Be open about salaries – I dare you

Dennis, thanks for answering these questions. Alexander Kjerulf also responded to my posting / questions, he states the following:

* If everyone can set their own salary, should you work with salary caps? How do you prevent the company from going bankrupt?

1: People are surprisingly reasonable about it and most people value themselves fairly
2: When salaries are open everyone knows what you're getting. If you set a high salary, there's huge pressure on you to create appropriate results!

* How often can salaries change? Every year? At any given moment? Never?

That's a matter of internal policy, but it also applies when salaries are secret. You may have a yearly negotiation, but everyone can walk into the boss' office and go "Gimme a raise or I'm outta here".

* What guarantees do you have that you will keep the salary that you have once set? I am pretty sure that your bank (or mortgage provider) will be somewhat interested in that.

What guarantees do you have that you'll keep your current (secret) salary. Or even your current job?

* It is not always easy to give proper credits for accomplishments.

Very true. We just gotta keep trying and get as close as we can.

* Won't the competition between individuals have impact on team work?

True. But maybe even more true if you have secret salaries.

* What do you write in job openings? Function: "Program manager" Salary: "it's up to you"?

Many job openings say "Salary depends on your skills" or similar. You can do the same here.

http://loekb.blogspot.com/2006/08/meritocracy-through-transparency.html#c115522402637606053

These are all valid point Loek and I'd love to say I have the definitive answers but I don't. Here's a lame attempt at answering:
- Salaries would need to be set as a total that can be sold to other stakeholders - could be complex but think salary sacrifice in return for greater reward based on performance
- Change...that's a review timing thing that can be agreed
- Rates can be made provisional based on agreed performance
- The system of credot for accokmplishment has to be fair and agreed prior to. If it needs to be changed then again that has to be agreed, otherwise the system fails
- Competition is OK - many problems arise when the secrecy thing leaves people wondering what's going on
- Salaries are often not stated but you could state a range, knowing that fits with incumbent employees

Looking at what Semco did gives a lot of clues but as I said to David, there are probably culturual issues here that may (or may not) represent barriers. As Alexander says: 'Only for the brave.'

Hope that helps in some modest way.

Dennis, thought provoking subject, however I have some questions:

- If everyone can set their own salary, should you work with salary caps? How do you prevent the company from going bankrupt?
- How often can salaries change? Every year? At any given moment? Never?
- What guarantees do you have that you will keep the salary that you have once set? I am pretty sure that your bank (or mortgage provider) will be somewhat interested in that.
- It is not always easy to give proper credits for accomplishments.
- Won't the competition between individuals have impact on team work?
- What do you write in job openings? Function: "Program manager" Salary: "it's up to you"?

http://loekb.blogspot.com/2006/08/meritocracy-through-transparency.html

Good to hear Alastair - suggest you print out (sic) or hand URL to co-corkers in prep for next management meeting?

have never accepted the logic of the salary hierarchy model - who is to say that the contribution of the receptionists is any less important than the contribution of the CEO?

have never accepted the logic of the assessment/bonus model - if you assess my performance then you should be prepared to accept my assessment of your performance - and how do you equate that the CEOs smarm is worth a bigger bonus than the cleaners elbow grease.

Dennis, the stuff you describe here is music to my ears!

we work under web magazine. WE WILL BE GLAD TO TRANSLATE YOUR ARTICLE ABOUT SEMCO EXPIRIMENT INTO RUSSIAN. THINK IT IS INTERSTING POINT FOR RUSSSIAN SPOKEN AUDITORIA.

As always, we agree more than we disagree, dennis. But I think we would also agree that the "open salary" strategy ONLY works if there's a lot of other pieces in place, so that it's part of a unified philosophy.

That's why the SEMCO story is worth thinking about. Personally, I like the first book ("Maverick") best. It contains the best all-round view of the (amazing) company approach.

Seneco is a 3K person outfit. That's a good size. I guess most people would assess their salary level against those of their peers so the potential for conflict, while real, would perhaps be limited.

Now - if you say that we're running an entire business here rather than a bunch of silos and salary disclosure is part of the deal then people start to get a sense of how they fit across departments. That may cause ructions in the early stages but if executed in accordance with Seneco's philisophy - one that is proven - then the only thing I'd be concerned about is cultural difference. That's why I said: 'I dare you.'

Mediterranean style cultures have a lot to teach us on this I think because here, there is usually a dominant 'master and servant' hierarchy. I assume that would apply in Latin America though I have no direct knowledge of that. If true then Seneco really has taken a step away that has proven positive.

Either way, I think there is something to learn here about the interplay between meaningful internal collaboration, reward systems and outcomes.

As an aside, the John Lewis Partnership used to run a fairly transparent system in the UK, but that was based on the notion of it being a co-operative. A different corporate mindset but one that was successful nonetheless. And if memory serves, they adopted a shared salary/bonus system not a million miles different from this.

I agree Alexander's post is really worthwhile reading, and there are a number of books now written by Semco's CEO.

However, net, net, net i come out on the side of NOT disclosing for the following reason. IF, as waa true in your case, Dennis, everyone could assess (or knew about) everyone else's performance and contribution, then disclosing rewards makes sense.

But what if you're a sizable business and there's no way people can know WHY someone got a smaller bonus? You can disclose all the salaries, but you can't (and probably shouldn't) disclose -prcatically speaking - all the personal details about why someone was a bit off their game this year, why someone was "dinged" for lack of collaboration, etc.

And if everyone knows the salaries but not the peformance details, don't you jkjust set yourslef up for idle speculation and gossip?

Wadja think?