Dubbed the "warts and all" approach, the Wall Street Journal recently profiled the trend, particularly among start-up firms, to open up information that has typically been closely held -- not only company financial and operating data but also information on individual hiring decisions, salary and bonus detail and employee performance appraisals.
The experience of New York based startup SumAll provides one example of the phenomenon:
Employees at SumAll, a Manhattan data-analytics company, can click on a shared drive to peruse investor agreements, company financials, performance appraisals, hiring decisions and employee pay, along with each worker's equity and bonuses.
SumAll Chief Executive Dane Atkinson says the company was launched as an open enterprise. He and his co-founders reasoned that people work more efficiently when freed of doubts about salary, and better understand their individual contribution to the whole group.
As a sidebar comment, it is interesting, as always, to note how much of what is "new" actually isn't. Think back to the dawn of open book management and participative pay practices like gainsharing and Scanlon plans, which seem to have fallen significantly out of favor. In a sense, what we're seeing now may be a new version of these movements, a corporate transparency 2.0.
I admit to having conflicted feelings about the transparency movement where it entails revealing individual pay and performance information. I admire and appreciate the spirit and goals that often lead founders and owners in this direction: to build a different and more noble kind of organization, to be, as SumAll's Dane Atkinson says, "the counterpoint to the corporate culture that's out there." But I also have experience working with a number of organizations who have taken this leap, and so have had a front row seat to some of the pitfalls and problems that can result. That isn't to say (I think) that it can't be done well and successfully; however, I have learned that certain conditions and ground rules must be in place to navigate this sensitive road and end in a happy place.
A few thoughts, then, about some of those conditions and ground rules:
An investment in education. Be prepared to invest time -- lots of time -- in educating, explaining and selling. As basic business literacy is a prerequisite for understanding and correctly interpreting financial and operating information, so is a good foundation in pay principles and practices necessary for people to understand and correctly interpret information on how they and their colleagues are paid.
An investment in structure. If you're going to open up salary information (for example), you'd better have a reasonable belief that salaries have been set and managed in a manner that is consistent, fair, explainable and defensible. I find that the move to "open salaries" often pushes a small organization into formal pay tools and policies much more quickly than the norm, and this means an investment in the time and resources necessary to establish and maintain said tools and policies.
A balance of transparency. I've encountered many organizations who open up company financial and operating information without taking the step of making individual employee pay data and decisions public. This, in most cases at least, seems to work. What doesn't seem to work quite as well is the situation where the company opens up individual pay and performance information, but keeps company financial and operating details under wraps. In the spirit of "if you show everybody mine, you'd better be prepared to show me yours too", this is an imbalance in transparency, one that employees catch on to very quickly. Many -- though by no means all -- of the issues I've seen erupt in "open salaries" companies have their roots in this kind of imbalance.
What about you? Anybody out there who can share their experience with, or at least their perspective on, salary transparency?
Ann Bares is the Founder and Editor of the Compensation Café, Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations. Ann was recently named President Elect of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and has joined the Advisory Board of the Compensation & Benefits Review, the leading journal for those who design, implement, evaluate and communicate total rewards. She earned her M.B.A. at Northwestern University’s Kellogg School and is a bookhound and aspiring cook in her spare time. Follow her on Twitter at @annbares.
Creative Commons image "The Open Window" by soham pablo