Extreme Pay Transparency

Editor's Note:  We are thrilled to welcome Stephanie Thomas back to the line-up of regular Café contributors!

Something interesting happened at Google a few weeks ago. Erica Baker, a former engineer at Google, created an experiment in extreme pay transparency: she and her colleagues started a spreadsheet detailing their names, job titles, and salaries.

Here's how she described the experiment in a series of Tweets:

One Sunday, some former coworkers & I were bored, talking about salaries on the internal social network instance. A spreadsheet was created... It took off like wildfire... It got reshared all over the place. People started adding pivot tables that did spreadsheet magic that highlighted not great things re:pay... More reshares. More people adding pay. It became a thing... The world didn't end. Everything didn't go up in flames because salaries got shared.

Erica Baker's experiment, described as "extreme salary transparency", has everyone from practitioners to academics to the news media asking the question: how transparent should we be?

This is a difficult question that is further complicated by a fluid definition of "transparency". To some, transparency means full disclosure of personally identifiable raw naked data. To others, transparency means pay process transparency - communicating to employees how compensation decisions are made and providing them with enough information to really understand those decisions. I fully support process transparency, but something about sharing individual employee-level detail just doesn't sit right...

To me, Erica Baker's spreadsheet feels a lot like extreme oversharing, akin to posting status updates to Facebook every 15 minutes. But then again, I'm a Gen-Xer who was taught at a young age that it was impolite to discuss compensation, you didn't ask people how much they earned, and you certainly did not voluntarily disclose how much you were earning.

Younger members of the workforce feel very differently. They've grown up with social media, and many of them broadcast all aspects of their lives on Periscope, Tumblr, and Instagram (they left Facebook after their moms and dads joined). It's only natural that they comfortably and willingly share all of the details of their compensation packages with one another. Social sharing is part of who they are as people.

What should we make of this experiment in extreme pay transparency? I have mixed feelings. The first thing that comes to mind is that this is a risky proposition. Sharing such detailed information creates the potential for feelings of unfairness - if I view myself as "equal" to you and learn that you are earning more than me, I'm likely to feel like I've been treated unfairly. This can not only create all of the disengagement problems my Café colleagues have discussed in the past, it can also damage the working relationships among colleagues. This can have a negative impact on productivity, which in turn can negatively affect the bottom line of the organization.

On the other hand, some are arguing that this kind of radical transparency is the only way to identify - and eliminate - pay discrimination. I'm reminded of Lilly Ledbetter, who learned that she was suffering from pay discrimination through an anonymous note left in her work locker. I can see the logic in this argument...

Ultimately, I don't know if there is a right level of transparency. Like most things, it's dependent on the context: your organizational culture, the characteristics of your workforce, and a myriad of other factors. The risks and benefits need to be evaluated against these constraints. Personally, I think that pay process transparency has many of the same benefits as sharing of individual salaries while minimizing risks, but that may be an outdated Gen-X perspective.

What do you think? Leave a comment - and don't forget to include your name, job title, and annual salary!

Stephanie Thomas, Ph.D., is a Lecturer in the Department of Economics at Cornell University and the Program Director for the Institute for Compensation Studies (ICS) at Cornell’s School of Industrial and Labor Relations. Throughout her career, Stephanie has completed research on a variety of topics including wage determination, pay gaps and inequality, and performance-based compensation systems. She frequently provides expert commentary in a media outlets such as The New York Times, CBC, and NPR, and has published papers in a variety of journals.

Comments

[Tony Bergmann-Porter]

Some years ago, Matt Ward is supposed to have said "You can re-price your options, or your competitors will do it for you". In much the same vein, it would now seem that you can have radical pay transparency, or your employees will do it for you.

[Scott B]

Since in the U.S., at least, we cannot discipline employees for talking about salaries, eventual near-full pay transparency seems almost inevitable. That said, count me among the number that would rather keep my salary private.

[E. James (Jim) Brennan]

I volunteer that mine is zero. Last time I led an exercise to openly share salaries among top professional society members at a national conference, the participants were scared silly before and highly relieved after. Their anxieties and worries were expelled by the sunshine. It was an ego thing of a bygone generation soon to depart the workplace.

[G Blanchard]

As a compensation practitioner for over 20 years, (I am obviously not a Gen Xer ;-)), I agree with the authors sentiments. The perceived benefits seem to pale in comparision to the potential detriments.

Pay process transparency works well enough for me. No thank you to posting my actual salary to the masses. If I wanted to do that I'd take a position in government!