Start Up Blog

Open pay display

Posted in entrepreneurship by Steve Sammartino on August 2, 2011

I think companies should have everyone’s pay on display. A publicly available intranet site in alphabetical order with every employees name, salary and benefits next to it. Ok, so this is a bit of a shift from the secret salary world we currently live in. It might even cause a little bit of a distraction in the short term. But one thing is for sure, it will move our society to a far more accountable culture than we currently have.

Let’s consider for a moment the type of behaviour this is likely stimulate:

  • “I work harder than Joey, and he earns $20,000 more!”
  • “I want a pay rise”
  • “Holy shit, I better start working harder, I’ve been found out.”
  • “I wont get a pay rise in years”
  • “She doesn’t deserve that”
  • “Why do sales people earn so much?”
  • “Our company is a rip off, they don’t pay well”
  • “I can’t believe how little Mary earns, she’s a gun”
  • “I’m gonna work my ass off to get that job – I never knew I could earn that much!”

I really believe the initial chaos would lead to a better and more transparent workplace. One where everyone understands their role, impact and the investment the company makes in its people.

In my next startup, this will be policy number one. Total transparency in all financial documents, including salaries.

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19 Responses

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  1. Steve Hopkins said, on August 2, 2011 at 1:08 pm

    interesting idea, for sure. It’s a bigger cultural thing than anything…some will handle it, others won’t. Read moneyball?

    I’m not sure it’s fairness that will result…transparency, yes. It’s an inefficient market, so there will always be variety.

    @stevehopkins (via twitter)

  2. Jussi Pasanen said, on August 2, 2011 at 1:09 pm

    Have you seen the Top 10 Highest Paid Aussie CEOs infographic: http://t.co/HCohJ5N Scary ratios.

    Jussi (@jopas via twitter)

  3. Josh G McDonald said, on August 2, 2011 at 1:12 pm

    Totally with you on that, shame it’ll never happen in established orgs :-/

    Josh (@sophistifunk via twitter)

  4. Blog Catalogue said, on August 2, 2011 at 1:14 pm

    I think it should be up to each corporation to decide what works most effectively for them.

    @blogcatalogue (via twitter)

  5. Jonathon Oake said, on August 2, 2011 at 1:18 pm

    you go first…

    I actually can’t, according to my contract. oh well … *whistles*

    Jonathon (@jonathonoake via twitter)

  6. Dirk Tolken said, on August 2, 2011 at 1:34 pm

    Good luck with that… I believe it’s possible but all your competitors will see it and you’ll open yourself up to head hunting of your employees? Plus the negotiation of salaries is still to maximise profit, but an ethical employer will pay a fair industry related price, that said you’re still running a profit chasing business and need to optimise overheads ;)

    Dirk (@dirktolken via twitter)

    • Jagtesh Chadha said, on August 31, 2011 at 7:32 pm

      He explitly mentions “intranet”, so people outside the company won’t know anything.

  7. Andre Sammartino said, on August 2, 2011 at 1:45 pm

    Hmmm, it’s an admirable idea, that could make for lots of ‘fun and games’.

    There are a whole lot of likely ‘gaming’ outcomes (in the sense of people making moves and countermoves, rather than the fun stuff whereby we all get sucked into buying ‘virtual treasures’).

    You would need to break the following behaviours:

    1. The renegotiation of salaries so as to retain employees (because surely this would now open the floodgates on everyone else seeking renegotiation…. do you have a bottomless pot of money to hand out?)

    2. The typical ‘fallback’ position of “we’re just paying/matching market rates” (so as to justify paying some functional areas more/less than others because everyone else does)

    3. The (typically ignored) incentive effect of a lack of transparency (i.e. “I’m not sure exactly where I fit in the pay pecking roder, but I know working harder might keep me there, or push me higher”)

    4. The well-understood economic (and legal) principle that wages are ‘sticky downwards’ (i.e. good luck ever cutting anyone’s remuneration – also see bottomless pot question)

    I’m not saying it can’t be done. I do know of one (small) advertising agency that experimented with peer-allocated bonus payments (i.e. “we have a pool of bonuses to pay, everyone is to enter their prefered distribution across alll colleagues, and we’ll average it out”). I’m not sure if that engendered the desired results (nor how transparent the rest of their remuneration was).

    You need to remember to also include the perks in the remuneration data too (who’s get unlimited expenses, who gets a car, who has a nicer office, more leave, the right to go pick up kids from school/go to footy training/fly business class etc…).

    And make sure to also track how much time is wasted on people scrutinising, debating and bitching about all of this!!

    Ah, the joys of management – do you really want them??

  8. Ender Baskan said, on August 2, 2011 at 2:31 pm

    Thoughtful post Steve,

    What get’s me about this debate and many others is that we have to justify openness and somehow secrecy is the norm.

    In the West, we are arguably at the precipice of a steep decline. Radical change is needed, the masculine ego in particular needs to be done away with.

    I believe that all in all, you get what you give. Organisations who are open and honest, in this day and age, generally win.
    In fact I’d like to re-phrase the saying “Pay peanuts, get monkeys” to “Treat people like it’s the industrial revolution, get zombies” (It’s not so catchy but you get my drift)

    Andre this statement of yours bothers me: “The (typically ignored) incentive effect of a lack of transparency (i.e. “I’m not sure exactly where I fit in the pay pecking roder, but I know working harder might keep me there, or push me higher”)” — If this is how your organisation is running, it is probably boring, riddled with weak and insecure people, and hence doomed. It may still work, but it is not a model for the future.

    Cheers,

    Ender

    ps. And also, isn’t pay transparency already done in Government? I know people in the public service and everyone knows what the pay scale is there.

    • Andre Sammartino said, on August 2, 2011 at 3:35 pm

      Ender, I think you’ll find almost that in every organisation that does have any semblance of pay transparency (such as teaching, public service etc) managers find they need to use non-pecuniary measures (task allocation, job titles etc) to provide the incentives have some pay discretion allows. And rest assured, any transparency in salaries ends well before the top levels of every government department

      I work in an environment (a University) with notional transparency that is rarely adhered to (i.e. loads of folks with mysterious salary loadings, discrepancies in teaching load and access to funding for projects etc). It makes for lots of petty jealousies and insecurities (or at least fuels them), but I doubt any top-end uni is going to opt out of the norms of the global labour market for academics on the off chance that this egalitarian and altruistic utopia exists.

      I love your hyperbole about ‘doomed’ models for the future. Why all of a sudden have the wheels fallen off the Industrial Model of remuneration that has worked for 100 years Signor Chickenlittle? :)

      Don’t get me wrong, I’m not suggesting that the current murky HR practices of most organisations are the ‘first best solution’. I’m arguing that ‘going alone’ on this will be a surprising journey and hugely risky if employees can’t break free from typical individualistic behaviours. Dirk’s point about the likely response from alternative employers is probably only the tip of the iceberg on the can of worms that this would open up (how’s that for an awkward mixed metaphor?).

      • Ender Baskan said, on August 2, 2011 at 7:34 pm

        Andre, thanks for the reply.

        I think you are spot on in your synopsis of how most established organisations work and how many of us have been conditioned to behave. I agree that the step to make every single person’s pay public is a huge jump, perhaps utopian. But that’s only due to inertia, resistance, and not for any absolute reason.

        I argue that for certain organisations, cultures, geographic areas, individuals ‘open pay’ would be a great thing and that it is entirely possible today.

        I also take umbrage with your assertion that “On the off chance that this egalitarian and altruistic utopia exists.” —- We are talking about a model for the future. It’s about creating new norms, new cultures. Starting small.

        “I’m arguing that ‘going alone’ on this will be a surprising journey and hugely risky if employees can’t break free from typical individualistic behaviours.” — I think we see individualism through different prisms. Many of us Gen-Y want individualism in the sense of freedom and choice rather than that of competitiveness.

        There is a backlash amongst many of Gen-Y – contrary to the stereotype – against the mainstream, against consumerism, against “The Man”, against the Australian/American Dream. Yes these characteristics have existed in earlier generations and probably in equal numbers, but now we are connected and this forms virtuous circles. One person protests, one startup does great things, the rest of the world blogs it, tweets it etc.

        We can now see what is possible. We see and now we want flexible hours, a relaxed work environment, to hell with hierarchy, freedom of creative expression etc. We want to do away with the stupid rules that force the young to conform in order to protect the old people from the threat of the young upstart.
        Some of us are forming organisations that promote this freedom, we could call this the new wave of entrepreneurs.

        It’s no coincidence that Silicon Valley emerged from the ashes of the SF in the 60′s.
        It’s also now no coincidence that Berlin is now the hotbed for great art and a burgeoning startup scene.

        In a systemic sense: The post-war era of prosperity is on shaky ground, we need to reconsider as a society and as individuals how we want to live and work.
        In a smaller sense: Those organisations who are open, in touch, and compassionate will be rewarded.

        Ender

  9. Jussi Pasanen said, on August 2, 2011 at 5:07 pm

    Hi Steve, another interesting topic. Some quick comments:

    1. Here’s what happens at Semco: “Salaries are public information unless the employee requests they not be published. In addition, all employees can set their own salary.” This works well at Semco but it’s hardly a traditional organisation. It’s also worth noting that this is not just a one-way street either (i.e. publishing salaries only), employees decide on each others’ pay packets through a democratic process. (Sources: http://en.wikipedia.org/wiki/Maverick_%28book%29 & The Seven-Day Weekend)

    2. In Finland, taxable income is public information. As with anything, this has its pros and cons. One of the side effects is the publication of annual “rich lists” by city/area and associated bold headlines in the yellow press that seem to do little else than feed people’s jealousy. On the plus side, perhaps this is slowing down the increasing economic inequality, even if only a little.

    3. Think what would happen all the salary guides and services like http://www.glassdoor.com/ if all pay information was public? ;)

    Information is power. Secrecy is a means of control. I doubt salaries were public information at the Ford Motor Company in 1903, and I doubt this is going to change anytime soon.

  10. Mildlycurious said, on August 2, 2011 at 9:35 pm

    Better yet, I think everyone should be forced to wear t shirts with their total remuneration package number and hourly rate printed on it. This might make managers assess whether assigning projects will achieve an acceptable return and reconsider unproductive meetings (“dude, you just wasted a total of $500 in this room with that 30 minutes of disorganised dross”).

    • onealbumaday said, on August 3, 2011 at 9:43 am

      Mildly curious, you presume a higher level of numeracy than I’ve observed among many folks :)

    • Steve Sammartino said, on August 3, 2011 at 11:02 am

      My favourite suggestion yet. Everyone should wear t-Shirts with their salary on them every day at work. In fact: I’m going to make a mockumentary of the office behaviour in what I call “the Web T-shirt Company”. Who wants to star in it?

      Steve.

  11. Lawrence Ladomery said, on August 3, 2011 at 11:28 am

    Great idea!

    Perhaps this should be gamified a bit too so that the value presented would not just be the salary but a figure based on productivity, originality, revenue generation, ethics, green-ness, niceness, etc…

    One week @sammartino would be at $135.56 cents per share and the next 23% higher because of the business you helped win :)

    Bonuses could be tied to this too. Not only rewarding one’s own success but give employees the option to invest (virtually) in their colleague’s shares too as a way to incentivize collaboration.
    :)

  12. Jussi Pasanen said, on August 3, 2011 at 3:21 pm

    @Lawrence – like!

    Combine this with something like Pollenizer’s Wooboard concept ( http://www.pollenizer.com/customer-empathy/ ) for Infinitely Variable Remuneration (TM) and I think we have a winner!

    Imagine the possibilities: personal IPOs, hedging personal stocks, speculation, secondary markets, dilution etc. etc. Fun for the whole family :)

  13. officegopher (@officegopheruk) said, on August 26, 2011 at 8:45 am

    What a great idea, if you can encourage your staff to buy into your company surely this can only be a win, win. I agree with your initial thoughts though in so far as to start with it will certainly cause a big debate on who should be paid what. I also feel its a good idea to be totally transparent with the company finances. If staff are aware of how well, or not the company is performing then they have a opportunity to change it.


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