Should companies keep salary details confidential? In almost all corporates, employee salaries and the process of pay raise determination remains a closely-guarded secret and few are privy to the process. This disconnect between compensation and performance is one of the biggest contributors of employee angst and subsequent employee disengagement. Due to lack of transparency, most of the employees fail to understand their companies’ compensation program and generally perceive it as inconsistent and unfair. Disengaged employees have reduced productivity and the chances of attrition increase. Time and again we hear that compensation is the not the prime reason for people being in a job. It is time that we face reality and agree that compensation does play a big role in keeping people in their jobs, particularly in the modern-day world wherein expenses have skyrocketed. Employees may love the company; however, love alone does not help them earn their livelihood. Unless organizations become transparent on salary ranges, countless employees will never even know if they have been shortchanged. This can and does happen if they dont have super-honed negotiation skills to get fair compensation from their employers. This is not to advocate pay equality - one rank, one role, one pay - but transparency in salary ranges. When companies become transparent on the salary range for a particular job and how the job compares to other jobs, employee scan fathom what jobs are valued higher in the company, and what jobs they can aspire to. Companies need to be willing to disclose the reasons for having some employees on the lower side of the range, and what these employees should do to move up on the scale. Wage differentials are fine - it could be a city allowance or any other item which bumps up a certain person’s pay – but there needs to be transparency about who gets these additional allowances, and why. However, the latter-day fact is that the discussion of wage and salary information is either discouraged or prohibited and can even lead to punishment. In the US of A – the quintessential icon of modern democracy - President Barrack Obama has gone on record stating that “Pay secrecy fosters discrimination, and we should not tolerate it. Obama does have some data from an American research to back this. The graph below shows the gap in American wages. While it may not be completely accurate, the gap cannot be denied. This is America which promotes equality. Conditions in other countries where such research has not been done are likely to be much worse; pay secrecy may even be pushing the gender earning gap. The benefits of being transparent with salary ranges: It is doubtlessly painful for running organizations to make their salary scales openly known. For years, we have practiced secrecy and punished anyone who dares to oppose the norm. However, the long-term truth is that making salary ranges transparent reaps undeniable benefits. It builds trust among employees: Sharing salary ranges with employees demonstrates that the company has nothing to hide and promotes trust. The employees see organization as transparent and not engaged in power plays aimed at pinching pennies from their pocket. Trust is one of the biggest drivers of employee engagement and commitment; nevertheless it remains one of the toughest levers to crack. Once trust sets in, other organization-wide changes are relatively easy to implement. Trust is the DNA of a great organization. It provides employees with positive reinforcement: By looking at their company’s salary ranges, employees can clearly see the compensation potential in the role they are playing. Salary transparent can play a big role in positively motivating them to the next level of performance.Since employees own their career development, they invest time and resources to learn new skills for moving northwards on the salary range. This, in turn, will increase their productivity and keep them employable in the larger economy. In turn, such companies become highly competitive, as their employees are continuously honing and upping their skills and overall value delivery. It promotes candid employee performance discussion: Openly-shared salary ranges provide employees with ‘ammunition’ to initiate conversations regarding performance and the resultant salary they can earn.These self-initiated dialogues can result in improved employee performance, as they can see a clear linkage between pay and performance. Employees become open to their developmental needs and start working on the. Development planning discussions will no longer be a tug of war between the employee and the manager. It builds a culture of transparency: Informing employees on salary ranges and allowing them to see where they stand is taking the first step towards a culture of transparency. Employees will reciprocate by becoming more candid. This reduces ‘corridor’ gossip and encouraged people to bring their issues to the table, where logical conclusions can be reached. Employees can plan their finances better: When employees have a clear vision of their potential earnings, they are better equipped to plan their finances and lives. This helps them avoid financial distress situations and makes them happier, more motivated workers. So what is stopping the companies from becoming more transparent about salary ranges and reaping the benefits? The fact is that most of the companies do not have a scientific process for measuring performance. Performance reviews have become a formality of filling sheets of paper because someone in the HR or Administration department wants it that way. This inefficient process directly ties into merit increases, and companies re unwilling to open up their inefficient process to employee questioning. Managers would not be able to play favorites and reward the select few who always nod their head to their suggestions. Also, managers would lose their power over employees. As reviews become transparent, managers and HR would no longer be the demigods of the compensation review cycle. Is someone already practicing this method? There are certainly companies which already have transparent salary ranges for their employees, to check where they stand in comparison to the range. The renowned American organization Whole Foods has gone ahead and made the salary data available to all employees, and staff can easily get an insight into anyones salary or bonus from the previous year - all the way up to the CEO level. The magazine Business Insider mentions that the CEO and others at Whole Foods believe that a culture of shared information helps create a sense of a‘shared fate’ among employees. If youre trying to create a high-trust organization - an organization where people are all-for-one and one-for-all -you cant have secrets, says Mackie. Similarly, Buffer - a Silicon Valley start-up - has the concept of ‘Open Salaries’. The simple formula, based on a living document, calculates salaries and is shared with the whole team. In fact, the current document is open to for public viewing on their blog too. According to Buffer, transparency breeds trust, and trust is the foundation of great teamwork. Open salaries are a step towards the firm’s ultimate goal of being a completely ‘Open Company’, says Joel Gascoigne, CEO of Buffer. Is legislation the way to make this work? Legislation to enforce salary transparency is not advisable in the initial stage. On one side, we have countries like Norway, Sweden and Finland where everyones income data is publicly accessible. Contrast this to zero transparency in most of other countries where employees are at the management’s mercy, with no strong and fully implemented HR systems to prevent pay discrimination. What works for A may not work for B. The United States government seems to favor a more transparent approach -although this could be an election stunt for November’s mid-term polls. A recent executive order from President Obama prohibits federal contractors from retaliating against employees who talk openly about their salaries. The executive order does not compel workers to discuss pay nor requires employers to publish or otherwise disseminate pay data, a White House official said. But (it) does provide a critical tool to encourage pay transparency, so workers have a potential way of discovering violations of equal pay laws and (are) able to seek appropriate remedies. As per Reuters, the move is in line with the proposed Paycheck Fairness Act,which bars all employers - not just federal contractors - from punishing workers who share information about their pay. In response to this executive order, Leigh Tost - a management professor at University of Michigans Ross School of Business stated on CNN Money,This will not immediately lead to open and honest conversations around the water cooler about what everyone in the office makes. But that directive,combined with the help of sites like Glassdoor, which allows employees to confidentially disclose their salaries, and the rise of a generation of workers that expects free-flowing information, signals the emergence of a more transparent workplace. Nevertheless, newer, more agile start-ups may become early adopters of these progressive policies and tighten their grip on talent war - especially millennials, who generally favor flexibility and transparency. This could be another wave of disruption unleashed by progressive start-ups like Buffer. for more similar blog visit: vkaprofessionals/
Posted on: Sat, 10 May 2014 06:19:59 +0000
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