Something great happened last week. Jamie Davis of HCR Software, one of our readers, suggested an article that he felt all of us at Compensation Cafe should be aware of.
We love our readers! And what great stuff -- a real opportunity to share and discuss a "war story" about pay transparency over coffee at the Cafe.
The article is a recent interview by Jen Wike Huger with a start-up star in the open-source code world. To give you a clue about that world, the conversation began with very wise insights into how to avoid burnout. Here's the context of the interviewee's, Leah Silber's, world. She's CEO and co-founder of Tilde, a small open-source training and consulting startup. Think warp-speed change and resilient flexibility. Think talent cravings so strong no amount of chocolate could ever put them to rest.
Leah runs her business based on a philosophy of what she calls, "practical transparency." And, to show how clear-minded she is about her approach, she points out:
If nothing's a secret, then everyone knows what's up with the company in one of the most important ways: the finances. Everyone can understand the big picture impact of the decisions they ask you to make. Assuming you're making the right decisions, it means a lot less questioning and needing to obscurely justify hard financial choices. The bottom line is right there and everyone can see it.
Here's a goal that every company that espouses pay-for-performance can relate to, so let's listen closely to her lessons from the line (no doubt, without a Human Resource department).
When asked to explain why practical transparency is so important, Leah began by talking about pay transparency. She gave a number of reasons for its purpose in a small, young company:
" . . . early on, when you're small, every new employee is an opportunity to realize that your salary calibration isn't competitive with the market. If a new employee pushes back, you might want to give them more money, but you also need to raise the salaries of other employees. Otherwise, early employees will perversely get paid less, as a group, than later employees."
So one of the reasons she believes in pay transparency is that it avoids compression, keeps her salaries competitive in a hot, hot, hot marketplace. And, going back to the earlier quote, one would imagine her financial philosophy involves setting aside enough budget for chasing the market in this way.
In fact, one of the benefits of pay transparency is that you aren't tempted to give prospects a windfall offer just to get them onboard, in Leah's experience. Bidding wars, in her mind, are not only a bad move but also unfair to the rest of the employees.
Another benefit to transparency is that it makes salaries easier for her to negotiate because a straightforward number is more likely to get people off to a good start than eyeball-to-eyeball bare-knuckles negotiating.
Lots to think about. Leah's thoughts and experience are so different from everyday compensation wisdom, I really thank Jamie for bringing the interview to our attention. In fact, many of Leah's experiences turn our profession's beliefs on their head. And yes, her companies have been very small -- but face the facts, most departments in huge companies are, too. So be sure to check it out. There's good stuff there about executive compensation, incentives and employee development, too.