I found an interesting pair of articles recently covering the topic of salaries. The first article, Why secret salaries are a baaaaaad idea, makes the case that all salaries should be public within a company. The arguments are pretty compelling, especially since I just finished reading Ricardo Semler’s book Maverick, which is an extraordinary book about an extraordinary company in Brazil.
Among other things, employees set their own salaries, which are public. The argument for doing this is essentially two-fold: 1) It keeps the employer honest, discouraging inequities in pay, and 2) It keeps the employee honest as well, as employees that are higher paid will feel more like they have to work for it, since everyone knows how much they are making. I see the point in this, and at least conceptually I like the idea of having an open company, in which most details are known to all (in the case of Ricardo Semler’s company, profits and expenses are open to all as well).
This evening however, I found an interesting article by Eric Sink (who coincidentally lives only about 45 minutes away from me) that makes the case for keeping them secret, but acting as if they were public. His rationale is that people value their privacy, and communicating everyone’s salaries to the entire company violates that. He advocates keeping the salary list “clean” though, as if the salaries were public:
So I think secrecy about compensation is important, but it should be for the purpose of protecting the privacy of individuals, not for the purpose of obscuring the fact that management is doing things they know to be unfair.
All in all, I think this is an interesting topic. I admire companies that disregard convention and defy traditional rules of business, but on the other hand I can see the point of the traditionalists with regards to things like salaries as well.
What are your thoughts? Ever work for an “open” company? What was it like?
Afterthought: It’s stated above, but I’ll repeat it again. If you want to read about a company who has open salaries, and why, you need to check out the Ricardo Semler book Maverick. It’s not just about salaries, there are lots of other innovative ideas in there as well. It’s well worth the time to read.