This is not the first of Spolsky's essays that's left me simultaneously amazed at his brilliance and clarity and dismayed at something around the edges that just completely misses. Maybe it's just the title that's misleading. His emphasis on openness is great but he's really just moved the discussion from "how much money" to "how should I rate your contributions." Most salary discussions come down to this question and it's a concept that's very difficult to define precisely. The guy whose lunchtime conversations shape his colleagues' ideas may have made a profound contribution but if his own direct efforts don't match "Has consistently had major success..." then I'm guessing there's still a lot of room for negotiation - particularly if the employee realizes that making this case will give him a lot more money. Focusing on output is great, but that's what most salary negotiations end up being about.
I think the point is that Joel tackles the problem of assessing each employee's contribution straight on and unambiguously. I'm sure there is opportunity for negotiation if you believe you have made more contribution than your position on the ladder would suggest. Most other companies won't even attempt to explain how they determine salaries because they are not brave enough to tell their employees "you're good, but not great". Equally, most employees aren't willing to discuss it objectively - we all think we're above average, right? By attempting to put more structure around the process, Fog Creek are making it a lot easier for them and their employees to talk openly about their (and their colleagues') contributions.
