Full disclosure: Salary transparency isn’t such a bad idea
Ready for another crazy but great money idea that could change your life for the better?
Salary transparency. At your workplace. Meaning: Everyone knows what everyone else gets paid, every year.
No, wait, stick with me here. I know you suddenly feel a little ill. But salary transparency works to your advantage.
It’s an idea most commonly discussed as ideal in recent years among Silicon Valley tech companies, but it shouldn’t end there.
San Antonio-based software engineer Nancy Hawa of DevResults, a data-organization and visualization company based in Washington, pushed for salary transparency in her 12-person company earlier this year. DevResults decided to take the plunge.
Her CEO and COO released to employees not only what all employees make this year but the entire history of everyone’s compensation. The initial feeling among Hawa and her colleagues was dismay, she admitted. She said the higher-paid employees held their heads at their desks in a kind of awkward embarrassment. Lower-paid employees such as Hawa held their breath, watching to see what would happen next.
To the credit of DevResults’ leaders, they announced that despite what appeared to be “unfair pay,” nobody would earn less as a result. Over time, Hawa reports, lower-paid employees received a pay bump to put them in line with their colleagues. Transparency for Hawa meant she will be paid a lot more.
I learned from my conversation with Hawa about a bunch of the nuances around salary transparency, a topic about which she is passionate.
The first nuance is the “Why?” of salary disclosure.
The two best reasons to want financial transparency are to fight corruption and to ensure fairness.
I wrote earlier this spring about income tax transparency, which is mostly about fighting corruption and a little about fairness.
Salary transparency is an even more radical departure from current norms. I’m increasingly convinced good business leaders should make it part of their companies’ cultures.
Now, before you all freak out, salary transparency actually is normal — in certain circumstances. As Hawa noted, “The state of
Texas is not a progressive or radical organization, but they decided they needed salary transparency.”
Texas believes strongly in salary transparency as a public policy, presumably for both anti-corruption and fairness reasons. I did an experiment to see how long it would take me to figure out Gov. Greg Abbott’s annual salary. The answer: 46 seconds. He makes $153,750 per year.
But I immediately realized the next important nuance about transparency.
One of Hawa’s main warnings was that “partial” salary transparency is actually destructive. With “partial” disclosure, she pointed out, you move quickly from no salary information to salary misinformation.
For example, an online search would tell you that Texas legislators earn $7,200 per year. But that number totally overlooks the generous pensions they can accrue over years of service. So “salary transparency” can be done well, but it can also be done badly.
Hawa also cited companies that release “salary bands” rather than all salary data. All that does is potentially hide big differences in total compensation within wide ranges — such as $40,000 differences, for example — as she has observed elsewhere. Also, releasing general information about characteristics of employees, such as “new hires receive $X in salary, but with some exceptions” can actually deceive.
Why the exceptions? And why the nonidentifiable descriptions? Selective disclosure, Hawa argues, is often worse than no disclosure at all because it misleads.
I wondered if only a “flat” organization — one that had little or no middle management — would want to subject itself to radical transparency. Hawa didn’t think so. Companies should be free to pay for star performance, as long as management can justify it.
“The company doesn’t have to aspire to flatness, but does have to aspire to fairness,” Hawa said. “Unequal is not the same as inequitable.”
From her perspective, transparency challenges leadership to be introspective. That’s where the hard conversations, and maybe some learning, can begin.