Can salary transparency break the glass ceiling? | Silicon Beach Talent
First Round Capital recently explored Chewse’s corporate philosophy of salary transparency. CEO Tracy Lawrence made a decision early in the company’s history to prioritize transparency and communication in all facets of the organization, first by removing the taboo of talking about salaries. So why is this important, and how can salary transparency benefit employees?
A transparency trend
The traditional school of thought was that compensation packages should be shrouded in mystery and employees should not discuss salaries because that creates jealousy. However, if we unpack that statement and think about it, we might start to question this a bit. What part of the salary discussion would cause jealousy? Would someone become envious if they learned that there was a planned, merit-based progression system, and all employees at X level earned Y salary range, and that raises were given during yearly reviews and promotions could be earned by achieving clearly described milestones? Or, is it perhaps more likely that an employee could become jealous after learning that he or she earns 30% less than their peer in a similar job because their peer “was a better negotiator”?
Complete pay transparency without context, however, is probably not the correct answer for all companies. There is a compromise that allows employees to have realistic expectations about pay scale without enumerating each employee’s compensation package line by line. Some companies provide a median salary for each position that can be used as a baseline. This way, if employees are earning less than the median, they can have a conversation with their manager and formulate a plan to increase their compensation tied to milestones.
Rising pay equality
Some companies have taken compensation philosophy one step further; they have made a concerted effort to increase employees’ salaries. A couple of years ago, Gravity CEO Dan Price made headlines by paying everyone in the company at least $70,000 per year. And biopharmaceutical recruiting firm PharmaLogics Recruiting recently announced a similarly inspired plan to raise salaries and be open about the process.
Salary transparency and the glass ceiling
Chewse’s strategy is a bold one, and some companies may find an open salary spreadsheet to be too intimidating. However, the current ‘guess the magic salary number’ game puts many employees and candidates at a disadvantage. It may even contribute to the wage gap. Women are still less likely to negotiate higher starting salaries and raises, and hiding the real salary information removes a weapon from their arsenal as they build their case for higher pay during the negotiation process. We have an opportunity now for managers at all levels to identify discrepancies in current and market rate pay. Corporate leadership can review gender pay gaps in specific departments or across the board and increase salary transparency to make sure people are being paid equally for equal work.
Perhaps the current hiring process is not serving all employees, or even the companies that employ them. The flip side of transparency is that employees often discuss salary numbers particularly when they are discouraged from doing so. And the underpaid tend to jump ship when a competitor presents a better offer. If we truly want to retain the best talent, then we need to be transparent with our own motives and actions.