Everyone knows what their coworker is paid, what they completed today, what they struggled with and what they’re proud of. What can traditional businesses learn from this start-up?
It’s rude to ask what someone else is being paid, so most of us can work next door to someone for years without knowing what’s in their paycheque. Should that start to change?
Social media startup Buffer uses the rule “Default to Transparency” when establishing what information its staff has available, and that includes payrates, according to co-founder Leo Widrich.
“To us, transparency isn't a buzzword – it's a huge competitive advantage when everyone knows what everyone is working on and getting done,” Widrich said. “Everybody who works here knows how much everyone else gets paid, what steps everyone is taking to improve, and even how much everyone sleeps.”
Buffer’s management developed a formula that calculates the amount of compensation for any present and future employee. Every employee is aware of the compensation calculation, so they know exactly what their neighbour is earning. and that there are no backroom deals--and this has created an incredible bond of trust among the team. It goes beyond pay, too. They know what their coworkers have completed today, what they have to do tomorrow and even how much sleep they got last night.
“Transparency isn't all rainbows and unicorns,” Widrich added. “It was actually incredibly nerve-wracking to make the company more transparent. Before we made all salaries public knowledge in the company, I was terrified.”
Both the great strength and cause of pervasive fear of transparency in corporate America is that, with transparency, you show your employees the company for what it is and you expose how it works. That's disastrous at terrible companies.
It’s a move that auther Alexander Kjerulf says will improve morale and reduce the risk of employees feeling slighted.
According to Kjerulf, there are three reasons why keeping salaries a secret is damaging:
It frustrates employees because any unfairness (real or perceived) can’t be addressed directly.
They’re not secret anyway. People talk.
- It perpetuates unfair salaries which is bad for people and for the organization
In organizations where salaries are kept secret, employees inevitably become aware of how much their colleagues earn, but may feel they can’t address it with their HR manager or direct manager, because they aren’t supposed to know. “When a company sets up a situation where people can see the unfairness but can’t address it directly, or even discuss it openly, they’re rigging the system for maximum frustration,” Kjerulf said.
The case for open salaries
Salaries will become more fair.
Top employees are more likely to stay because they’ll know they’re being fairly compensated
The pressure is on the people with the high salaries to earn their keep.
- Employees will understand of the factors that influence their salary and will strive to improve, knowing that by meeting key goals they can improve their compensation.