How HR Pros Have Proven Complete Pay Transparency Is a Bad Idea...

Frank Roche had some great data up over at Know HR on Pay Transparency last year - go check it out, because it's the real deal regarding how people really feel about pay transparency - not how individuals want YOU to feel.

I'm on the record as saying that the employee relations fallout from complete pay transparency dramatically outweighs the benefits.  While it's trendy and seems progressive to call for full transparency in pay rates and pay practices in organizations, the folks who are calling for it don't have to live with the employee fallout. 

While I'm here, let me go on the record with another piece of information:

HR PEOPLE HAVE PROVEN TO ME THAT COMPLETE PAY TRANSPARENCY IS A BAD IDEA.

That's right, I'm calling out my own, not pointing to other people.  Work with me on the following flow chart:

1. HR Pros have access to all the pay data for the units they serve.

2. HR Pros often have access to all records, including the units they don't serve.

3. While we never sign an agreement or a code of ethics, I expect people to treat that pay data with complete confidentiality.

4. Complete confidentiality and ethics for HR Pros, who have access to all pay data, means they never use their access for their own benefit.  At least that's my standard.

5. Many HR Pros can't handle the realities embedded in the pay comparisons they make between themselves and others and, as a result, become vocal about the differences.  Worse yet, they may not become vocal but choose to leak pay data to other parts of the organization.

It's sad, but true.  The HR pros I've encountered in my career have proven that you can't have full pay transparency.  I'm going to guess that I've worked with 50 HR Managers in my career, including bosses, direct reports to me and peers.  Out of those 50, at least 10 have wigged out when they came across pay data they thought proved that they were undervalued.

Except it didn't.  And the folks who complained and caused employee relations issues were always the low performers.  Their pay was fair from an experience, credentials and performance standpoint. 

I'll say it once, I'll say it a thousand times.  WITH GREAT ACCESS COMES GREAT RESPONSIBILITY.  You have access to all the pay data in HR?  You need to get mature - real fast.

I've seen the same things, albeit on a less frequent basis, from accounting pros with access to payroll data.

If HR Pros can't treat compensation data with a mature eye and that's a job requirement, what hope does the whole organization have?

I'm just sayin'...

Last note - most of the HR pros I've worked with have treated the access with great responsibility.  To you, I throw a salute.  You're a pro, and I'm glad I'm working (or have worked) with you.

To the rest of you - get out.  You're hurting the profession.

Comments

[Michael VanDervort]

How about the Whole Foods way of doing comp. where you can see what every employee in a store makes? Seems to work in certain cultures

[Patricia]

I love the Notorious BIG chart. It is true "Mo money, mo problems."

[Frannyo]

I had a comment before but it didn't come through, please feel free to delete this one if the other shows up.

We have complete internal pay transparency for all jobs. It's a consulting company, so basically we sell brains by the hour. In our case, it makes sense and works for us rather than against us.

I would not ever want to move from pay secrecy to pay transparency within the same company - that would most likely be stunningly messy and at least temporarily focus every employee on the exact wrong thing.

But here it works because everyone knows what everyone else's pay, bill rate, and value to the company is. It keeps everyone focused on what they can do to increase their bill rate, and therefore increase their own pay.

[Dave]

"Their pay was fair from an experience, credentials and performance standpoint."

I'd feel better about that statement if there was actual data behind it. Too often, these things are measured subjectively and there is no rhyme or reason to what people are actually paid. Management usually responds to the squeaky wheels, and they can't ignore their favorites...

HR has numerous cop outs for this situation my favorite being "they were a better negotiator." I think the HR/Comp people afraid of transparency are right to be, because it would expose their house of cards. The (undisputable)fact that some people can't handle it is not a valid business reason.

The most important question on the survey you linke to was #4: would it make pay more fair? Of course it would. And in companies that actually pay for performance, maybe productivity goes up because actual poor performers see what they could be making. Secrecy only protects favoritism and sometimes outright discrimination. Sunlight is the best disinfectant.

[LukeBohline]

I've worked in both types of companies, and I absolutely appreciated pay transparency. Not only was the manager up front about what everyone made, but everyone made the SAME amount (or at least similar) for the SAME job function/title. This remained open and ensured that no one on the team was unfairly over or under-compensated. It also increased teaming and productivity since everyone knew how hard the others were working.

Now, bonuses were a different deal. That's where companies can remove the transparency and reward those people who stood out during the year, were over-productive, or who's credentials "entitled" them to a higher pay. Bonuses can always be linked to objective things like numbers hit, or more subjective things - based on management style and what's taken into account.