Why Making Salaries Public Is Hard

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Jill abramsonAt most organizations, leaders speak of “transparency” the way politicians speak of “jobs” and “family.” It’s a safe word no one will object to. You may as well milk it when you’re speaking publicly.

Yet most organizations are far from transparent when it comes to employee salaries. And that topic has been in the news lately, after the well-publicized sacking of Jill Abramson as editor of the New York Times. As with every firing in the history of firing, only the insiders know the real scoop. But as Felix Salmon points out on Vox, “she was fired not long after she started asking questions about the amount that she had been paid, over the course of her career in NYT senior management, compared to the amount that her male predecessor was paid.”

Salmon goes on to make a case for making pay rates public. Of course, here at Inc, where the concept of open-book management was first promulgated back in the 1980s, there’s a ton of material on the merits of making all numbers (not just salaries) transparent. Jack Stack and Bo Burlingham have written about it extensively.

Here’s the problem: In everyone’s race to venerate transparency, it’s easy to forget that actually implementing an open-book system is difficult.

The Challenges of Open-Book Management

You can find a great example of those difficulties in the dot-com era story of Internet consulting company, Adjacency. Back in 1998, CEO Andrew Sather and his partner, Chris DeVore, director of business development, started meeting weekly with their 25 employees to discuss the details of the San Francisco-based company’s operations, including cash flow and potential customers. While employees appreciated the honesty, here’s what happened:

    •    Employees got frightened. They didn’t like hearing about Adjacency’s close calls with missing payroll. Sather admitted that the reports sometimes “scared” the employees.
    •    Secrets were leaked. In one meeting, they told employees about a potential deal with a new client. One worker bragged to a friend at a competing company. The friend told his bosses. Adjacent almost lost the client. And the client was furious.

When it comes to being transparent about salaries, there are comparable risks. Competitors, knowing what you pay, can outbid you for talent. Employees, knowing their colleagues’ salaries, can become unduly emotional (bitter, nervous, jealous, resentful) about what they perceive as the injustices of their own pay. They also might feel that their own secrets are being betrayed–after all, not every employee wants her salary to be a matter of public record.

Read full story at Inc.