SUMMING UP: What Are the Limits On Workplace Transparency?

 
 
For Jim Heskett's readers, the issue is not whether to make staff salaries public, but rather how to do it. What do YOU think?
 
 
by James Heskett

Summing Up


What Isn't Off Limits When it Comes to Transparency?

The discussion of this month's column on corporate transparency to employees made it clear that we have reached a point at which disclosure of pay information in organizations is no longer much of an issue. The message was, "Find a way to do it," with some cautions and advice about how to make such information available to all.

For example, Praveen pointed out that, "It is essential to have a culture of mutual trust but we also need to have mutual respect. Transparency on salary details … without the proper perspective to interpret/appreciate the information can (produce) negative energy that is avoidable…." Peter Lee echoed the thought this way: Management must "work to improve trust before emphasizing transparency; transparency without concurrent levels of trust almost always cause(s) problems."

Nevertheless, there was enthusiasm for disclosure, perhaps using a system of disclosing "pay bands" within which holders of specific jobs are compensated.

Pete described a specific example this way. "Back in the 90's Digital Equipment Corp. had a unique way of allowing personnel in the business to 'roughly' understand what a person was earning…. Each role was assigned to a pay … range. The greater percentage of that range was awarded dependent on performance, benchmarked through goals and objectives agreed earlier in the year and an in depth 720 review feedback." This system promoted a high level of collaboration—"(It was) brilliant!" P. A. Chacko said that "pay bands and the roles/designation levels which are mapped to each … may start facilitating aspirational endeavours."

Kristin Wolfe reminded us that systematic pay disclosure could address other problems in today's workplace. She commented that, "Salary transparency within peer groups is the most expeditious way to bring an end to the gender wage gap that exists in every country in the world… (it) will certainly be the catalyst for a very different—-and long overdue—conversation in the work place."

Others addressed the more general question of who or what should determine the limits of transparency in an organization. While there was an acknowledgement that not all things can be disclosed, confidentiality was seen as a potential means for covering up decisions and avoiding confrontation on potentially sensitive issues. Although, as Phil Clark put it, there are times when information must be held confidential, "What I have seen is the restriction of information to cover a multitude of power decisions or incompetence. That is a crime against the workforce and a company." Laurence Rohde added that "not being open and honest has been the downfall of many American businesses." Vishwanath Pujar commented that, "each organization should have an internal 'right to information' policy where any kind of information is available to an employee on demand which is deemed as justified by a panel…."

What isn't off limits when it comes to transparency? What do you think?

Original Article

When Sony was hacked recently, most observers concentrated on issues of criminality as well as inappropriate leadership behaviors that may have arisen because executives assumed that their private email would not be made public. There is another angle to the incident, however. It can be viewed as an extreme example of corporate transparency, however unintended it may have been.

Personal transparency can be thought to end where privacy begins. Looking at it this way, privacy has been losing ground rapidly with the ascendancy of big data and the Internet of things. The retreat of privacy has been aided by personal use of networking apps like Facebook, Twitter, and YouTube, search devices provided by Google and others, and the hosting of cookies on our personal computers. In an effort to shape our individual images through the use of networking devices, we are nevertheless disclosing many things about ourselves that can be employed by clever marketers in ways that appear to violate our privacy. How many of us utilize convenient free services on the Internet? How many of us have then received offers for products that we didn't yet know we needed?

Organizational transparency today most often is associated with good management practice

There is a movement afoot to thwart personal transparency. The market for encrypted phones and other devices that aid in preserving personal privacy is growing rapidly. Encryption may even become the next major privacy issue as governments step in to attempt to limit its use on the grounds that it makes it more difficult to track and observe actions of terrorists and criminals.

Organizational transparency today most often is associated with good management practice. It is thought by some to generate the trust that fosters everything from cooperation to speed in decision making and execution. It forces managers either to deal with contentious issues up front or avoid them altogether, assuming that their actions (and possibly even their motives) will become known later. It appears that some organizations are shifting control of "need to know" policies out of the hands of managers, as was the case in the past. Instead, employees define what they need (or would like) to know.

One specific issue of organizational transparency arising with increasing frequency is whether or not salary and wage information should be shared by all members of an organization. It may in part be a reflection of the changing nature of the work force and the acceptance by younger employees of less privacy. It is related as well to concerns about equal pay for equal work. Those in favor of sharing compensation figures cite the benefits of more trust among employees, less misinformation about pay, and a clearer basis on which employees can make job decisions. Those opposed mention more tension and envy among employees as well as a greater burden on managers sorting out complaints about pay.

Should all pay information be shared in an organization? What do you think the effect would be on such things as trust and productivity?

Thinking more generally, should managers or employees determine what needs to be known by members of an organization? What are the limits on transparency in the workplace? What do you think?

To read more:

David Card, Alexandre Mas, Enrico Moreti, and Emmanuel Saez, Inequality at Work: The Effect of Peer Salaries on Job Satisfaction, 2011.

Edward E. Lawler III, Rewarding Excellence: Pay Strategies for the New Economy (San Francisco: Jossey-Bass Publishers, 2000).

Alina Tugend, Secrecy About Salaries May Be on the Wane, The New York Times, August 23, 2014.

Post A Comment

In order to be published, comments must be on-topic and civil in tone, with no name calling or personal attacks. Your comment may be edited for clarity and length.
    • Phil Clark
    • Clark & Associates
    I guess there is need for keeping some things under wraps but for the most part, my experience has shown, that restricting transparancy is an excuse not to deal with fairness, workplace issues, or the overt use of power when people know it will embarrass them. It is always easier to hide and not face behaviors or decisions when kept secret. I worked for the federal government for years where everyones pay is essentially known. I found no issues with that. It never harmed the relationships or teamwork required to do our jobs.

    I know there are times when information must be held confidential or development of products and services should be held in check until released. What I have seen is the restriction of information to cover a multitude of power decisions or incompetence. That is a crime against the workforce and a company.
    • Param Kler
    • Engineer, Ingersoll Rand
    Having lived and worked in 2 different countries, India and US, I have experienced both sides of the coin.

    In Indian corporate culture, the pay is very transparent among employees. Everyone knows who is making how much. When the time comes for annual raise and promotion, everyone compares his/her raise with others. Is it good or bad?, and from whose prospective (employee and company). What do you think?
    In US at least in the corporate world, no one talks about how much they are making among his/her peers. Even outside of work- the topic is deemed to be very personal and if asked- people tend to think they are being judged on how much they make.
    The answer to your initial question- "Should all pay information be shared in an organization? What do you think the effect would be on such things as trust and productivity?", is IT DEPENDS.
    Now that being said- making salary information transparent WILL start employees to compare their salaries with others, leading to negative energy at workplace, distraction from work, and lowering daily productivity. Just as the dust settles down from all this, it is time for year end performance reviews which will determine raise and promotions, and this triggers the cycle again.
    I believe this will have a negative impact on talent retention for corporations.
    Can an employee draw more salary than his boss?
    Majority will vote for Yes.
    How do you think will the Boss feel when company makes the salary data transparent? and what will be his/her choices?
    Salary information is Personal Privacy. I don't see what positive impact will salary transparency will have for employees and/or for companies.


    Question #2:
    Thinking more generally, should managers or employees determine what needs to be known by members of an organization? What are the limits on transparency in the workplace? What do you think?

    The practice of employees determining what needs to be known by the members of the organisation may be the right approach today.
    Employees should themselves decide what access they need to perform their job at their best.
    Does this mean the implications of employees deciding on the needs and not the management should not be accessed?-No. It should all work as one unit cohesively.
    • Pete
    • Director, Baseline Business Support Ltd
    Back in the 90's Digital Equipment Corp (DEC) had a unique way of allowing personnel in the business to 'roughly' understand what a person was earning. The process was simple without giving away each person's actual salary and worked like this.
    Each role was assigned to a pay level. Within that level there was a pay range. The greater percentage of that range was awarded dependant on performance, benchmarked through goals and objectives agreed earlier in the year and an in depth 720 review feedback. Rare these days as the data was largely gathered by the person in the role and their line manager. This promoted such a high level of collaboration and emails of thanks when high levels of support were often given to help colleagues to achieve their goals. It really was a supportive network and a great place to work and thrive.
    If you were new to that level and the job, you were automatically within 25% of the range. Rare exceptions did occur. As you grew into the role, became more proficient and you met your goals you could progress from 25% to 75%. At anything above that percentage you would been seen as being prime for promotion to a higher role with a higher pay range and obviously knew your role extremely well and consistently met or outperformed your goals and targets.
    To 'estimate' where a colleague was in any given pay range you only needed to know how long they had been in their role and 'assessed' how well they performed it.
    At the beginning of each financial year the pay ranges were widely published on the intranet and internal job boards only needed to publish the pay range for any advertised roles.
    To this day, DEC was and has remained, the most people oriented business I have ever had the pleasure to work with and the best review process (called JP&R), after some 35+ years in business. Unfortunately, I was never able to replicate it in other businesses only seeing it as a burden. The benefits of such a highly motivated workforce with such an open pay policy, without giving the actual person's wage away was brilliant!
    • P A Chacko
    • Wells Fargo India Solutions
    Having worked with the government before joining my current organization, the pay bands and the roles/designation levels which are mapped to each were public information. In case corporate entities also follow this norm it should work as a good middle path between privacy and transparency. This way everyone is aware about what everyone else is drawing (as a range of possibilities) without any name-specific information being made available. As against the issues called out in earlier comments on this topic, specifically work-place envy , distraction and 'negative energy', this information may start facilitating aspirational endeavours.
    • Praveen
    • Head of Finance, MNC Bank
    I guess we take things like transparency quite literally sometimes. Yes, while transparency in most matters helps and is needed - I think extending to personal matters or preferences like salary or other personal aspects is taking it too far. We do need transparency in policies, practices and in general organizations should ensure that every employee has what he/she needs to do their job effectively. We do have some people sharing more things than the others on social media and it is their individual preference - imagine a rule which says everyone should share their honeymoon pictures on FB because that is being transparent !!!

    It is essential to have a culture of mutual trust but we also need to have mutual respect. Transparency on salary details, for eg, without the proper perspective to interpret/appreciate the information can be negative energy that is avoidable. Similar for things like age, marital status, preferences etc etc. What needs to be known to members of an Organization can be, like other rational decisions, a collective decision keeping in mind the requirements, sensitivities and collateral impact. Times change and we should change with the times !
    • Laurence Rohde
    • Analyst, CLI
    This has always been a touchy subject and some where down the line it will have to be addressed much to the discomfort of many US businesses. When we keep pay rates or use bands we do a disservice to the employee while letting employers keep information behind closed doors. This has a damaging effect on moral with many organizations taking additional profit and increasing executive packages without increasing the worker wages participation in the fruits of their contributions. Although most public companies share executive compensation through the SEC reporting the secondary level of executive management goes under the radar. This is what started the growth of the unions in the past whereas workers had the ability to have a say and participate in the distribution of the profits. With the current employment situation and the constant change of how we measure the unemployment rate the smoke screen is again falling apart. As our workforce be
    comes more educated (which cannot be stopped due to the advent of computers and smart devices) they can no longer be told this is what the job pays.
    Another aspect is corporate growth which can be stagnated when the labor force is unaware of corporate planning. Keeping certain things private is becoming difficult as well with the internet as a unlimited source of information those employees whom have moved on to other positions can be free to post information as to why they have left which can come back to haunt businesses by posting information they have not shared. Is there an answer at this point I'm not sure it is easy to balance who should know what. All I can say it has been my experience that not being open and honest has been the downfall of many American businesses and with the trend of constant misrepresentation by executive management in sharing of information with employees drives a lack of concern for moral. Thus trying to grow market share will continue to decline for American business and we will see the continued growth in Asian and European markets.
    • Weill David
    • CEO, Primequal, Switzerland
    The most difficult to address is the perception that surrounds the value of someone's work ! Fundamentally there are no solid rules even though their are some classes linked to the type of work, to the education level, responsabilities and duration within the company. As a general rule we are all less paid than how extraordinary we are ... dont you think ? and we all feel bad when the lazy one sitting next to us earns 1 cent more than we do .. true ? so no matter how fair your beleive the system is ... your are not in the head of the others ...
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited
    Gone are the days when top managements kept many matters to their chest and appreciated those who could maitain secrecy in staff-linked matters like salary, promotions, etc.Good governance now professes corporate transparency which has the advantage of all knowing the company's present and the likely future. This keeps all alert to face the realities.
    Not making salaries transparent is due to subjectivity in awarding/punishing some for unwarranted reasons. An ethical organisation need not have any fear of disclosures if all actions are carried out objectively without fear or favour.
    Having said that, there could be some matters requiring to be kept secret and these should be made known only to a tried and tested close group of a few individuals. These could be some considered plans not touching the stakeholders directly and hence not suitable for going to the public domain at the moment.
    • Frode Hvring
    • Head of Human Resources, EBU - EUROVISION
    The degree of transparency is part of company culture: some companies favor it, some don't.
    I believe more transparency is indeed better for the modern company.
    However, throwing the raw data onto staff about sensitive issues such as salaries is not fair: management need to "frame" the data, to guide staff in the interpretation of f.ex. salary bandwidths and numbers when going into more transparency. It makes the move more useful both to staff (understanding the new info they have access to) and to management (caring about the effectiveness of the move).
    Which in turn increases the productive use of the new sources of information, with some positive outcomes, such as improvements to the system through calibration, or more profound changes to the current system.
    In other areas such as f.ex. salary negotiations linked to a promotion, or interpersonal conflicts under management, it seems obvious that "transparency in action" is not adding value and would prevent the parties from finding the most sustainable solution. In these cases it's good to be transparent about the "general" process and also to ensure that the outcomes are properly communicated.
    So transparency should be an aspiration for sustained engagement and alignment in any case, cum grano salis.
    • David Harrison, PhD
    • Director, MRI, Mentoring residents In-transition during hospital situated learning, Global Education Outreach (GEO)
    Professional duty of care recognizes negligence when violating the social trust of the customer. Responsible citizens in professional communities are holding personally accountable managers neglecting to be transparent about mitigating risk. CEOs, CFS, CIOs, Senators and others will be influenced by what the public is calling the new white collar crime... Such that societal collective conscience will not permit the Enron situation to ever happen again...
    • Peter Lee
    • Mg Consultant, Remuneration Data Sepcialists
    Level of disclosure must be congruent with level of trust - too much or too early disclosure likely to generate problems.

    Mgmt must obviously work to improve trust before emphasising transparency - transparency without concurrent level of trust almost always cause problems.
    • Meenakshi Jayaraj
    • student, College of Engineering, Trivandrum
    The transparency in salary should vary with the type of organization. If the salary solely depends upon performance of the candidate, then it should be open to all. This could inspire the employees to work harder. But wherein jobs are done in groups, and one makes more than the other, it should not be disclosed as it could create tension between co-workers.
    • Vishwanath Pujar
    • Lead, Altisource
    There has been immense discussion on what to disclose and how much to disclose. One of the systematic ways would be to segregate information into Public, Private and Confidential (as done in ISMS). Public information should be available to any one and every one while Private information is to be shared with employees of the organization. Confidential information should be accessed by designated group of employees. However, each organization should have an internal Right To Information policy where any kind of information is available to an employee on demand which is deemed as justified by a panel. This will create confidence in the employees that their private data is not being shared and also an employee can access information if there are justifiable reasons.
    • Dan Wallace
    • Partner, Tailwind Discovery Group
    If someone on your team asks you to keep something confidential, you owe it to them to do so (although you might want to challenge the need for it). Other than that, open it up.

    Transparency consistently proves to increase engagement, alignment and productivity. In my 30 years of experience, I have always found that most of the time, "people know." That is, whatever you think you're doing a great job of hiding is actually well known around the business. We call these "the worst kept secrets in the company."

    What's more, in the absence of solid information, people will speculate. That wastes their time and your money. And whatever the result of that speculation, in is invariably, always, 100% of the time worse than whatever it is you're not telling them. So tell them. Be open, be honest, be vulnerable.

    Last point. . .if you're paying someone an amount that you would be afraid to try to justify to others in the company, you have a management issue, not a transparency issue.
    • George Olsen
    • Consultant, self
    There are things such as business strategy, product development and product profitability that firms want to keep confidential. This is understandable but it can be counter productive if employees who should know this information are restricted from accessing it. As an example an organization that I worked for did not make its strategy available to the groups that were responsible for developing their capital investment program. You can imagine that this wasted organizational resources when projects that did not match with strategy were brought forward for approval.

    Salary information, or at least job level payment information, should be available. Without this type of information how can an employee know what jobs they should be aspiring to? HR groups resist making this information available so they don't have to deal with the inevitable discrepencies that will be revealed.

    I believe that in most organizations there is an tendancy to move to more secrecy unless there is ongoing high level pressure to resist it. After all, knowledge is power. If you think you have knowledge why would you want to disiminate that knowledge and decrease your power?
    • Tom Weston
    • Retired
    In my professional career at General Foods (acquired by Phillip Morris and folded into Kraft) the company annually published a salary folder that identified job levels and salary ranges. It did not identify exact salaries by individual but allowed all salary employees the opportunity to gauge their salary to the salary range for their job level. It also provided all salary employees to potential future salary opportunities, up to and including the President and Chairman position. Overall I found it transparent and helpful as to planning a career and salary potential. It also allowed comparison analysis and options for salary discussions with immediate manager.
    • Kristin Wolfe
    • Global Head, SABMiller plc
    Salary transparency within peer groups is the most expeditious way to bring an end to the gender wage gap that exists in every country in the world.

    According to the OECD's 2014 gender report, women earn on average 16% less than men. The pay gap exists even where men and women are in the same roles. Progress in closing the wage gap has stalled since 2005.

    Whether males are seen to contribute more (either through performance or experience) than their female counterparts, or men simply "negotiate a better deal," salary transparency among peers will certainly be the catalyst for a very different - and long overdue - conversation in the work place.

    In the end, the most progressive companies will attract and retain the best employees.