Is money still a taboo topic? (Editor's Notes)

Open salary' approach can be fraught with productivity, engagement landmines
By Todd Humber
|Canadian HR Reporter|Last Updated: 04/07/2014

There are three well-worn taboos when it comes to the workplace: money, religion and politics.

So when you hear of organizations adopting transparent compensation philosophies — literally opening up the books so every employee can see how much their co-workers make — it can be a shock to the system.

As outlined in one of this issue’s cover stories (see “You make how much?” on page 1), grocery chain Whole Foods has embraced the notion that being transparent is a best HR practice.

SumAll sums it up

Whole Foods isn’t the only company to take this stance. Last year, in the pages of Canadian Payroll Reporter, (see, we told the story of SumAll, a small company with 30 employees that puts all of its salary information — including the CEO’s pay — in an open, shared document on its internal network.

Dan Atkinson, SumAll’s New York City-based CEO, said the benefits for the company have been notable — “a lot less time lost to games, bureaucracy, negotiations — all the drama that goes along with salary.”

He called the structure a “meritocracy” and said it has helped people push themselves because they could see that higher-performing employees truly were being rewarded.

Whole Foods thinks along the same lines, and it’s easy to be drawn into that siren song — it’s not hard to come up with a list of the benefits of everyone knowing how much their colleagues make, including their bosses.

But an organization considering that approach would have to ensure its compensation ducks are definitely in a row because revealing salaries could be opening Pandora’s box if salary structures are inconsistent or unfair. It may be motivating to see that a high-performing manager is earning $10,000 more per year than her peers, but if nobody really thinks that person is a high performer, it can have the reverse effect.

The same is true if there are no clear links between performance and pay, or if the difference is negligible — why go the extra mile time and again for a measly couple hundred bucks extra per year?

It may be comforting to know the person in the cubicle next to you is making the same amount as you, but it could be devastating to morale to find out a junior staffer with half your responsibility is carting around a fatter wallet than you.

That’s why so few organizations have adopted this tactic — as appealing as it may be, it is fraught with landmines that could be engagement and productivity killers that feed jealousy and turnover.

And then there are the privacy concerns — for many people, money is very personal and they would be horrified if everyone could see their salary.

Lessons to be learned

Not adopting the philosophy, though, doesn’t mean you can’t learn from it. Here’s an exercise that could go a long way to improving compensation at any organization: Pretend the books are open to everyone.

Compensation reviews happen all the time at organizations, but not necessarily in this light. If there is gross inequity in pay for similar positions, it’s worth finding out why.

It could be performance-based, and that would be a good thing. Or it could be that a manager has — either accidentally or subconsciously — been giving larger raises to men than women. Or giving larger increases to Caucasians versus minorities, which could raise pay equity and human rights issues.

The decision to open the books is an extreme step that only a handful of organizations are willing to take at this point. But the underlying reason for doing so — fairness, equity and ensuring performance is truly rewarded — is worth emulating.

Compensation will only become more open as time goes on. Of late, we’ve seen shareholders clamouring for a vote on how executives are paid through “say on pay” initiatives, and younger workers seem more inclined to talk money than their parents’ generation.

But just don’t talk about religion or politics in the process. Some things have to remain taboo.

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