If salaries are fair and have been determined logically, discussions would be more transparent and meaningful
The current factors which are commonly based on work experience, past compensation etc actually drive relative rather than individual behavior
When I got my first offer letter, the HR lady congratulated me and said, “Do not discuss it with anyone.” Perplexed, I asked, “Not even my family?” And she said, “You can share it with your family, but not anyone else.” I still remember how serious she looked when she said that to me -- as if my salary was a state secret and mayhem would breakout if people got to know about it. I was confused, but the ignorant me felt important -- only to realize later that it was a standard line which she robotically repeated with each offer. And everyone dutifully nodded, never to comply.
Since then I have never shared my salary with anyone, other than family and close friends, and neither have I ever asked any of my friends how much they make. In fact, in the course of my 9 years as an HR professional, and the 800 offers that I have made, I myself have dutifully instructed all first-timers that they aren’t supposed to discuss their salaries with anyone other than their family.
Why was I doing that? Why did I think and believe that discussing salaries was a bad idea? In fact why do almost all of us feel the same?
When I was an HR manager, I found conversations about salary the most difficult to handle. In fact, I wished I could disappear till the time people forgot about it. But people do not forget, they talk. And the more enterprising ones want their managers and the HR partner to answer those queries. The most remarkable conversation which deserves a mention is the one in which one employee came to make a case for another.
Anurag was an employee in the strategy team and had been rated ‘Outstanding’ in his performance appraisals. When we handed over the appraisal letters, his manager refused to hand it over to Anurag, stating that he had asked for a salary correction for Anurag, and he scheduled a meeting with the Head-HR asking for an explanation. Ankit, who happened to be Anurag’s team member, asked me why Anurag did not get a salary correction, and instead, was drawing less than Ankit and other members of the team despite being rated ‘Outstanding’. I tried my best to avoid the conversation, because I agreed with Ankit. Apparently, Anurag had always been a great performer and had risen through the ranks within the organization. But because his salary growth was only through internal promotions, he wasn’t drawing as much as the external hires.
As expected, the conversation didn’t end on a good note. I knew Ankit was right. I had a long argument with the Head-HR over Anurag and one more employee. Both star performers, both internal promotions, and both being paid way below the band for their positions. The organization needed them, but would they stay on after this? I had my doubts.
While I struggled to make those conversations meaningful and satisfying, it led me to ponder the need to transform the compensation department so that salary-related irritants are eliminated and people start thinking about what they want -- about their personal and professional aspirations. Were we actually magnifying the importance of compensation by treating it as a trade secret? Was there a way to salary determinants so that decisions about salaries are not always so subjective? There had to be a better way!
Here are some dubious arguments that HR professionals cling to:
- Salaries are kept confidential because there are differential salaries being paid to people in the same job, with the same qualifications, same responsibilities. There are numerous determinants of salary, which leads to a certain salary for an individual: Why can’t we define those determinants for each role and each level? If two employees at the same level are being paid different salaries, there has to be a logic behind it. A logic that can be reasoned out, not like the ones that I gave to Ankit. I agree it is difficult, and this would need substantial investment of time and effort. But the benefits in terms of transparency, morale and employer branding (particularly in terms of values such as trust and credibility) would be immense.
- Open salaries will be like opening a can of worms, leading to discussions and cribbing sessions which none of us can handle: People are anyways complaining. If salaries are fair and have been determined logically, discussions would be more transparent and meaningful. And it is the job of the leader to logically and succinctly justify his decisions.
- People tend to overestimate their value, they will demand more, and it would, in turn, result in increased employee cost: Since organizations haven’t been able to determine a logical process to determine salaries and haven’t tried open conversations, there is not much data available to prove or refute this belief. However, a few companies such as Semco (Sao Paulo, Brazil) have implemented it, and they say that employees are reasonable enough. And if employees know, the factors which influence salaries, they will be able to determine their own.
- Salaries are paid to individuals, they are not relative: That is the idea: that salaries are being paid to individuals, and hence individuals should focus on why they are being paid, what they are being paid for, and that’s why there is a case for defining the factors that determine salaries. The current factors which are commonly based on work experience, past compensation etc actually drive relative rather than individual behavior.
- At times, market conditions drive wages that could be exceptionally high or exceptionally low: Those are exceptional situations. In case wages for a certain level are exceptionally high, we need to re-evaluate pay ranges for that role, before the incumbents start looking out. In case they are low, we may need to re-evaluate as well, if there is a mistake in determining the pay for that level, or is it a temporary phase and wages will be corrected when the market improves. If it is a temporary phase, I would pay the person what he deserves irrespective of the market.
- It is the dream of an idealist world, it just cannot be done: Defining the factors which define salaries and which are actually aligned to business goals would actually be beneficial to the bottom line though it seems difficult.
The idea is to define the logical determinants of salary, pay people well and as fairly as possible, and then do everything possible to take salary off their minds, so that they can focus on more important things that can move an organization forward.
Besides the counter arguments, open salaries do have their own benefits. One, it leads to fair pay for everyone. Two, employee turnover caused by dissatisfaction from salaries is minimized. Three, once discussions related to salaries are no longer a taboo, you can have meaningful and transparent conversations about what defines pay, in case pay is proving to be a distracting and de-motivating factor for anyone.
I do not mean that, starting tomorrow, publish everything on your intranet. However, taking one step at a time, we can have defined determinants for salaries at each level that are well thought through and aligned to the business goals. This would in turn lead to fair pay. So that next time around, conversations like those with Ankit do not happen.