The question is, when going from private to public information, how best to handle it so that it isn't a source of chaos.
I often think its that the transparency is only halfway that causes many of these peer to peer problems. It also doesn't help that most white collar work these days isn't directly translatable to revenue. Its easier to tell a salesman what he's worth than a designer etc...
They definitely have the option of not offering the raise and the employee choosing to leave. If the employee isn't worth X dollars more then the company should be ok with them walking without that bump.
In the end the issue being discussed is asymmetrical info, and positions. If an employ is producing less than their cost they don't get to keep that "surplus". They get written up / fired. But if an employee is producing more than their cost, the employer gets to keep that surplus. It's an imbalance.
Asymmetrical info on salaries produces this situation. I'm not saying it's right or wrong, but it is imbalanced.
This is the crucial bit: "In a study of engineers at two major Silicon Valley companies conducted some years ago, I found that nearly 40% perceived themselves as performing within the top 5% of their peers. Ninety-two percent felt they were in the top quartile, and only one engineer felt his or her performance was below average."
Say you're the manager. Let's start off with the optimistic case: you have a good relationship with your team, are using objective but not necessarily easy to measure (to prevent gaming) criteria to evaluate your employees, and you are pretty accurate in your assessment of how valuable each person is. They aren't going to believe you. Almost everyone thinks they should be near the top. You have no way to win this unless you judge purely based on lines of code or other such measures, in which case you've actually already lost for other reasons.
And then consider how hard this is for a less experienced manager new to the team, who might not have a full picture of everything but is going to get hammered by people complaining about not being at the top of their peer pay grade.
You can go away from pay for performance, which the article notes, but do you really want to? Is that the situation you'd prefer to work in, where you know what someone makes purely because you know how much anybody with that many years tenure would make?
There are also multiple definitions of "good developer" (speed/output level vs maintainability vs project definition and architectural influence vs firefighting vs...).
That doesn't mean they're all what a company needs at a given time. This leads to another way you end up in hard managerial conversations: you're good at X, but the business has changed and Y is driving our bottom line much more than X now, but you have no interest in Y and are resentful that you aren't being rewarded as handsomely for X anymore. What do you do if you're a manager who knows the odds of X being that important again in the future are very low (maybe there's enough structure in place now with automated testing and such that firefighting is way less critical than it was when small), but the one-time-star starts complaining that their raises have gotten smaller as they've resisted coaching/directional changes for the past year or two?
And if you're completely transparent with salaries, you've got an extra problem: this person could be higher paid than some of the people contributing the most right now, and explicit specific knowledge of that will just make even more people unhappy, if you aren't in a position to simply raise everyone's else's pay to match.
Representative ranges (with room for overlap for e.g. someone peaking at one level vs just starting at the next) give you many of the benefits with far less of the ego bruising. Generally you-as-employee can get a feel for what these are after a couple years even without it being explicit, IME.
This should be open discussion whether you have transparent salaries or not. Long before it comes to salary decision, the topic of "we need more Y, learn it" should happen. Not just because of salaries. If transparent salaries force it, then it is a good thing. Not just because of fairness, but because developers often focus on the wrong thing. And because when manager opens it, sometimes it turns out there is obstacle for doing Y that can be overcome with help of manager.
I mean, really. If you valued X in the past and just merely praised people for it and now it is changing to Y, be clear and tell them. It is very unlikely that your ninja coder turns from best to worst overnight just after slight strategy change. If he was so awesome, he will be able to learn new thing fast - unless there is some kind of resentment going on in his head which usually have little to do with strategy.
Non transparent salaries dont prevent people talk, dont prevent resentment either, but you usually end up with humble/shy coders having much lower salaries then overconfident ones. And I seen that humble/shy getting really resentful when he figured it out.
I'd argue that it is a sign of a healthy company when each employee is producing more value than they are taking home in their paycheck.
I am instinctively for transparent salary information, but I'm not sure if I can intellectually back it up.
All arguments against salary transparency seem to be that people will be unhappy when they find out that the company has screwed them over and therefore it's better for these people to be ignorant.
Salary info is a very small piece of the information needed to evaluate the fairness.
The article details quite extensively how difficult it is to communicate the totality of information in all but a few circumstances. If everyone could see every piece of relevant info then I'd agree.
One example: my value to the company may be for something you see as worthless. But you don't have the full strategic roadmap of the company's leadership in mind when you devalue my contribution. And the company may have valid reasons for not making the strategy widely known in the company. If you learned that I got a big raise for my success in that area, you'd feel slighted. The problem there isn't lack of info re: salaries, it's the impossibility of every employee having every bit of info needed to make the assessment.
I’m not saying this is easy, or without pitfalls, but the biggest reason I’m for transparency is that it helps protect against unfair salary discrepancies.
What markets function like this? I have no idea what the cost of growing, harvesting, shipping, and selling a banana is. At every step of this process there are capital investments, labor costs, and profit margins that are totally opaque to me. And yet I can look at the price of a banana and decide if I want to spend the money or not. One beautiful aspect of markets is that not everyone has to spend years researching every purchasing decision. The makert sets a price for you. If one company has margins that are too high, another steps in to take some of that profit, by offering at a lower price until it reaches equilibrium.
The job market seems similar. I don’t know how companies set their offer price but I am capable of evaluating offers all the same.
That would be the equivalent analogy. That you know you are paying the same price for bananas from the corner store as everyone else.
Right, but that mechanism is only possible if information is public. You don't know about the pricing of growing, harvesting, shipping and selling bananas - but it's possible to find out, and a company looking to enter the market would find out. You can rely on market pricing because the market lets you outsource your research to other market participants, but that only works if research is possible in the first place.
Largely because somebody else out there is doing it on your behalf in order to make a buck.
Without market transparency you wouldn't be able to rely upon this happening.
I like the privacy of my coworkers not knowing my exact compensation, it is not their business. If we follow your logic to its natural end, why not force disclosure of all expenditures each of us make as well? (which on another topic, that is the best reason to never have digital currencies)
If team cohesion breaks down because pay information is revealed, give them pay cuts for being petty and disruptive. This is not an unsolvable conflict. People are not advantaged by remaining ignorant of their status in a transaction.
>I like the privacy of my coworkers not knowing my exact compensation, it is not their business.
It is their business to conduct the business of the company which employs them, which includes the distribution of that company's funds. Maybe people in other companies don't need to know, but people in yours do, because it is their business.
The floggings will continue until morale improves.
This is a great point, and let me add that it becomes 10x worse when money is involved. Some (many?) people are just flat out irrational when it comes to money. Jealously and envy quickly block any rational thought when it comes to explaining why someone might make more than they do.
You can even reasonably guess someones salary based on their job and location, especially a coworker's.
Precisely the people with hard-to-guess salaries may value that privacy.
- an insurance company demanding a premium because you're well paid
- competitor bidding for your labour anchoring their offer to your current salary
Those are just two cases were it could be harmful. The idea is to make the information available and transparent while still not making it public and still protecting it.
I'm not a bad actor, who spends all their time figuring out how to make profit off of someone else's private info. I'm pretty sure there're very creative ways private information (salary and not) can be misused, but I don't want to find out by volunteering this information.
Why do you assume someone making less is being "screwed over"? Imagine employees A and B. B greatly outperforms A and therefore rightly makes more. However, A is delusional about his skills and thinks he is as good as B. Pay information is made transparent and A sees he is making less. This makes him mad because by all rights he ought to be making as much as B! This type of comparison/resentment might make A want to quit or ask for a raise, whereas before he was both content and fairly paid at his performance level.
If someone is in an executive position, and something like you describe happens, it is their fucking job description to resolve the problem. Meanwhile, by having open salaries, everyone has the information needed for a competitive market. Including college graduates, who get screwed over routinely
//Edit: Oh, and if A ever DOES need to find a new job and advertises his "delusional" skills, either him or his next company will feel the pain from the lack of price information here
> saving the company money
No, seriously. If A is getting upset because he feels he's not paid "fairly", but A isn't contributing enough to get paid more, then someone needs to tell A exactly why he's being paid less. And if you can't explain why, then you need to reconsider that decision very, very carefully.
Without measurements how can we can say who is delusional, A or B? Ultimately transparency benefits everyone except those who currently non transparently draw greater wages without justification.
People will adopt their attitudes, there is no place for immaturity and ego in a professional context.
Had the designation been clear from day one and each individual pay scale evolved over time publicly, I seriously doubt there'd be the same issues.
In essence, a reveal all at once is the equivalent of a massive swath of promotions to one's co-workers and not to yourself (for the lower paid), all in one day - yeah, of COURSE it's going to harm team dynamics. That doesn't mean we should only promote people in secret though, right?
Transparent compensation is simply a more granular hierarchy of representative productivity and value to a company, and the respective compensation, than a simple job title. We don't lose our minds at the idea that some employees are junior, others senior, etc. So what's substantially different with a more granular system to what already exists?
Any employee should be able to ask "Why is Bob making more than me?" the same way they might ask "Why was Bob promoted to XYZ position instead of me?" And a healthy company should be able to answer the question with the reasons why for the former, just as a healthy company can answer the latter. If an employee is lagging in salary over time because upper management isn't seeing the same value as their equally experienced co-workers, this should be made clear to that employee so that they can find out why their efforts aren't having as much value, and either adapt accordingly, or find an environment where their efforts will be better valued.
Imagine a classroom where each student can see their own grade as a number out of 100, but has no idea what the average is, spread, etc. You could have a C student who thinks they are doing as well as an A student, because they have no context for how they are being graded. Yes, there will be drama with each student knowing the other's grade, but they'll better know their own relative performances.
At very least, we should have anonymous compensation transparency, where employees can know where their own salary stands in the company compared to tokenized other salaries, so the conversation can at least be "Why is #335 making more than me?" instead of "Why is Bob making more than me?". In small firms/upper management levels this won't be all that anonymous, but it could mitigate the drama in larger employment pools while still providing the contextual benefit.
Don't have to imagine it. This is how all of my education worked from kindergarten through undergrad. Grades are there as an absolute measure of how well you've accomplished what you and the institution set out to do; your peers' performance is not relevant to that question.
My high school and university both had longstanding policies against disclosing any information about GPA distribution or class rank, explicitly to discourage students from measuring themselves in relation to each other. Facing highly ambitious and academically successful student bodies, administrators (rightly, in my opinion) feared the cutthroat and competitive climate that grade transparency might create, and felt it didn't align with either institution's mandate.
Instead, we measured ourselves against our education and career goals and broad population averages, against which we were overwhelmingly successful. You didn't have to be better than your friends, only good enough for the college applications you had in mind (or later, the grad schools or employers you had in mind).
I view professional compensation the same way. A salary is good to the extent that it funds the housing, transportation, financial security, dining, entertainment, toys, travel, etc. that I'm after. As long as I'm in the Bay Area, no salary will ever be satisfying with respect to housing, but later in life, once I've attained conditions for my family similar to the ones I grew up in, what do I care if a coworker makes more? (Though I certainly couldn't resist reading and resenting it if available, I have no need for this information).
Put another way: I don't care that I'm beating 90% of startup employees if I still have to live with roommates. I don't care that I'm beating 90% of my high school classmates if none of them are going to college at all. I don't care that 90% of bigco employees are beating me if I can comfortably afford a nice condo with a short walk to the office. I don't care that 90% of my high school classmates are beating me if they're all going to Harvard and I'm accepted to the schools between #2 and #10.
This is a great and underrated idea. Have an upvote! This solves the privacy concern neatly while removing the unfair information asymmetry.
The same exact thing happens with promotions and titles, so should they be secret too? If it's such a problem then how about getting rid of positions altogether and just say "everyone's equal?"
The second point is exactly why salaries are hidden - to drive down wages. There's a damn good reason why American professional athletes players union make sure salaries are published. You only thought your salary was fair based on the information your employer gave, which was "it's fair, trust us."
It's not about the money. It's not even the fact that you ranked them. It's that you ranked them publicly, and from a place of authority to boot. And worse still, on a one-dimensional scale.
And in large companies with salary ladders, we know the range of all our coworkers.
Where the Board stops hiring and delegates to management.
Edit: Not that it isn’t currently gamed and not that this doesn’t already happen: I’m pro pay transparency but there aren’t any magic fixes here, this is a really complicated social issue.
The high performers will view it has a hard cap on compensation and look elsewhere, in my experience at least. Obviously this cannot be entirely correct, but it's hard for me to get into the mental space of someone who wants to be paid exactly as much as their peer sitting next to them. In my career I've always wanted to outperform the next guy - and be compensated accordingly.
I say this as having been both a high performer and an under performer. In the hard personal years where I am underperforming I would love transparency and know what to expect. In the years I was "crushing it" I'd have set myself back financially by a decade+ had I simply been okay with the average compensation for my position.
And the only people I can think of who would prefer the existing opague system would be those who benefit from it: management and people receiving outsized salaries for some anti-merofratic reason.
That was me! I can say without a doubt I quickly learned to only work for small companies where I reported to the owner directly. This enabled me to get 50% raises YoY when starting out - where my corporate job was limited to the typical "well, that wouldn't be fair to the rest of the group" style politics.
I would say it's vastly more important to the hypothetical vulnerable high-performer than the guy graduating MIT or Harvard working for Google. They start at an extremely high salary and will do fine no matter what. The high performing high school dropout needs rapid massive raises just to eventually get to par with the other group - assuming similar performance.
I can almost guarantee you that if salaries were transparent it would have been a huge scandal in a few of the companies I worked at since I was making 2-3x the wages of those next to me. It would have been untenable for those managers to pay me that, even though/if I were worth it - they'd have done nothing but deal with politics and fallout from it. I still believe I was underpaid in most of those positions compared to the folks they had working there.
Egos are easily bruised. When that 19 year old high school dropout is making more than the 45 year old with a degree people start to complain. Loudly. They don't even look at work output or performance - it's utterly irrelevant to most.
I see both sides to this, but I'm relatively certain salary opaqueness helped me through the start of my career. Now? Maybe not as much. It's much harder to stand out at an exceptional level once you reach a certain point.
Location base: For the other 65% of the base, we factor in each location’s cost of living using Numbeo together with data from Payscale and Glassdoor, which we then use to have a base salary for that particular location (say New York or Cape Town).
[1] https://elsajohansson.wordpress.com/2017/09/13/what-does-a-w...
When you notice that someone that brings zero value to the company gets the same salary as you one of two things happens:
1. you either loose any incentive to do anything
2. or you quit.
In time all what you're left with is the people you don't want.
(Termination protection does not apply if the behavior of the employee is the reason: http://www.gesetze-im-internet.de/kschg/__1.html)
The process may not be fast, but for a useless employee, it would be difficult to claim that the termination was unjustified, so the outcome is essentially guaranteed. I would call that easy (as opposed to simple).
If its so easy to fire in the USA why is hr so paranoid about it
Employer tribunals are not free and are intimidating to use, so many people who are wrongfully dismissed don't seek justice.
Also, do you really want to set up your incentives such that the smart thing to do is work just hard enough to avoid getting fired?
I got sick of being compensated the same (typically worse) as the worst employee on the floor, while doing 5-10x the productive output.
All these policies do over time is ensure you lose top-tier talent and eventually get stuck with a lot of middling folks who are content with the status quo. This can be a good or a bad thing, depending on who you are.
I have a friend, whose team had this policy - no raise with promotion.
He got a promotion with no raise. When asked, his manager said, "you shouldn't work for money. You should work for the learning experience."
He resigned in a month. And this was not some random fringe start-up - one of the biggest companies in the world, with over $100B in market cap.
Maybe introducing those salaries would be a benefit for both employees and employers.
In which case after finding out they leave and if it turns out they're not all that valuable they mainly just end up screwing themselves.
I'm not sure why any employer would consider this a problem.
An underpaid employee leaving and getting a better job though - sure, that's a problem.
Was it fair? Who knows, it's not really possible to debate that because it all depends on your definition of "fair". But in my experience, it's not very realistic to assume that employee A sees what employee B makes and objectively understands how they need to improve to make what employee B makes. Especially since that's not really how pay is negotiated anyway.
Seems like a bit of an extreme statement.
The problem is with egos, Employee A might view themselves as more valuable to the company than Employee B and vice versa. If Employee B gets a raise, Employee A will want one too, or a higher one. A spiral of trying to get a higher salary relative to other team members can begin.
Also, Employee A and Employee B might have private salaries that meet or exceed their expectations and everyone is happy. When salary information is public, unhealthy comparing can begin. Even though they're grateful for what they have, they see that more might be available if they ask for it.