Salary Transparency and the Modern Workplace
One morning this summer, I was doing one of my neighborhood runs with the dog listening to a Planet Money podcast (yes, I am a not-so-secret economic policy nerd) and the topic of the show that morning piqued my interest. I was drawn to it in part because it was closely related to something our team spent a lot of time working on last year – how organizations structure and share out information about their compensation systems. [For more info, I highly recommend listening to Planet Money Episode 550: “When Salaries Aren’t a Secret.”]
Now even if you are not someone who specializes in HR or compensation policy, please keep reading! I know this topic sounds dry and uninteresting to most people but it actually relates to something that is really important to all of us employed in the traditional economy – how much money we make each year and how open our organizations are (or should be) about not only our salary and benefits package but that of all of our colleagues, including your boss, her boss, and so on. Unless we work in a traditional union environment, most of us take it for granted that individuals’ salaries are generally private matters and although many of us are comfortable walking up to the new neighbor and asking how much they paid for their house, few of us would feel brazen enough to ask that same person how much income they declared on their W2 last year.
And yet, what I found so great about this podcast – and it lined up well with research our team did in the past year around compensation practices and strategies, including interviews Alicia Robinson and I conducted with a number of different education organization employees – was it gave examples of companies who decided to go against tradition and open up their “books” so that their salary decisions were open to every person working there. The reason this so appealed to me was that, during our conversations with employees of different education reform organizations, experts in the field, and our review of the literature, we came to a similar conclusion that much of people’s dissatisfaction with their salary and benefits comes from a feeling of uncertainty: uncertainty about what they are paid compared to their colleagues; uncertainty about how salary decisions are made; uncertainty about what to do to improve their situation if they do have a concern.
One of the start-up leaders profiled in the piece said that earlier management experiences around salary led him to institute a completely open policy around compensation from the time he started his company. In this example, every position at the company had a dollar range associated with it and each person was given a salary within that range when they were hired (standard practice for most places these days), but then – and this is what was revolutionary – there was a published excel spreadsheet that every employee had access to with the details of each person’s compensation. Each person, from the least experienced admin assistant to the CEO. And what happened? Did employees rebel or flee en masse? Was there upset and discomfort about having these things in the public eye? Actually, overall the leaders of this organization found that when they opened things up and created a system of total transparency, it had overwhelmingly positive effects.
By making salary public, management made a statement that nothing was hidden behind closed doors while also dramatically decreasing that natural level of uncertainty experienced by employees. In this scenario, people knew where they stood compared with others. With that information out in the open, they felt comfortable approaching their superiors to ask how salaries were assigned and so direct conversations about compensation became more commonplace. Managers made salary decisions knowing they would have to be able to justify them to everyone so they were more deliberate and systematic in placing people on the salary scale. And as a result, managers and employees reported higher satisfaction with their compensation package and workplace culture and climate as a whole.
This kind of transparency may not be the right fit for every organization, and the reporters and experts interviewed agreed that it is more challenging to convert a salary system from being private to public than to launch a company with a public compensation ethos from the start. But for me, it provides an interesting example and food for thought for talent managers as we try to reward, incent, and retain the best people. And maybe a potential new solution to discuss with clients and colleagues as we continue this work in the year ahead.