[SatvikBeri]

You always have tradeoffs. Which tradeoffs make sense depend on the culture you want to foster, the size of your company, and probably a hundred other factors.

Transparent criteria for salary mean that you avoid the politics associated with salary negotiations. And making even a single exception typically breaks that, meaning that now everyone at the company is incentivized to get higher-paying offers and bring to you, asking for more money. Ben Horowitz wrote a great post on this: http://bhorowitz.com/2010/08/23/how-to-minimize-politics-in-...

Personally I would say that you should avoid ad-hoc raises. I really like the idea of matching salaries to titles and matching title changes to a bi-annual performance review (for companies over a certain size.) And it gets a lot of the advantages you want-transparent compensation, no incentives for politicking, ability to pay people differently, and the ability to adjust the pay for the role according to market rates.

Edit: Fog Creek's compensation system is a good example. http://www.joelonsoftware.com/articles/fog0000000038.html

[michaelt]

Matching salaries to titles means your best-performing developers can't get a raise without becoming managers, or getting a raise for everyone in their title (i.e. a raise that's much more expensive for the company), or leaving the company.

Seems like quite a pair of handcuffs to put on yourself.

[SatvikBeri]

Most places have more than one developer title. See e.g. the Fog Creek link.