Doing “exemplary work within their band” but not ready for promotion or level up seems to describe somebody exactly meeting expectations at their level, so the compensation for the current level should be perfect.
Making promotion the only way to get a bump in salary can cause all sorts of problem when the responsibilities and requirements of the role change at the next level.
As an example, at big companies staff level engineer is more oriented around writing/reviewing and building consensus about technologies. This is a very different role to the level below and someone who is great at that role may not be great as a staff level engineer. They do however deliver a lot of value to the company.
Having a way to reward someone who’s doing an amazing job at their current level helps avoid this situation. I.e inventing projects to justify promotion to staff level engineer.
In most companies, the level below staff is a terminal position. I.e their isn’t necessarily an expectation that you need to get promoted to the next level. I think Facebook got the formula right with its performance based bonus that allows employees who go above and beyond to be rewarded.
This is a similar situation to when companies had career tracks that forced really good engineers to get promoted into management in order to get more comp. Just because you are an amazing engineer doesn’t mean you would be a good people manager.
I think you and most of the other commenters here are analyzing this correctly, but from a very different perspective than me - I've only worked at small companies (less than ~80 people) at varying levels (Junior Eng, Senior Eng, Founder), but in my experience at these companies, you solve the retention problem by giving engineers things to work on that they /actually/ want to work on, hiring people who are not strongly motivated by money, and doing work as a company that is ethical and progresses the world.
At least half of my coworkers could move over to a similar position at a FAANG with no difficulty and make over double what they are now, but I have no doubt in my mind that if any of them did that, it would not be for compensation.
Yeah, stuff like leveling and role changes become issues mainly at companies with large engineering teams. I.e FAANG, MSFT, etc.
In my opinion the main reasons to work at a startup are A) it’s growing ridiculously fast and you expect your equity to be worth something. B) your learning. I.e you like the technology or the space or your new to tech. C) you like the people.
Hence retention and recruiting for startups is a totally different ball game.
Other small non venture backed tech companies have a different set of challenges in this regard.
Sure, if you have 1,000,000 different bands - that is far more bands than people. Otherwise you have someone who isn't good enough for the next band, but better than anyone else in the current band.
Salary levels are discrete, performance is continuous... you can expect to lose high performers if you have rigid salary levels. I assume at larger companies that is less of an issue because the marginal effect on output of even the high performing developers is small relative to total output, with some outliers.
As an example, at big companies staff level engineer is more oriented around writing/reviewing and building consensus about technologies. This is a very different role to the level below and someone who is great at that role may not be great as a staff level engineer. They do however deliver a lot of value to the company.
Having a way to reward someone who’s doing an amazing job at their current level helps avoid this situation. I.e inventing projects to justify promotion to staff level engineer.
In most companies, the level below staff is a terminal position. I.e their isn’t necessarily an expectation that you need to get promoted to the next level. I think Facebook got the formula right with its performance based bonus that allows employees who go above and beyond to be rewarded.
This is a similar situation to when companies had career tracks that forced really good engineers to get promoted into management in order to get more comp. Just because you are an amazing engineer doesn’t mean you would be a good people manager.