Transparency Part III – Salaries! All We Have To Lose Is Our Chains!

Ready for another crazy, but great, money idea that could
change your life for the better?

Salary transparency. At your workplace. Meaning: everyone
knows what everyone else gets paid, every year. No, wait, stick with me here. I
know you suddenly felt a little ill. But salary transparency works to your
advantage.

Salary transparency is an idea most commonly discussed as an
ideal in recent years among Silicon Valley tech companies, but it shouldn’t
begin or end there.

San Antonio-based software engineer Nancy Hawa of DevResults a data-organization and data-visualization company based in Washington DC, pushed for salary transparency in her 12-person company earlier this year. DevResults decided to take the plunge.

As a result, her CEO and COO released to employees a
completely open set of data around not only what all employees make this year,
but the entire history of everyone’s compensation.

The initial feeling among Hawa and her colleagues with that
disclosure, she admits, was dismay. She described the higher-paid employees in
the office holding their heads at their desks in a kind of awkward embarrassment.
Lower-paid employees, like Hawa, held their breath to find out what would
happen next.

To the credit of DevResults’ leadership, they announced that
despite what appeared to be “unfair pay” then, nobody would be paid less as a
result. Over time, Hawa reports, lower-paid employees received a bump up in pay
to put them in line with their colleagues. Transparency for Hawa meant she will
be paid a lot more, not only this year, but in the future.

I learned from my conversation with Hawa a bunch of the nuances around salary transparency, a topic about which she is passionate.

The first nuance is about the “Why?” of salary disclosure.

The two best reasons to want financial transparency are to
fight corruption and to ensure fairness.

I wrote earlier this Spring about income tax transparency, which is mostly about fighting corruption, and somewhat less about fairness.

Salary transparency is an even more radical departure from
current norms than tax transparency. I’m increasingly convinced good business
leaders should institute it as a matter of setting company culture.

Now, before you all freak out, salary transparency actually
is somewhat normal in certain circumstances. As Hawa notes, “The State of Texas
is not a progressive or radical organization, but they decided they needed
salary transparency.”

Texas believes strongly in salary transparency as a public
policy value, presumably for both anti-corruption and fairness reasons.  I did an experiment, moments ago, to answer
the question of how long it would take me to figure out Texas Governor Greg
Abbott’s annual salary. The answer, in my case: 46 seconds. He makes $153,750
per year.

But immediately, I realized the next important nuance about
transparency.

One of Hawa’s main warnings is that ‘partial’ salary transparency
is actually destructive. With ‘partial’ disclosure she points out, you move
quickly from no salary information to salary misinformation.

TX. Transparency there is mixed. Easy to find what we pay the Governor. But legislator salaries are misleading

For example, an online search would tell you that Texas legislators earn $7,200 per year. But that number totally overlooks the generous pensions they can accrue over years of service, as I wrote about back in January. So ‘salary transparency’ can be done well, but it can also be done badly.

It took me 41 seconds to find that my wife has part of her
salary disclosed online as well, as she is paid part-time by a State of Texas
entity. That partial disclosure, however, is misleading because it’s only part
of the story. Again, partial disclosure can obscure rather than illuminate.

Hawa also cited companies that release “salary bands” rather
than all salary data. All that does is potentially hide big differences in
total compensation within wide ranges, like $40,000 differences, as she has observed
elsewhere. Also, releasing general information about characteristics of employees,
like “new hires receive $X in salary, but with some exceptions” can actually deceive.

Why the exceptions? And why the non-identifiable descriptions?
Selective disclosure, Hawa argues, is often worse than no disclosure at all,
because it misleads.

I wondered if only a relatively “flat” organization would
want to radical transparency. Hawa doesn’t think so. Companies should be free
to pay for star performance, as long as management can justify it.

PayScale has a spectrum on the topic

“The company doesn’t have to aspire to flatness, but does
have to aspire to fairness,” says Hawa. “Unequal is not the same as
inequitable.” Those seem to me important points as well. Pay as much as you
want or need to, as long as you wouldn’t be embarrassed by everyone knowing
everyone’s pay.

If you’re a business owner who would be embarrassed by full
salary transparency at your firm, what does that say about your method of
paying folks? In an important sense, Hawa believes, the discomfort is the
point. Hawa described her colleagues’ initial discomfort as a positive rather
than a negative.

From Hawa’s perspective, transparency challenges leadership
to be introspective. That’s where the hard conversations, and maybe some
learning, can begin.

Says Hawa, “If you are leader, give yourself the opportunity
to be challenged by your employees. If your salaries are fair, you’re good. If
they are not, you [the manager/owner] have something to learn.”

I’m pretty interested in the thought experiment. This all
got me thinking about the fact that salary transparency is really not
considered ‘normal’ in most workplaces. But why? Why are we unwilling to be
transparent? What are we uncomfortable with? Who benefits from the secrecy?

For competitive reasons, we can all agree it makes sense not
to publish your data to your competitors. But to ensure fairness within your
own organization, wouldn’t full disclosure for current employees reduce
mistrust?

I asked Hawa if she thought disclosure helped managers run
her business better.

“I think there’s a business value in taking this off of
people’s minds.”

And if you are a worker at an organization and the idea of
salary transparency makes you uncomfortable, you should probably realize that
secrecy isn’t your friend. You might have some initial shock and resentment
upon disclosure, sure, but after that you would likely benefit. Secrecy is a
tool in the hands of management.

As Siskel and Ebert once said: All You Have To Lose Are Your Chains

I think if you’re a worker worried about salary disclosure, you should remember the words written by a couple of German guys who became famous in 1848: All you have to lose are your chains!

A version of this post previously ran in the San Antonio Express News and Houston Chronicle.

Please see related posts:

Transparency Part I – TX Legislator Salaries

Transparency Part II – I’m a fan of total income tax transparency

City Economic Development Transparency – SA and Houston failing grades

San Antonio and Houston need transparency taken to 11

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