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THE INC. LIFE

Instead of Making Salary Talk Taboo Tell Your Team This

Transparency is great until people start asking questions. Here’s how to deal with awkward money talk.

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BY Jory MacKay - 05 Sep 2017

PHOTO CREDIT: Getty Images

Despite your best intentions, your company probably doesn't pay employees entirely fairly.

Biases, negotiations, and policy changes can mean people doing the same job are paid vastly different wages, and all it takes is a quick peek at a co-workers pay stub to open this pay-based Pandora's box.

So to fix pay inequality (and keep your team happy), why not just be open about what everyone is making?

It's a simple proposal to a complex problem. But what are the realities of going fully transparent about everyone's (including your own) compensation?

"Broadcasting pay is as likely to demoralize as it is to motivate," explains author Todd Zenger, who says that pay transparency is a double-edged sword.

While openness around salaries can expedite dealing with serious problems like pay discrimination based on gender, ethnicity, or other biases, and has even been shown to increase productivity, access to that level of information opens up a multitude of other issues.

For one, we're notoriously egotistical when judging our own abilities.

When Zenger interviewed 700 Silicon Valley engineers about their performance relative to their peers, he found that nearly 40% thought they were in the top 5% of their company, while 92% believed they were in the top quarter.

Pay transparency presupposes that employees are being paid in relation to the value they bring to the company. But that isn't as easy to calculate as you'd imagine. And when you open up what people are making to the whole company, you're inviting more than a few awkward conversations around performance.

So, how do you embrace this level of radical transparency without rocking the boat too much?

1. Bring your team in on the process early on

Sending a memo with everyone's salary attached is a sure-fire way to upset your team. Instead, start the process with a conversation around pay transparency. How does your team feel about it? Are they comfortable revealing their compensation to the rest of the team? What problems do they see arising?

Bringing them in on the process earlier on and getting buy-in will soften the blow when or if you choose to go public with the information.

2. Be honest about where salary numbers come from

When social media scheduling startup Buffer went fully transparent with their team's salaries back in 2013, they did so knowing they could back up the numbers.

Instead of just releasing a spreadsheet of salaries, they showed exactly how each was calculated with a formula of job type X seniority X experience + location.

"One key reason transparency is a such a powerful value for a company's culture is trust: Transparency breeds trust, and trust is the foundation of great teamwork," explains Buffer founder Joel Gascoigne.

3. Have performance stats readily available

While Buffer relies on categories like seniority and experience to determine salaries, it's increasingly becoming common practice for compensation to be performance based.

"Merit raises" are meant to incentivize employees to work harder, but research has shown that few companies use them in this way. According to a study by Willis Towers Watson, 26% of companies surveyed gave out performance-based bonuses to employees "who fail to meet expectations."

The problem for many of these companies, was that the numbers they needed to judge performance just weren't available. Creating an internal dashboard to track performance metrics or having clear performance goals set in place makes sure everyone is clued into how they're performing against the expectations.

"What do effective organizations do?" asks Zenger. "They link individual performance to rewards but recognize that they must be vigilant in efforts to measure performance."

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