Posted on Tuesday 8 August 2006
Here’s an interesting post advocating open salary knowledge within a company.
There are three major reasons why salaries secret are silly:
- It frustrates employees because any unfairness (real or perceived) can’t be addressed directly.
- They’re not secret anyway. People talk, you know.
- It perpetuates unfair salaries which is bad for people and for the organization
…
Making salaries public (inside the company of course) has some major advantages:
- Salaries will become more fair. The system gets a chance to adjust itself.
- It will be easier to retain the best employees because they’re more likely to feel they’re getting a fair salary.
- The pressure is on the people with the high salaries to earn their keep. Everybody has to pull their weight – the higher the salary, the larger the weight.
I agree with most of the post. I think that the salary taboo is one of those things that just became conventional wisdom in the business world without evaluating the alternatives. Corporations love to err on the side of secrecy, but as more executives see that their can be some benefits to open standards. Obviously there need to be some trade secrets, but it may be better to make information open by default and evaluate the secrecy exceptions rather than the current mindset of making information closed by default.
What is especially entertaining to me having been around academia for a while is the pseudo-open salaries. In most states, the salaries of state employees that earn over a certain amount are public information. Thus, anyone can theoretically find the salary of most professors and university administrators. In practice, you usually have to go to some obscure corner of a library to find the data and, if someone does publish it widespread, people usually aren’t too happy about it. Back at Clemson, one of the student newspapers had an annual issue where they’d publish the data.
An interesting tool we have hear in Illinois is this website where you can find the salaries for virtually all K-12 teachers and administrators in the state. I’m sure parents love using this tool 
.
And finally, on the subject of openness, check out this article about how some proprietary data formats are allowing software companies to withhold patient data from doctors unless they renew their software.
Intracare is the publisher of a popular practice management system called Dr. Notes. When some doctors balked at a drastic increase in their annual software lease, they were cut off from accessing their own patients’ information.
This is always something I think about before I start using software and I lean almost exclusively towards non-proprietary formats for my data (or, practically non-proprietary formats in the case of my relatively simple Microsoft Office data given the advent of Open Office). This is one reason I use Excel for all our budget data instead of Quicken, for example. In the case of iTunes, you can already see the problems that Apple’s proprietary music causes by not allowing users to play their purchased music on any hardware other than an iPod. One day a lot of people are just going to be out of luck when they decide the iPod isn’t the best music player anymore.
Tags: Business, open-standards, Science and Technology
About the data formats: I also worry about this a lot of times. For example, will I still be able to access all my old application documents next time I need to fill out a similar application. Or will my picture files still open when I’m 50? Or will I still be able to play my computer games when I get a new computer in a couple years? In my case, I’m more worried about the company going under than not renewing a license, but it is the same thing.
I read an article in IEEE Spectrum (Volume 42, Issue 7, July 2005 Pages:22 – 27) called Eternal Bits about the DSpace project at MIT (Here’s a copy…just don’t tell the IEEE copyright monitors). I think their goal is to make sure that files for research material never become obselete.
I think it’s only a matter of time until this problem hits a critical mass of users in some form or fashion. I also think virtualization is going to become a Big Thing ™ in the next few years and may be a way of addressing the problem.
So I was looking at the wedding pictures, came across this blog and felt compelled to respond as I have the pleasure of handling salaries and subsequent complaints on a daily basis:)
Here is the main problem with having salaries “open”:
Employees are not equipped with the skills and knowledge of fundamental Compensation, and Performance Management to handle the information.
Compensation decisions are made based on an individual employees duties and responsibilities, the minimum requirements to perform the job as well as any additional credentials that they might bring to the table that an employer should wish to reward. Perceived inequities of duties and responsibilities (i.e., I do the same thing as my Sr. Team Lead, Supv, or Ann down the hall) lead to unrest and questions of why don’t I make the same as Ann down the hall when we do the same thing. The issue here is that Ann does 50% more duties possibly that the employee performs and perhaps only 25% of the same duties that the employee performs – but because Ann does have those 25% similar tasks, in many employees minds they perform the “same job” and should be paid at the “same rate”. Additionally – equity is maintained in an organization by APPLICABLE experience and qualifications – many employees do not understand what “applicable” means….Many employees think just because they have any kind of degree – they should be compensated – this is not true in many organizations – most companies only compensate for applicable degrees and experience. The same issue goes for experience, just because an employee has 20 yrs as a manager at an accounting firm does not mean they should be at a high level rate if they will be working in IS. As simple as this all sounds – these miscommunications and perceptions are what send employees into a frenzy and directly down the hall to HR – especially when they are equipped with the exact knowledge of what their coworkers make.
The other area that causes issues in an “open enviroment” is the complete misunderstanding of the Performance Management process. Most organizations do not provide each employee with the same performance based increase each year. Rather they distribute their budget based on performance and goals. Even though 10 employees might “meet their goals” and all be high performers – they cannot all receive 3.5% rather some would get 2, some 3.5, some 5%. Managers make these decisions based on not only performance but on an employees position in the range – let’s say you have a young high performer who is pd low because of their “newness” – A manager would reward them with a higher % increase than another high performer with tenure on their side in order to more quickly advance them through the pay range. If employees knew each others salaries and subsequently their increases each year companies would open themselves up to many employee relations issues such as favoritism, age discrimination, etc. Additionally, back to the “perceptions” of the workforce – no one is willing to admit that they are a “poor performer” or not performing as well as their co-workers that could potentially earn higher bonuses each year.
I think also there would be a bit of backfire with motivation and moral if salaries were open. Reason being is that unfortunately not all managers make the right decision and often times they make poor salary choices and continue to reward poor performers and keep them in their current roles for a number of reasons. If high performers knew this information it would be extremely demotivating – Why should they try to excell and work harder when it is obvious that it is not rewarded in the organization – or the only way they will attain a high salary is through “years on the job”.
Ok so that is my dissertation (abridged version) on comp and perf mgt….more than you all bargained for I’m sure.
Have an awesome day!
Thanks for a dissenting viewpoint. I’m too overwhelmed by the sheer magnitude of your comment to make a rebuttal at this point
. This may well qualify as the longest comment ever on our blog…pat yourself on the back.
Well I am pretty sure that this is my first blog ever so I thought If I was going to do it, I mean I might as well do it… and I even rated a response – I guess I’ll consider it a success.
My boss sent out an email the other day on accident with a spreadsheet where you could calculate the salaries of just about our entire office. It creates an incredibly awkward environment, knowing what everyone makes. You begin to base your assesment of them on their salary as opposed to work ethic, knowledge, etc. I think this open salaries is a terrible idea with a million problems that it would create in a work environment, sorry bro.
Did you think your boss deserved a 10% salary cut for making that bone-headed mistake?
Here’s a question for the naysayers: do you think it’s bad to disclose the salaries of government employees? Should we know how much the governor or mayor makes? If so, should you know the salaries of every employee that is paid by tax payer money (e.g., professors, civil servants)? Should you place some arbitrary limit on how much you have to make before your salary gets disclosed publicly?
I think the fact that managers make poor choices in salaries is a good reason for open salaries. It’s not fair to high performers if their managers make poor choices. Managers have to perform well to increase their employees’ productivity. If they dole out salaries poorly, then everyone will be unmotivated and only do the minimum (see the public school system for an example…where your salary is pretty much solely determined by longevity). If managers do a good job distributing salaries, then employees will see a connection between performance and salary and be motiviated to perform well to get a bigger share of the salary increase.
I think it also makes managers more clearly define performance metrics for their employees. Some of the examples you give revolve around the fact that employees don’t clearly understand their duties or how they differ from their peers. If duties and performance metrics are clearly communicated to employees then Bob might understand that Alice gets paid 20% more because she works 55 hours/week and he only works 40 hours. Or, that her position requires a knowledge of MySQL that Bob doesn’t have.
I’m not saying it’s definitely the way to go, but I think it’s a hypothesis with enough merit to test it out and evaluate it against closed salary systems. Even if it would be a little scary for managers to try it…there’s a possibility it could result in better performance in the long run.
This is interesting to read. It seems like I’m seeing that open salary information is bad for the company (and HR people – sorry, HR people) and good for the employee. As I am an employee and not a company, I find myself more in favor of it.
And before it comes up in a different way, let me just point out that everybody knows when the high performers get poor raises. I’ve been here like 2 months and I can list at least 3 people that should have gotten higher raises than they did for the last year. So I have no information that motivates me to do a good job, but plenty to motivate me to do a mediocre job.