The 2nd Step Towards Pay Transparency

The second step towards pay transparency is identifying the changes and outcomes that you are going to ask leadership to approve. After all, they need to be in on this change from the beginning.

There's no doubt that using the term "pay transparency" is a big risk in most companies. Leadership is apt to shut down discussion in the blink of an eye if the mention of any big idea sounds slightly controversial.

But just how controversial would it be to talk with them about giving employees, "A better understanding of what fair pay is for an employee's position and skills?" This description communicates a clear, detailed picture of the outcome of a pay transparency effort without actually using the hot-button term.

Or to bring up with leadership some of the compensation issues that have been in the news recently. For example, The New York Times just had a front-page article about Massachusetts' bipartisan agreement on a new law that, " . . . will require  hiring managers to state a compensation figure upfront -- based on what an applicant's worth is to the company, rather than on what he or she made in a previous position." They have done this to ensure that, " . . the historically lower wages and salaries assigned to women and minorities do not follow them for their entire careers."

Most executives that I have worked with would be interested in hearing more about a policy like this, and kicking around how it could work in their own organization -- again without necessarily mentioning the term, "pay transparency." A specific discussion of the steps involved, and how far you would go making changes and how fast, would be very welcome. They may not end up agreeing to comparable changes but you would have briefed them on what's happening in their business world. A world where the new overtime rule and the Pay Ratio announcement seem like just the beginning of changes we'll be making in how compensation is talked about.

Let's face it, the Pay Ratio announcement may be scheduled for months and months from now, but it will put leadership right in the middle of a true pay transparency issue. Employees will be as skeptical of the median employee data as they will likely be of the Pay Ratio information. Talking with executives now about how your company can update talent and communication practices to create a better context for the Pay Ratio announcement is simply treating the situation strategically.

And when you do talk with leadership, remember the basics in conducting any executive discussion:

• Be as plainspoken as possible
• Specify measurable outcomes of the updated practices
• Identify key milestones when you will ask for further leadership input as well as keep them in the loop
• Help them realize how much investment is involved, both in budget and staff time

Q. OK, that's the second step. But what's the first step towards pay transparency, you ask?

A. Deciding how far and how fast you want to go. There's no need to think pay transparency will turn your company on its head. The pacing of the change is up to you, as you'll find out in the earlier articles in this series about what pay transparency really means and where to start.

Everything you do in compensation is communication, so why not do everything better? The popular ebook, Everything You Do (in Compensation) Is Communication @ https://gumroad.com/l/everythingiscommunication belongs on your summer reading list. Margaret O'Hanlon, CCP collaborated with Ann Bares and Dan Walter to create this DIY guide to compensation leadership. Margaret is founder and Principal of re:Think Consulting. She brings deep expertise in compensation, communications and leadership to topics like the CEO Pay Ratio and performance management discussions at the Café. Before founding re:Think Consulting, Margaret was a Principal at Willis Towers Watson. 

Comments

[Jay Schuster]

If you told me some years back that I may believe that "transparency" is not a good idea, I would have argued with you to no end. For years I believed that "pay and rewards are powerful and effective communicators of organizational directions and values". Also, when we worked with executive teams to develop 'reward strategy' it seemed logical to assume the leaders would want to spend their reward dollars getting the 'message' to the workforce. Working with others, I did research on 'pay secrecy' with the bias that an 'open' pay solution was the best course to follow.

Now I wonder about that to be honest. My assumption had always been that 'paying for performance' was a 'good thing' as long as you used measures within the influence of the workforce that help organizational goals. But how many organizations actually even try to reward performance through reward design? If we could 'open' all the reward solutions so the workforces would 'see in', what would we actually be communicating? Would it be 'good stuff' or not? Anybody help with this one???

[Margaret O'Hanlon]

Jay, pay for performance is always a critical issue to kick around, but frankly supplemental to understanding how your salary is determined and why. That's where transparency progress is so urgently needed -- and continues to be embarrassingly in low supply. Data continues to show that employees either don't know how they are paid, or don't understand what little information they are getting about this.

I think the reward and recognition communication and administration issues are far broader than an issue of transparency.

[Jay Schuster]

Hi Margaret:

So the logic of an open pay system is to give everyone information on how their pay (and I assume the pay of others) is determined. And the conclusion is that the workforce is better served if they know what factors, and the process itself, currently is no matter how bad the news might be.

I had always assumed the organization would first 'fix' the pay determination process and then communicate the 'news' as a 'before and after event'. That is the way we always tried to do it to be honest with you. Some of the 'before' pay determination solutions we ran into over the years would have been terrible news to the workforce to be honest with you.

In your 'formula' then, it is better to know the 'terrible truth' than it is to wander around in darkness looking for the answer.

Thanks. You and I could chug a couple of beers talking about this one. Interesting to me anyway.