
Why transparent salaries make sense - swombat
http://blog.granttree.co.uk/post/70579054648/why-transparent-salaries-make-sense
======
silverbax88
I used to think transparent salaries were a good idea. Until I was hiring
people. Over time, I learned that it's not just transparent salaries in your
own company that causes a problem - it's transparent salaries in other
people's companies.

I've worked for multiple HR companies who performed studies, all of which
showed that salary isn't the highest priority on employee concerns. Yet, in my
experience, the number one reason I lose employees (or have left a job) was
money.

Also, yes, I have poached employees from competitors by simply finding out how
much they were making and offering more. You want to show me how much you are
paying your people? It will tell me either that you are not profitable (if you
are paying too much) or it will tell me the exact number I need to beat to
take your best people.

And rest assured, I WILL take your best people.

Rest assured, I HAVE had my best people taken as well.

Business is not a democracy. Business is a competition. It is a fight for
survival. No business is going to be so transparent to reveal enough to help
their competitors. Even those 'transparent' companies who post on blogs their
entire process? Trust me, they ain't showing you some of the most important
stuff. They are marketing to you.

I don't know how this comment will be taken on HN, but I realized some time
back that the number of people on HN who are smart is very high, but the
number of people who actually run businesses is much, much lower. So I run a
company. My comments are based on my experience.

~~~
shin_lao
If you want to know the salary of someone you want to hire, you can just ask
him... In which way is it hard?

~~~
Bahamut
It is one of those potentially awkward questions - a candidate has no
obligation to answer that question, and in some cases, I believe it is even
illegal to ask.

~~~
drcoopster
It's not illegal in the US to ask what a candidate is getting paid, but you
also (typically) have no good way to verify their answer.

------
gizmo
For people who are skeptical this sort of transparency could ever work,
consider that in Norway (also Finland and to a lesser extent Sweden) tax
returns are completely open to the public:

[http://skattelister.no/](http://skattelister.no/)

So you can quickly look up what somebody's income and net worth are and the
public at large are in favor of it.

~~~
pmelendez
I don't know how is in those countries here in Canada taxes are a combination
of several factors, and you can be in the same salary range that somebody else
and still be paying a significant different amount.

~~~
gizmo
Income, tax, and net worth are all public in Norway, so that issue doesn't
exist.

------
ljoshua
I work at a great mid-sized (300+ employees) company that has a transparent,
set pay scale, with an even simpler formula than Buffer. Each inter-level
promotion is a 10% bump, and a level promotion is 20%, all the way up. I love
it.

A positive side effect is that promotions become more of a "are you performing
at this level?" question rather than a politicking game, and responsibilities
at each level become much more clearly defined. I think that many companies
could benefit from adopting similar structures.

------
DanielBMarkham
I am progressive enough to love all the things people are changing up in the
business world to make things better. I am also conservative enough to be
somewhat dubious that things that sound awesome are _actually_ awesome.
Usually (but not always) things are the way they are because other things have
been tried and this was the optimum solution found at the time. Many times we
forget the initial experiments and start fresh without learning from all the
work that went on before. This can both be a good thing and a bad thing.

My point is that as readers we should be careful. We need to distinguish
between stories that tell us things we are predisposed to like and things that
actually work. Daniel (swombat) has done a great job of sharing some personal
experiences. I say let us let the real world decide. If we can all work from
the beach in a transparent organization where there are no bosses? Freaking
count me in on some of that action. But either it works or it doesn't. A few
stories here or there about small companies trying new things is more of a fun
read than anything else.

Good luck to all these experiments, though. With so many cool things being
tried, I expect to see some great results over the next few years as the
marketplace sorts out the efficient business ideas from the popular ones.
Really cool times ahead!

------
jasonkester
Transparency sounds good from the employer perspective. You get to control the
negotiation procedure (by completely eliminating it) and set salaries how you
like. Take it or leave it.

Transparency also sounds good to lots of engineers who don't like negotiation,
see it as unfair, and aren't any good at it. No need to bother with all that.
Salaries are set. Everything is "Fair", which resonates nicely with an
engineer.

But it sounds really bad to an engineer who's genuinely good at what he does
and knows how to negotiate a rate that reflects that. Why would a fella leave,
say, 100k on the table to go work for a place like Buffer, where even the CEO
is only making $150k/year? No thanks, but thanks for saving us the trouble.

The worst thing that could happen is that this sort of thing takes over the
industry. That's definitely a possiblity because it's so attractive to those
first two groups, and let's face it, there are a lot more managers, introverts
and suckers in this industry than guys who are willing to negotiate their
worth.

I could see a whole generation of engineers coming up, expecting to be valued
on seniority only, and thinking the Industry Average is the correct value for
their output.

Not a happy prospect.

~~~
swombat
You wouldn't - and that's fine.

We don't have to hire everybody. If what you care about is salary above all
other things, that's absolutely fine. I don't judge you for it. I care about
making money too. The kind of people we do want to hire care about making
enough money, and making a fair amount in relation to how the company is
doing, but they care just as much about working in a great environment which
has the features that transparency allows us to have.

In other words, you may be very good at what you do, but based on the above
you would be a poor culture fit for a place like GrantTree or Buffer - and
that's absolutely fine, on both sides.

~~~
jasonkester
Why assume that somebody asking for their market rate wouldn't be a good fit
for your company?

Framing salary discussions in the context of how the company is doing is one
way that employers try to manipulate naive young engineers. Same with all "8
Pieces of Flair is the minimum, but if you want to wear more, we encourage
that" tactics, it tries to compare something relevant to the employee with a
second, completely irrelevant thing. It's easy enough to spin those
discussions in a way that make it look like we're all pitching together to
build something great, but at the end of the day, it's still a negotiating
tactic.

Personally, I prefer to separate salary negotiation from the rest of the
decision about whether somebody would be a good fit. After all, that's a one-
time negotiation that probably won't ever be revisited. A guy's skills, sense
of humor, leadership ability and overall fun-to-be-around-ishness are the
things that matter every day for the rest of his tenure, and are therefore a
lot more important when deciding whether you want him on your team.

~~~
swombat
> _Why assume that somebody asking for their market rate wouldn 't be a good
> fit for your company?_

That's twisting my words. What I said is that if salary is their primary
concern, then they're not a good fit. Asking for your market rate is just
fine, so long as you understand that what we can give you is constrained by
what has been decided by the team is a reasonable level of pay for that
position.

Someone who, knowing our culture, still insists on being an exception and
getting a different salary, is basically saying that they care far more about
their own outcome than about the outcome for the company as a whole. Teamwork
is one of our core values, so they've just marked themselves out as a bad
culture fit.

> _Personally, I prefer to separate salary negotiation from the rest of the
> decision about whether somebody would be a good fit._

Arguably, with our system the salary negotiation is entirely separated out -
and then reduced to nothing. There is no salary negotiation. The salary is
what's on offer in the job ad, and that's that. If you don't like it, don't
apply.

------
progx
And tomorrow write somebody the article "I read about transparent salaries
yesterday".

Dont miss on Sunday: "Show HN: How i read an article about an article that
assumes, that transparent salaries make sense."

Sorry, i cant resist.

~~~
pmelendez
Don't be sorry, that idea comes to my mind any time I see that pattern too. It
is somehow funny, like people hacking the stories and titles to be used as
another level of conversation.

Not new nor HN exclusive, but still interesting.

~~~
progx
Sometimes i am not sure if it is for an another level of conversation, or
simple a try to get some traffic from strong visited topics.

------
KiwiCoder
Transparency makes sense _in the right context_ , but adding this
qualification makes the suggestion less controversial, and therefore less
noteworthy, since almost anything can make sense in the right context.

One of the contexts in which full transparency is less appropriate is where a
business has a legacy of inconsistent approaches to hiring and remuneration,
meaning that person A is paid significantly more or less than person B, even
though both do the same job at the same level. We might all agree this isn't
fair, but at the same time it isn't necessarily something that is easily
fixed. A business might simply not be able to afford to fix salary disparity
in one hit. Transparency in this context might do more harm than good because
it brings the disparity to the fore gives it a focus it would not otherwise
have. It reduces the options available to the company that wants to fix this
disparity, in particular it reduces the timeframe in which the disparity might
be removed.

In fact, this is my recommendation for fixing a problem of salary disparity;
institute a policy toward salary adjustment that makes it clear that
discrepancies will _over time_ tend to be eliminated. You can be fully open
about this policy without disclosing individual salaries, and you can adjust
the timeframe to fit your business context. If you're cash-poor you can take
longer to fix the problem.

In other words, we should be transparent about the approach to setting and
adjusting salaries, but the situation with individual salaries is more
complicated.

~~~
swombat
The catch is, transparency forces a certain amount of fairness to come with
it. I should probably have mentioned that in the article too.

It's difficult to keep unfair arrangements when all is transparent. You can't
just implement transparent salaries, without also making the salary scale
fair. And the benefit there is that once salaries are transparent, everyone
knows that they're fair, because they can verify it for themselves.

~~~
KiwiCoder
Transparency forces fairness assuming you can afford to fix the discrepancies
in an acceptable amount of time.

If you can't fix discrepancies in an acceptable amount of time then full
transparency forces something unpleasant, and in this context it is
potentially unhelpful to everyone.

~~~
swombat
Of course. If you're committed down a path where your company is basically
unfair to its employees, then yeah, transparency won't help.

A good example of transparency not helping is our sudden transparency about
the activities of the NSA. Obviously that's not helping them. Though arguably
it is helping us.

In a case where a company is intrinsically unfair to its employees and can't
correct that, transparency would probably hurt the company but help all the
employees - by sending a strong message that it's time to get the hell out of
this crappy company.

~~~
KiwiCoder
It's the other way round - if a company is committed to a path of fairness but
has inherited an unfair legacy of salary disparity (this can happen in many
ways and is not always because of overt unfairness) then transparency can make
it harder for the company to fix the problem.

------
dworin
One issue I have with transparent salaries is that employment is an agreement
between the employee and the company: it's a two-way street. Yet when you
implement transparent salaries, the company is unilaterally deciding to share
critical information in that agreement.

I am a huge fan of a company transparently sharing its own information with
employees. Revenue, profitability, sales, etc... People like to feel like they
know what's going on. But it's another to share an employee's information with
other employees. There are many people (and I recognize this is a cultural
norm, so it differs around the world) who like to keep their salary private,
and it should be their prerogative.

~~~
MetaCosm
Exactly this! Who audits this? It is a corporate "policy" effectively, which
the controlling interest can lie in exactly as much as they feel like...
transparency for all people not in a place to control the "numbers".

This is an insanely one sided arrangement, that can easily be leverage to keep
employees in line. "Don't you see that Jim only took a 2% raise this year, do
you really think you deserve more than Jim? He has four kids!"

~~~
swombat
It's far more complex and simple than that in our case. The starting point is
that 50% of revenue is allocated to "costs": overheads, base salaries,
commissions and the bonus pool.

How people decide to split that up between themselves is up to them, through a
process that itself is open and semi-democratic (getting more so with each
round of changes).

If anything, I would say that seeing transparency as a weapon of management is
really misguided. A manager could always lie and claim that Jim only took a 2%
raise this year. With transparency, they can only say that if that is in fact
the verifiable truth.

------
userulluipeste
"And, strangely enough, people react to that by behaving like adults."

Unless they don't! When access to information is warranted only to people
responsible of having access, things stay secure from a wide range of angles
(the golden rule of security - "deny everything by default, the access is
explicit exception"). People aren't all milk and honey, they also have inner
bad parts, and the usual systems we employ have (among other things) the task
of keeping those parts in check (at least as much as possible). Like any other
free commodity, the (useful) information can be not only used, but also
abused. Knowing intimately a system one becomes able to game it. Or you think
that doesn't happen or it's unlikely? Just to leave an example - what do you
expect will think someone sweating in stress and efforts all day long, working
close to coworker better paid with apparently less work/effort involved? That
that coworker is better at what he/she does? You'd be lucky! That one will
more likely think that the system is unfair. And if these kind of people won't
leave right away to find "rightness" somewhere else, they (although not
admittedly) will self-attune to give you the minimum for what they get (it's
easy to do that given enough info) and maybe focus on emulating good visible
marks (also easier when you have sufficient information to learn the system
well enough). This is just one scenario from many possible other ones (driven
from the human inner bad parts). I'm sorry, but I can not ignore the
consequences of this kind of thinking. I lived in such environment, I felt it,
and I also saw it going down. Maybe it doesn't ring to you, but this "total
transparency" is just a juicy piece of communism.

~~~
swombat
_Just to leave an example - what do you expect will think someone sweating in
stress and efforts all day long, working close to coworker better paid with
apparently less work /effort involved? That that coworker is better at what
he/she does? You'd be lucky! That one will more likely think that the system
is unfair._

As I mentioned in another comment (and should have mentioned in the article),
this is a natural consequence of transparency: it demands fairness. There is
nowhere for unfair compensation schemes to hide with full transparency.

So in your example, the underpaid worker would naturally demand to be paid
fairly. And the response to that better be something like "yes, this is how
we'll do it" \- otherwise, you're right, they will leave (a good call, if
they're working in a company that treats them unfairly). This is definitely a
plus for the employees.

From your username you sound Romanian (I was born there, my parents left just
after I was born and I grew up in Switzerland). I know from my parents that
Romania under communism was a pretty horrible place. But I also know from
talking to them that it was a place that was full of fear and mistrust. We're
using transparency to increase trust, and it works. Sure, from one angle, if
you squint the right way, it looks like some sort of "communist" nonsense to
open up all this information, but I can assure you that at least at the scale
we're at, the effect is to increase trust and empower people, not to reduce
them to fearful subjects of the state.

------
squozzer
Keep in mind, a lot of jobs have transparent (or at least published) salaries
which hasn't seemed to render negotiation tactics ineffective or, for that
matter, raised the maturity level of people holding said jobs.

For example, professional athletes and political office holders.

I think a more difficult, and more desirable, target for transparency is not
one's salary, but one's contribution to the top and/or bottom lines.

------
mathhead
I'm not really sure. At least, this would help others poaching from your
company, as they know exactly what your employees are getting?

~~~
hfttrader
This article is talking about internally transparent salaries. The salaries
aren't disclosed to outside parties, so the policy doesn't help poachers.

~~~
mathhead
Sorry, it seems the Buffer article gave me a Halo here.

------
nicolethenerd
I'm curious how this internally transparent policy works when hiring new
people? Do they tell you what everyone else is making before you negotiate, or
only after you've been hired? Either way, that feels potentially awkward.

------
kfk
Maybe, but to me, this still looks like an intrusion to people's privacy.

Edit

To those "but if they tell you before". I reply: it still is. Google/Facebook
tell you before that they will use your data for advertisement, some still
think that's an intrusion of people's privacy anyway. However, Google/Facebook
give me something in return, so I play along, but what's in it for me when a
company makes my paycheck public? I just don't see the point of it. Also, once
you grow over a certain size, I don't believe you can make up salaries with
such rigid rules.

~~~
aeden
If the organization makes it clear to potential hires _before_ they are hired
that the company has an open salary policy then the potential hire can choose
to maintain their privacy and work elsewhere that does not have an open
policy. In this case it probably is not an intrusion into employee privacy.

If an organization were to do this after the fact (i.e. when there are already
employees on board) then I think you are right.

