Powerful: Building a Culture of Freedom and Responsibility

by Patty McCord

Companies tend to be adamant that salaries and other compensation should be kept confidential. One founder I consulted with told me that compensation information is like medical information. But really, it’s not. One of the craziest things about companies paying so much to get salary survey data is that they usually don’t share it with employees, which should be part of communicating to people why they’re being compensated as they are. Companies should not be reluctant to explain their compensation rationale. They withhold the information partially because so many are following some below-top-of-market percentile rule, and they think their employees will feel they should be getting compensated at a higher overall market level. They also feel that specific individuals will react badly if they learn they’re making less than colleagues they perceive to be doing work of comparable value. No question: pay is one of people’s favorite things to gripe and gossip about. But that’s actually a great reason to be more transparent about it. Being open allows you to explain to people why others are being paid as they are. Having a good rationale for the discrepancy reinforces that you’re a performance culture. If you don’t have a rationale you can share openly with people, then you probably ought to take a hard look at why.