Wally was nervous. The interviewer had just asked his salary claim for the position of Process Manager. He thought: I need to say a high amount. I have no idea how much people earn here. But I’ve always been told to throw the value up to make a good impression. Also, if I say an amount below what they intend to pay me, I will receive less than I could.
My wage claim is $ 150,000 a year – said Wally, confident.
He was hired. Twelve months later, the company realized that Wally’s work was not worth the salary he received. He was fired.
Wally’s story is sad, but it’s not unusual. If he knew the pay of his future colleagues at the time of the interview, he could have made a more conscious proposal. But why do organizations hide wages under lock and keys?
Inconvenient truths hidden in paychecks
Behind the paychecks is a bitter reality. It does not appear in the individual payslip, but in the comparison between them. The strategy of making pay a secret subject avoids inquiries. No one sees that women earn on average 30% less or the difference of 300 times between the salary of the president and the trainee. No one sees that there are people with seemingly the same skills, experiences and responsibilities, yet they receive completely different values. Nobody sees.
No matter how great your effort at creating a fair and coherent pay system, distortions will appear over time. As we have seen in the case of Wally, it is common for compensation to be determined in a negotiation. Even if there is a policy or formula, some will escape it. After all, nobody sees. And because no one sees it, no one speaks up.
Lack of visibility also gives room for imagination and corridor conversations. “Did you see that the director’s cousin is working here? I have heard that he is earning an astronomical salary.” If you have a social business with a strong purpose, multiply that problem by 10. People will demand even more consistency.
We need to protect people. They are not prepared to deal with it. We can not throw this shameful reality on everyone’s face.
That’s what the Human Resources area says. But that sounds like the phrase of a father, wanting to protect his children from the cruelty of the world. Hey, does that mean we’re kids? Unable to understand the market criteria governing wages, however much we disagree with them? Or with the fact that social inequality also exists in companies, which are micro-reproductions of society?
It is comfortable to live with this illusion, throwing the responsibility of solving this problem for your manager or for HR.
Revealing how much each one earns
Some organizations are testing diametrically opposed approaches to wage privacy. This is the case of Buffer, which takes transparency seriously. On their website you can find the salary of all members. Open. Public. On the Internet. Not only salary but stocks, revenue, fundraising, product prices, emails and roadmap of what is being built. This is not just an innovation at Buffer, but a movement. The manifesto of responsive organizations addresses transparency as one of its 5 pillars:
Today, we have access to so much information that it’s become impossible to predict which information might be useful, or who might use that information in a productive way. In this world of abundant information and connectedness the potential benefits of trusting people who share the organization’s purpose to act on information as they see fit often outweighs the potential risks of open information being used in counter-productive ways.
What does an organization gain in revealing salaries?
I can list some good reasons for you to think about transparent compensation. When you reveal wages, you tend to:
- Reduce the absurd differences between executive and base salaries;
- Decrease wage differences by gender;
- Increase everyone’s confidence in the organization;
- Encourage people to ask for more consistent increases;
These are good benefits, but do not think you can just send the “spreadsheet” right away to everyone, especially if there are grotesque differences. You will need a transition plan. Also, you will have to understand if people are willing to have their salaries unveiled. It is easier to start an organization from scratch with pay transparency because you already establish this condition at the beginning of the employment relationship.
Seeking transparency and universal criteria for compensation tends to generate a greater sense of justice, even if the questionings are constant. But when it is transparent, everyone sees it. And with everyone seeing, we have more eyes attentive to deviations and inconsistencies.
Ready to bring this issue into question in your organization? We are.