Should organizations be more transparent about pay?

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“…the currency of leadership is transparency.” – Howard Schultz, chairman and CEO of Starbucks

In last week’s article, I introduced the idea that transparency will be one of the top organizational priorities for 2014. People will be happier and organizations will be more effective when there is less control of information and when there are fewer secrets. When everyone knows what’s going on, everyone knows better what to do. Last week, we covered transparency of vision, strategy and results. Today, we’ll finish off with two sticky topics that organizations like to keep opaque: process and pay.



Transparency of policies and processes (for employees and customers)


Thanks to a transparent vision, strategy and results, I know what the next right thing to do is. However, if I don’t know how to get that thing done in the organization, or I’m unaware of the rules and parameters within which I can do it, I’m not set up for success. Organizations need to make readily available to all employees every defined process and policy, and they also need to make sure that unspoken policies are made explicit. Organizations that openly and proactively communicate how things get done equip employees to do their best work.

Once again, just in case you thought I was being a bleeding heart once again — well, you’re right. But also, being transparent about policies and processes engages customers more fully in your business and enables customers to make informed decisions.  Cha-ching again!


Transparency of compensation and rewards


OK, if you were with me up until now, I’ll bet this section heading lost you. Surely, I’m not suggesting that organizations should be transparent about how much money people make! That’s a long-standing taboo.

Yes, it is, and yes, I am. Organizations are already experimenting with compensation transparency to demonstrate their commitments to transparency. So far, the sky hasn’t fallen and the earth hasn’t swallowed everyone into a hellish abyss. Being transparent about compensation can yield multiple benefits:

  • All the wasted energy that goes into conjecture about who makes what can be freed up for more productive pursuits.
  • Employees who want to increase their income can see exactly what it will take to do so.
  • Organizations have to get serious about justifying big differences in pay for certain roles — or adjust compensation accordingly.
  • The organization that shares compensation demonstrates a commitment to transparency that buys a ton of trust points with employees and other stakeholders.

Being transparent about your rewards — whether they’re bonuses or special recognition programs or on-the-spot atta-boys — is key to an effective recognition program. After all, if your recognition program is intended to incent certain good behaviors, how else will folks know what to do?

 

Let’s be clear about transparency

Sorry. I can never resist a good pun. But let’s get on with it.

Transparency isn’t just about availability, but also about understandability. If your organization decides to start being completely transparent about financial metrics like EBITDA, then you’ll also need to get serious about educating employees about how to read a balance sheet and what the heck EBITDA is. If you’re getting clear about policies, make sure employees understand why those policies exist (and if you’re not sure why the exist, then ax ‘em!). If it’s time to be transparent about vision, tell the freaken truth in language that everyone in the organization can understand. You’re even going to have to get transparent about transparency.

If all that transparency sounds like hard work, it might be. After all, a history of regulations, competition and poverty mentality has given us all habits of opacity. You won’t be able to flip a switch tomorrow and be totally transparent. It’s going to take time and intentional management of change. But if even some of the benefits we’ve talked about in these articles come to fruition, then I would argue that it’s well worth it.

 

 

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