Insane transparency — Seeing or even setting what your colleagues earn

society, workplace

At Google, we have pretty radical transparency, at least in Engineering where I sit.  With few exceptions, we can all see what every colleague is working on (via the Project Database or “PDB”), what they’ve recently accomplished (via weekly self-composed “Snippets”), and even what their core contributions have been to the company (their Google resume).  Through our performance review system, we can not only review our peers (and have them read exactly what we wrote about their strengths and weaknesses) but even review our bosses.

I think on the whole this transparency is outstanding… ethical and useful.  But one part is missing, right?

– We can see what people are working on.
– We can see how people are performing.
= We can see what they accomplish.

but…

– We CANNOT see what their compensation is.

and beyond that…

– We do not have a direct SAY in their compensation, only quite indirect input into promotions.

Let me make one thing very, very, very clear here:


I believe that total compensation transparency (beyond one’s own private understanding of his or her own salary and compensation mechanisms) IS A BAD IDEA.  Let me repeat that.  I am NOT seriously advocating that companies disclose the salary of each employee within or even outside of the company, nor do I suggest that employees be empowered to set and adjust their peers’ compensation packages.

But… what if?  And why does salary remain so strongly one of the last taboos in this increasingly hip world of transparency?  What is it about human nature which makes us (even me!) shudder at the thought of this specific set of ideas?

*  *  *

Notwithstanding my quite-likely rational revulsion to the idea of compensation transparency, it would seem that there are some good arguments for such openness:

  • This might fix (what rank-and-file consensus would deem) stunningly inappropriate salary packages… on either end of the spectrum.  That do-nothing middle manager?  He’s making WHAT?  Not any more he isn’t!  That super hard worker in internal systems who stays late and doesn’t get the glory of working on glamorous projects?  Totally increase her salary!
  • People would (at least in theory) be paid more along the lines of what they’re currently worth vs. what they had the savviness to negotiate.
  • You could potentially stress out less when asking for a raise because either you’d have full knowledge of where you are on the pay scale or, in the scenario in which peers set your pay, it’d be out of your control.

But I do believe there are far more arguments against radical compensation transparency.

  • Biases based upon “visible wealth” might skew perception and adjustments, resulting in harmful demotivations.  Have you seen the car that manager drives?  She surely doesn’t need more money.  Let’s dock her pay (even though that may drive her out of the company, to the firm’s detriment).
  • That aforementioned super dedicated hard worker in internal systems?  Her low profile and lack of direct revenue impact may cause many to perceive her as less driven, less worthy of compensation star status despite the actual criticalness of her work in the background.
  • Study after study has shown that our perception of and happiness with compensation is driven less by raw numbers or trends or even buying power, but rather keeping up with the Joneses.  In other words, getting a raise of $5000 is apparently not nearly as satisfying as earning $5000 more than one’s teammate.  Can you imagine the drama involved with compensation transparency given this aspect of human nature?!

*  *  *

And here’s an even crazier additional proposal:
What if you could actually set your own pay (again, with the group transparency)?  As in, each quarter or year, literally determine how much you’re paid (though obviously if you asked for $10 million, the company could fire you on the spot due to reasons of insanity).

  • Rich folks who were working just for the love of it could more easily adjust/decline “excessive” salaries.
  • People might temper their pay a bit out of embarrassment, realizing that they really shouldn’t be earning 8x what their equally-worthy colleagues do.
  • People who needed a bit extra short term (for a house payment, etc.) could temporarily front-load their salaries.
  • When an individual employee accomplished an admirable but not very visible achievement, they could again temporarily increase their pay.  Or when they realized that they’d been slacking, they could dock their pay.
  • Or if an individual felt like taking a couple of extra days off, they could take that as “unpaid time” without form filling and bureaucracy.

There’s some precedent for this self-determination at work; Netflix, for instance, lets their employees take vacation “as needed” without a preset limit.  And vacation is a type of compensation, right?

*  *  *

What do you think?  Again, please remember that I’m bringing this topic up not to advocate change but to philosophically examine our thoughts on compensation, transparency, taboos, and so on 😀

8 comments… add one
  • Adam Aug 8, 2009

    We have the same transparency, typically, on the salaries of executives / CEOs at public companies, and also for our elected officials, too, and I like that.  I think most people like that, in fact.

    But then again, that hasn’t seemed to have helped rein in CEO pay, given that so many have received and continue to receive what any rational human would deem horrifically inflated compensation packages despite doing embarrassingly bad work.  So perhaps transparency into the compensation of non-execs wouldn’t optimize pay-for-performance, either.  Hmm 🙁

  • Danijel Duvnjak Aug 17, 2009

    Hi

    I there is a book written by a guy who did this in brazil? with the company his father left him. it was going down the drain and he turned it around by educating his staff on finance accounting and other business themes and doing pretty much what you described above.

    cheers

  • WILLIAM A. KENNEDY Oct 16, 2009

    many of us want to think that we are making more than our co employees. This makes working for our company more enjoyable.  So why destroy the fun through salary transparency?

  • Mat Oct 21, 2009

    Well I think the problem with having transparent salaries, is once you do this it is going to be very hard to set people’s salaries dependant on their abilities, quickly you are going to find that people will complain if others are earning way over what they are earning, and will either work less as they feel less appreciated or leave.
    Also there is a study done which shows that people are happy dependant on their relative wealth rather than their absolute wealth.

  • Hendrik Nov 5, 2009

    There’s some precedent for this self-determination at work; Netflix, for instance, lets their employees take vacation “as needed” without a preset limit.  And vacation is a type of compensation, right?

    Yes think you’re right!!!
    But find someone that can program such a portal 😉
    My PHP is not suffice enough!

  • Martin B Nov 16, 2009

    You are right in what you say. No salary transparency!!

    But even allowing collegues to comment on your work or vice-versa and letting them see it, is going too far in my opinion also.

    There are some people in this world who can hear constructive crititism and react and improve. But there are a lot who cant!!

    Which leads to backstabbing, poor team morale, even bullying abuse.

    The are certain things that should be left in the personel file!

  • dramaKor Dec 31, 2009

    @Hendrik,

    Why would you stick with PHP, you can try ASP.NET too.. It will probably give you better results 🙂

  • Tom Jul 21, 2011

    Hi,

    Just came across this thread and had to pipe in.

    I’m in the public sector (county government) and, like all public sector organizations, EVERYONE’S salary is public information, so you can generally do a search and find out exactly what everyone is making.

    Beyond this, every job description has a specific salary range, so if you know someone’s job title you can simply look up on the HR web page what the pay range is for that position.

    This has pluses and minuses. On the plus side, you know what positions do and don’t have a pay grade higher than yours and thus can decide on career paths better.

    On the minus side, if you find out that someone you think is incompetent and/or a jerk makes more than you, it tends to tick you off?

    I’m not advocating one way or the other. I spent my first 15 years in the private sector where you seldom if ever know other people’s salary and that too has pluses and minuses.

    Overall, I like the transparency of salaries in the public sector – you always know just where you stand.

    Tom
    http://www.interviewblueprint.net

What do you think?