See What Happened When These Companies Made Their Employee Salaries Public
March 30, 2015
Imagine how you would feel if your employer decided to publish your compensation details online — available for anyone in the world to see. As much as you value transparency in business, you may find this level of vulnerability a little nerve wracking.
“There were so many unknowns,” says Kopprash. “There were personal considerations that we needed to think through, with questions that we didn’t know how to answer — would it feel weird to make more money than my friends at the company? What if we wanted someone who didn’t want a family member to know his or her salary? We kept going down this rabbit hole of ‘what ifs.’”
In spite of uncertainties, Buffer forged ahead in publishing team members’ salaries in this public spreadsheet. The leadership reasoned that the benefits of total transparency would outweigh any risks. Anyone in the world can see what Buffer’s employees are earning — as well as the formula used to calculate each team member’s worth.
Here is what recruiting leaders, hiring managers, and executives can learn from the experiences of companies like Buffer.
1. The process introduced unexpected challenges.
Kopprash describes Buffer’s experience as a ‘journey.’ Before sharing salaries with the world, Buffer tested its open salary idea and formula internally. This test revealed some changes that needed to take place with respect to individual salaries and the formula itself.
“When we first published the data internally, a few salaries changed,” says Kopprash. “We made sure that all salaries went up or stayed the same — we were as generous as possible. We also realized that the ‘location’ component to our formula needed adjusting to truly account for cost-of-living.”
An even bigger problem with the initial formula was that it did not encourage opportunities for growth. Lacking a ‘seniority’ aspect, the formula was constricting.
“We changed the formula to accommodate promotions and raises,” says Kopprash.
2. The challenges presented a hidden upside.
Like Buffer, tech startup SumAll has implemented a transparent salary structure across its employee base of 50 people. The key difference from Buffer is that SumAll’s salary information is only accessible internally through a spreadsheet. Dane Atkinson, SumAll’s CEO, describes the company’s internal salary structure as “irreplaceable” yet “tough to navigate.”
“You have many more hard conversations, for sure,” says Atkinson. “These conversations are ongoing — we can’t use defenses to say that we discuss raises quarterly or every other year. You spend a lot more time justifying your salary decisions and fixing things that need to be changed.”
Atkinson recounts one particular instance in which an engineer was hiring another engineer — and the person being hired was offered a higher salary. The hiring manager felt free to raise his concerns — which SumAll directly addressed.
“It’s better to say ‘help me understand’ than to suppress emotions in an environment of secrecy — to stumble upon a piece of paper in a printer,” says Atkinson. “Within closed cultures, these conversations happen when there’s a crisis. In a transparent culture, you have more knowledge sharing and participation — you can have conversations before they reach a boiling point.”
Tough conversations, over the long-term, are a good thing.
3. This created an opportunity to fight bad hiring practices.
Kopprash and Atkinson can’t help but look at their transparent salary cultures from an fair pay perspective. Both leaders view the decisions they’re making as steps toward a ‘greater good.’
“Our transparent salaries and formula remove the potential for any discrimination,” says Kopprash. “Your value is your value, no matter your ability to negotiate.”
SumAll’s transparent salary culture has inspired Atkinson to re-evaluate the decisions he’s making as a leader.
“Gender pay gaps and discriminatory salary practices are awful,” says Atkinson. “I used to do these things at my other companies. I would hire someone for one amount and someone else for another amount. At the time, I thought I was creating shareholder value — but it ended up hurting me down the road.”
As Atkinson explains, the biggest repercussion that he’s witnessed is employee churn.
“People discover that they’re not being treated fairly,” says Atkinson. “Their only method for resolution is to self-compensate by underperforming or leaving altogether.”
4. Talent engagement dynamics shifted.
SumAll and Buffer have both seen big changes in how they attract and retain talent. Buffer, for instance, receives many more job applications than it did previously. Kopprash has noticed that every single applicant shares Buffer’s value for transparency.
“Of 100 applications, 100 have figured out that we’re transparent about salaries,” says Kopprash. “It’s a cool filter for people who are as excited as we are about transparency. As a result, we’re inadvertently pre-screening for people who have the potential to be great culture fits.”
At SumAll, open salaries have helped team members branch into new skillsets.
“Person X, for instance, will see that person Y is earning more in a different role,” says Atkinson. “This data inspires person X to develop a new set of skills or change career paths. Open salaries facilitate career transitions — I’ve never seen anything better for helping people develop their own careers.”
However, it won’t work for every company.
Open salaries have the potential to be strong culture-builders and engagement drivers — but companies will need to carefully evaluate (and test) whether the fit will be right for them.
Through this due diligence, Jameson Quave, founder at Lumarow, decided against implementing a transparent salary structure within his own company.
“We offer performance-based compensation, which we are in fact open about,” says Quave. “It's impossible to directly compare the income levels of individuals when there is an unknown dependent variable: performance.”
Quave and his team briefly implemented an open salary structure, but quickly reverted back.
“This led to a desire to also flatten the salary structure,” says Quave. “There was too much frustration and resentment.”
Given the enormous organizational impact, it is important to test a transparent salary structure before fully deploying it. Listen to your employees, encourage openness, and don’t be afraid to make tough tradeoffs that are right for you.
*Image by Buffer blog