Ad network Glam sees record 4th quarter, puts entire workforce on “variable” pay

Glam Media, one of the newfangled content and advertising networks assumed by many industry observers to be vulnerable to financial meltdown, says it still hasn’t seen any marked decline in online display advertising. Yet, to be cautious, it is slashing salaries by moving to a system called “variable pay.”

While it’s too early to say whether the much-hyped company will remain healthy in coming months, its network — which focuses predominantly on the female demographic — is reporting it had its strongest revenue quarter on record, and also that it has decided not to lay people off, at least for now. The news was contained in a Glam memo released to employees today, a copy of which was leaked to VentureBeat. We confirmed its veracity.

The company made some small trims to its workforce several months ago, but that was before the stock market crashed in October — which many economists now believe marked the beginning of a prolonged recession.

Instead of resorting to mass layoffs, as many other Silicon Valley startups have, Glam is implementing an across-the-board cut in fixed pay. It is increasing the amount of “variable pay” its employees receive — in other words, pegging more of their compensation to revenue performance.

The management team of 12, for example — which took a temporary 25 percent pay cut earlier this year — will take a 25 to 60 percent pay cut in its compensation over the next year, depending on their exact positions. Glam’s top sales representatives, for example, will now only have about 25 percent of their compensation “fixed,” down from 75 percent. That means they’re more dependent on Glam bringing in revenue than ever before.

The rest of the company is also taking higher variable components of their pay. Functional managers will see 15 percent of their pay move to variable, and other employees will see between 3 and 10 percent of their pay become variable. The less an employee makes, the less their pay will vary.

This is a notable experiment. Most companies in Silicon Valley and elsewhere reward their sales executives with such a variable pay component, because salespeople should be entirely focused on sales and nothing else. It is unusual for companies to make the rank-and-file subject to revenue performance, however, in part because of the danger that short-term goals will be prioritized at the expense of long-term decisions (quality product development may be neglected, for example, because there’s no reward for it).

Excerpt from the memo is below. Full copy here (downloads doc).