Quick note today about pay transparency. For those of you new to the game, the call for pay transparency is hot, and a while back I encouraged everyone who would listen not to drink the entire pitcher of Kool-Aid regarding pay transparency. My main point in that Workforce article. 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.
In my experience, employees generally don't want their co-workers to have exact or directional information regarding what they are making. See more regarding the fact that while most employees would love to know what you are earning, they don't want to reciprocate by allowing you to have access to the same information here. If you practice HR, you know what follows these survey results if you opened the transparency door wide open - tons of ER issues you can't solve.
So, that's pretty much where I'm at. The new observation I'd like to share from the world of pay transparency involves the parable of CEO pay, and I was reminded of it in a post this week by Paul Hebert (a rewards, incentives and influence guy) over at FOT. Here's what Paul had to say about the law of unintended consequences regarding pay transparency in the CEO ranks:
"Talk about unintended consequences. One of the reasons cited for the huge salaries and pay packages available to top executives is in fact greater transparency caused by the disclosure requirements in Sarbanes -Oxely. Congress enacted the Sarbanes-Oxley Act of 2002 in response to a spate of highly publicized business failures and corporate improprieties. The issue they said was a lack of oversight and transparency. I don't want another Enron and can see why more transparency was needed but, some of the requirements of SOX may be what is driving CEO pay issues. Specifically, once I can see what others get paid - that's what I want. The highest salary now becomes the minimum salary and I want more than the minimum."
And that, my friends, is what I mean when I cite the fact that those who call for unlimited pay transparency won't be around to help with the fallout. Conceptually, I get pay transparency, but the fact that most employees would look at the range, where their peers are in the range and automatically want more duckets speaks volumes.
I can handle the conversations and defend the differentiation employees would see. Most managers can't, and that's the issue. For the transparency folks, I absolutely agree with their core argument - we should pay fairly regardless of gender, race, etc. With that said, there's a lot of contrast regarding what people are paid that makes total sense. The problem is that most people in your org won't be able to defend it.
No company has strong enough managers to withstand the pressure and stand tall on how they value talent, so guess what happens? You start valuing talent the same because of the pressure, and then a vocal average employee ends up making as much as your star.
Does that sound like the best way to maximize performance?