I recently read Todd Zenger’s article in Harvard Business Review, “The Case Against Pay Transparency.” Mr. Zenger makes great point after great point about how a transparent pay program can destroy a culture. He argues that opening up pay conversations and information with employees can lead to a culture of politicking, division, and disengagement.
Zenger isn’t wrong.
If your organization is pocked with strife, infighting, and division, you should be cautious to implement pay transparency .Transparency of any kind, but particularly pay, can create canyons in what was a crack when implemented in an organization in cultural chaos or confusion. Communicating clearly about compensation can expose inequities that people assumed were there but did not have evidence of. It could push people with low morale to have the evidence they need to shop around for a better fit. And, of course, it could expose you and your team to legal ramifications that could have devastating effects. (Does the Ledbetter Act ring a bell?)
But what if you have a culture that eschews politicking and embraces unity at all levels? Would simply being honest about how pay is figured out and how employees compare amongst their peers ruin that? If your organization has cultivated a culture of high trust and engagement, would your employees go running for the hills if their cubemate made more than them? If your employees are regularly hearing about the state of the business, would they feel surprised by the percentage of a raise?
I don’t think so.
Transparency can strengthen a great culture and provide engaged employees a deeper level of understanding of how the business is run. In fact, according to those that study pay and pay transparency, forgoing pay secrecy can have transformative effects. Payscale, a salary and benefits research center, ran a survey in 2015 asking 71,000 people about their pay and job satisfaction. They found that those employees that were paid below market for their jobs were actually more satisfied with their organization if their employer was transparent about pay decisions. Having knowledge on how their pay was determined increased their job satisfaction from 40 percent to 82 percent.
When you have a strong foundation of trust, arming your employees with the information on how their pay was determined and what their earning potential is only helps build on that foundation. You are showing employees that you indeed trust them with this information, that you value transparency, and that decisions you make are equitable and done with care. But, if indeed those decisions are not being made with care, you do not practice equity, and you do not have a strong foundation of trust… yeah, you should probably take Todd’s advice and keep that stuff a secret.