[Temperature Check] Establishing the Balancer Compensation Committee

[Franklin]

Salary, budget, and performance discussions have been some of the most contentious topics in our ecosystem. Traditional companies have a human resources department to handle these matters; decentralized orgs do not. In particular, under the SP model, we’ve seen three essential problems, which are 1) forcing those ordinarily unaccustomed to HR/management to take time away from essential job functions to serve in this role by necessity, 2) pushback against those questioning budget requests as violating the independence of SPs, and 3) consequently, no effective way to ensure accountability except on a quarterly or in some cases, a yearly basis.

It seems the solution either lies in decentralized HR tools, like Coordinape, and/or an independent committee that makes budget and salary recommendations across the ecosystem. This Temperature Check is an open discussion on the viability of this subject.

@Fernando

DAOs are all about long-term alignment of incentives: I wish more SPs were to request funding in the form of BAL they are going to max lock, which has been a great example the maxis have been giving since their beginning.

In the discussion this point was lost:

@Franklin

an independent compensation committee that makes salary suggestions across the ecosystem

IMO we as a DAO should experiment with this idea. It’s a very complicated and hard topic but in a bear market where the DAO treasury (considering all tokens including BAL) has almost never been so low and uncertain times are still ahead, we have to be as controlled as possible with expenses.

[ZenDragon]

Howdy, this is an interesting topic of discussion for me in particular as I have had a diverse set of roles with the DAO over time, as many of the contributors have. I have had a grant and am now approved for another, have been a grants co-lead, half baller, baller, and Maxi. I have self managed my comp for the most part over time and as of recent limited myself to the lower end of the grants committee with a cut on Maxi pay when things were overlapping, even if my output might have been considered higher than that. With this all said, i would hope that this compensation committee would be well worth its weight in BAL or USDC if they need to be compensated as well. My perspective is that the governance process and SPs themselves should be acting in unison as the “compensation committee” and maybe we are doing that as we speak.

Internally at least, I have witnessed Maxis and Grants committee members elect themselves for pay scales they see fair, and be shy when it comes to asking for higher comp. I find that interesting enough alone in terms of the psychology of the contributors we have and think it attests to the ethos a DAO would want. The questions I would poise here are:

• Who would make up this committee?
• How much does it cost?
• What type of unintended consequences would installing them have?
• What is the goal here, to save or to properly compensate people? One might say both, but I feel valid arguments could be made that this committee may cost more than its worth in short medium and or long term. In both tangible and intangible terms.

Open to changes of course as the DAO is ever evolving, but I currently would lean towards the answer that comp can be handled as it is now and was the last few days, through open discourse, even if it is uncomfortable it can likely be the most efficient method.

[zekraken]

I don’t understand what this committee is really going to accomplish, it seems it could potentially be an unnecessarily layer. Ultimately the veBAL holders will decide if they will allow an SP to move forward or not, so if there is something in their proposal that is a no-go then it will get voted down and the SP can decide if they want to try again or not. We faced this very thing when we moved from subDAOs to SPs. Having a committee decide comp isn’t going to mean a SP gets voted in automatically. Lastly, in regards to the Maxis, we are only asking for a 3 month engagement.

I am also confused how this ‘temperature check’ spawned from the Maxi SP discussion. I have yet to see anyone else chime in on that discussion, so not sure how that warranted a side conversation on comp to be applied to the whole ecosystem.

I’ve pointed this out before back when Humpy was voting against the majority. I would like to think that this DAO is a community lead, collaborative effort that changes slowly over time to help move the protocol forward. Not one entity or small group of concentrated power making trying to force things through, but understand that may not be possible with the current structure of governance. Regardless, where is the outcry from the rest of the community that is asking Tritium to change his comp ask or demanding we install a compensation committee (I understand this post is only 16hours old)? If you speak on behalf of many others please let everyone know.

[solarcurve]

wait, this is supposed to be a democracy?

[Xeonus]

I personally think such a committee is a major step back.

I am seriously asking myself how did we end up here?
We are discussing PAYING someone to decide salaries for others in a DAO because they potentially are asking for too much? This is contradicting the entire spirit of a DAO: to be decentralized! In the end it’s about giving power to veBAL holders, not committees!

We are one of the most active DAOs with a striving community and a great product. Let’s keep it that way - we are already transforming quite a bit and are optimizing costs wherever we can.

I think it is much more efficient as well as sufficient to get open-source metrics in place like my DAO financials dashboard (Balancer Analytics) and use that as a tool to discuss if our SP landscape is in line with our income. I am happy to expand it to meet our community needs.
Anything else is just another layer of inefficient bureaucracy we don’t need

[Jojo]

There is merit in at least having a discussion on this topic.

I understand it’s quite sensitive, potentially affecting people’s pockets or requiring supervision, or both, as it has happened in this case, which is understandable. It is also important to note that no topic should be taboo to discuss in public, especially regarding compensation of contributors. Instead, it’s healthy to start a discussion on what works, what doesn’t, and how things could improve, especially for previously untouched arguments.

My personal opinion is as follows:

• The crypto landscape has no standard in terms of salaries. This is not true for any other job (you can quickly search “senior VP tech company USA salary” to have a reference).
• Crypto salaries vary widely from DAO to DAO.
• Crypto salaries are usually skewed toward tech people due to the very high demand we currently have for implementing smart contracts, front-end UI, and so on.
• Evaluating crypto performances is often difficult and putting them into context because there is usually no “manager” with their own corporate targets/KPIs that are subsequently reflected in the FTE below. As a result, salaries are difficult to justify.

If we combine the above with the fact that the Balancer ecosystem is not only very big but also quite complex internally, there could be situations in which salaries, performances, and targets are not properly put into context.

I am not sure if we can, at this point, solely rely on public reports to assess the community because, many times, communities don’t have the best tools to evaluate data presented in a complex way (e.g., financial reports) and lacking granularity (e.g., actual spending) or presented in heterogeneous ways (e.g., two SPs in the same DAO can present data very differently). Relying solely on public reports has, for example, led to situations like the Orb one.

I think it’s worth at least starting a discussion on whether there are areas and ways to improve the current situation, ways to check outside the Balancer world how things are going in crypto, and if the standards are aligned and respected compared to other situations. Additionally, there could be better evaluation processes for contributors, for example, with an independent third party, and a fair way to track this metric.

Let’s keep an open mind on this.

[Tritium]

I completely agree with your points. Compensation is indeed a complex issue in our industry, and HR topics can be challenging to navigate without clear management structures. While creating a centralized committee to make decisions about individuals connected to the DAO is one approach, I believe we can explore a different perspective, akin to managing outsourced services.

Rather than focusing solely on how the DAO compensates people, let’s shift our attention to managing service providers. Many businesses outsource various aspects of their operations, from production and operations to strategy and innovation. These providers operate in diverse ways, ranging from individual freelancers to specialized consultancies or large offshore centers.

In my view, we should consider managing service providers at the DAO level. If a team is performing well, being reasonable, and their costs align with what the DAO can afford, that’s great! On the other hand, if there are concerns about performance or the costs exceed what the DAO can bear, it makes sense to reassess budgets for those providers and explore alternatives. How the service providers handle budget cuts should be their prerogative.

To facilitate this approach, we can focus on the following questions:

1. What specific services does the DAO require and why?
2. How can we ensure that service providers are aware of any performance concerns well before they submit budget proposals? It’s important to avoid surprising them with feedback after they’ve assumed their performance was satisfactory.
3. How should we handle situations where service providers are occupying critical roles but are deemed to provide unsatisfactory performance or are costlier than their level of service justifies? How to we ensure that those deeming performance have sufficient context?
4. How do we determine fair and reasonable compensation for the services we need, taking into account that many roles around a DeFi DAO require a high level of specialization?

Addressing the challenges you raised through a compensation committee would require an executive to lead an extensive conversation and establish a robust HR program. However, such an approach would likely incur significant costs, both in terms of resources and time. Involving numerous external stakeholders beyond the managers responsible for employment decisions would further extend timelines, increase expenses, and raise the risk of failure.

Instead, if our governance structure excels in managing these outsourcing relationships, we can leverage that strength rather than duplicating efforts in HR. Let’s focus on enhancing our capabilities in managing service providers effectively.

Standardizing reporting about spend, and working towards good quarterly updates about accomplishments and spend that include robust community feedback, as you suggested, is a good start.

[jameskbh]

It is good to see the discussion moving to a specific topic instead going as replies in one that was not meant for that. This is an important issue that needs to be discussed in depth.

I want to add some points in this discussion that others touched on briefly here and in past conversations:

• Balancer don’t live in an island/bubble. With that in mind, how are our costs compared to others? With the same size? Within the same market? Not only salaries but other relevant costs as well. Why is that important?

• How is our current runaway projection? The last update I found specifically about this subject was State of the Balancer Tresury: Resources. Did we improve our financial situation? How is the outlook for the Y2 ~6 months after our last public report?

• A bunch of random dudes (and girls) in a web forum may not be the best choice to analyze/propose budgets and salaries. It can be in the best interest of the DAO to have a dedicated person/entity to study (or benchmark) costs. It may add a healthy and needed distance to view the situation with a technical lens. It seems this worked (to have someone with a technical background to handle the task) with the treasury management by karpatkey. This is something we should consider.

• What transparency level do we want, as a DAO, in this matter? Are we ok to move to a model where we make a reverse auction to several SPs and choose the lower cost and don’t care how they will handle the tasks? Do we want to see all invoices and wire transfers between the relevant parties? Today, the DAO delegates this granularity to the entity responsible for the payments and only receives a summarized report. I’m not arguing in favour of any model, but this has an impact on the topic too.

IMO, it is a positive scenario to have a better structure to address funding requests than the current setup. We need more information to make educated choices. I probably didn’t find all sources on this topic (costs x revenue), but it would be nice to have an update on this front.

The impression is that we still have bull market costs (salaries in special) with revenue that didn’t drastically improve in the last six months. While we made adjustments to address this situation, like the selling of 250k BAL, how sustainable are we?

[zekraken]

On the point about being given binary decision points with other SP proposals, did anyone ask them to make adjustments and tell them not post the snapshot until they were made comfortable? It is probably just me, but i’m finding it difficult to believe that a 3rd party is going to be able to work with each (what should be) independent SP that will lead to a much different outcome. How is this HR person going to know what is expected from the community for each SP proposal? I guess I just don’t understand why each SP proposal can’t be critiqued by anyone that has a problem with it instead of making the entire DAO adhere to some additional layer for the comp portion of a proposal.

I also get that this is a temperature check, however the origination of this post seems to be a quick escalation due to Tritium’s ask, why didn’t this come earlier due to the Orb or OpCo threads which you highlighted in your response to my post?

If this is something that everyone wants that’s cool, but I am pointing out my skepticism and curiosity around the timing.

[0xDanko]

@Franklin

Perhaps committee is an incorrect word choice here, a HR advisor or a HR consultant would perhaps be more apropos. We currently have only one individual guiding our legal program, so perhaps a committee isn’t even necessary; one advisor might be enough.

I’d be more inclined to favor this option, rather than a whole new committee.

Initially, I thought the Foundation/OpCo board of directors could lead this powwow between SP leaderships, I wasn’t expecting this idea to escalate so quickly over the weekend, drifting away from our legal framework. The board has always been the entity responsible for streamlining the accountability mechanisms through transparency and budget oversight.

If Aura/veBAL thinks and independent professional (specialized in that nature) will add value to these discussions, that’s probably something more people could be comfortable compromising, as long as we are not creating yet another wasteful layer of complexity and bureaucracy.

I doubt an independent contractor could do much better than the actual leaders working and hiring these contributors, though. But we could run a one-off state of the art and see how it goes. If it makes veBAL voters happy, I’m happy.

[solarcurve]

it’s impossible to give current runway projection without having all SP budgets in for year 2 yet. once we have that then it’s a very simple calc. if you want the most recent up to date calc please review here.

if HR pro can do this without having all SP budgets then should hire em asap.

to say no one is tracking this or taking it into account is arrogant and completely wrong. it’s actually laziness on the part of the ppl raising this not doing their own DD.

[Xeonus]

Not only that, we should also define what is regarded as liquid and what are “untouchable” assets. We have quite some funds under Karpatkeys management which could extend our runway significantly (e.g. the Compound USDC position).

All in all I think this whole endeavor could be simplified:

• Define liquid assets that are theoretically assignable to comp SPs
• Take the last 6 months of fee collection as a base line for revenue income
• Based on these numbers define a yearly budget until we would become “net negative”

SP proposals should reference those numbers when applying for funding and do a small impact section like we Maxis do (e.g. x% impact on BAL reserves, Y% impact on liquid asset reserves).

I still believe a full-time HR pro is not needed. A simple recommendation or something like that after a short consultation would be enough, maybe on a quarterly basis. We are already taking it very far here.

Also curious how other DAOs are handling this topic. Any insights?

[Jojo]

The discussion is quite lengthy, sometimes heated, and also interesting. I understand the various points of view from different parties here. The fact that there is friction when discussing certain sensitive topics is perfectly normal.

We should take the best of the current discussion, understanding that this is just a temperature check to improve and address a key point that has rarely been properly discussed.

I really like the idea of all service providers (SPs) being able to present themselves, both financially and from their inception, as a percentage impact of the liquid treasury or assets set aside for payments and costs for the DAO. I also appreciate the concept of having an independent third party serve as a bridge between the robust web2 HR framework, cost evaluation, and salaries, and the web3 industry, which is more agile and younger, thus requiring adjustments to the existing frameworks and evaluations.

I would love for this independent third party to engage with the most important leaders of the Balancer ecosystem, to understand the key performance indicators (KPIs) of every SP, the individuals comprising the SPs, and why these people are crucial to the DAO. This interaction would be similar to how managers relate to HR and report on why their cost centers are what they are.

It would be beneficial for everyone involved to position Balancer as an organization that puts more effort into improvement compared to other DAOs. There is no better starting point than making compensations and costs more objective and justified.

[cryptocomical]

An alternative could be to flip the current model on its head and start with the budget.
This would allow for more robust runway planning.

Overall total budget breakdowns could be submitted and voted upon annually based on required domains eg. X% Development and innovation, X% BD and marketing, X% legal etc. with justifications.

SPs could then apply, along with competing SPs, for each domain, outlining their proposed use of their allocated budget and deliverables. VeBAL voters would then vote on which SP would be responsible for that domain for the term.

The pay for each individual would be decided by the SP itself, and the performance of the SP as a whole would be held accountable.

[jameskbh]

Very reasonable points are presented here. This is a good start for budget planning, as we have an income/revenue prediction, and then we can check what we can pay for the services we want to be provided without touching our “savings”. Or, at least, know how much we expect to deplete it taking, for example, the adjusted previous funding requests.

It is usual to know how much we expect/want/can spend taking into account our income/revenue, and not the other way around (try to find ways to pay for everything we want to buy).

Budget planning always comes with uncertainties. But it gives us an overview of the current situation and what needs to be changed/adjusted to safeguard our financial situation.