-founder Johnathan Nightingale.

Nora Jenkins Townson, founder of HR consultancy Bright + Early, echoed the sentiment, adding, “Pushing folks who aren’t interested (or suited) to people management into the role is a common HR mistake, so I’m glad Shopify has joined the ranks of companies who recognize this.”

“It’s not surprising to see Shopify adopt this common practice. It’s more surprising that they’re only just getting around to it. This is pretty basic management table stakes,” said Nightingale.

Feature image courtesy Burst.

Meagan Simpson

Meagan Simpson

Meagan is the Senior Editor for BetaKit. A tech writer that is super proud to showcase the Canadian tech scene. Background in almost every type of journalism from sports to politics. Podcast and Harry Potter nerd, photographer and crazy cat lady.

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