It's no secret that money talks--and when it talks, people walk. In fact, money is the number one thing that convinces people to leave one job for another. And that puts companies in a tough spot when it comes to hiring and retaining stellar employees. On the one hand, you need to be competitive enough to attract high-quality talent--which means being transparent and letting folks know how your compensation stacks up. But on the other hand...well, money isn't something that we generally discuss in the open (especially those from the Baby Boomer generation). Is there a way to balance these conflicting sides and still come out on top?
I think so. And it revolves around one critical element: having a compensation strategy.
You see, compensation in the workplace isn't often cut and dry, which is one of the reasons we don't like to put it out there for the world to scrutinize. Many variables can affect an employee's salary beyond the obvious things like experience. Today, in particular, we are navigating a very dynamic job market and a rallying economy, and these things can influence compensation heavily. When job candidates receive multiple offers and are in high demand, for example, salary can be the thing that tips the scale in a company's favor. When investors are generous and markets are strong, businesses might have more accessible capital to leverage when hiring key employees. But does this mean that those candidates hired during a boom are more valuable or productive than those hired during down cycles? Absolutely not. And this is where too much transparency and a lack of strategy can get you in trouble.
When a company has a clear, well-planned approach to compensation, it can prepare in advance for scrutiny from both job seekers and employees. Here are three guidelines to keep in mind when weighing the necessity of salary transparency:
1. Candidates are always paying attention to what you pay--so you've got to be honest.
Every company nowadays slaps the catchphrase "competitive salary" on its job descriptions. But candidates are smarter than that. They know not to take your word for it; instead, they go straight to the source. Sites like Salary.com and Glassdoor now offer inside views from anonymous employees about what people make in specific positions at your organization. You need to be prepared to have your actual compensation match up to what you claim on your career pages, as well as to what your competitors offer--or you could be turning talent off before they even apply.
2. Salaries have ranges for a reason, and there is never a one-size-fits-all number.
Sometimes it feels like people crave salary transparency because they're looking for a magical apples-to-apples comparison. But we all know that a software engineer in Portland, Maine, is not the same as a software engineer in Redwood City, California (and quite frankly, no two software engineers in Redwood City are likely to be the same either). The fact of the matter is that salary comparisons will always be apples-to-oranges due to the many variables at play--so we as business leaders must define roles, devise compensation ranges for those roles, and then decide where the company will position itself within those ranges based on the variables.
Now, this can require some legwork on your part. You need to work with Human Resources to clarify performance expectations for each role in the business. You'll possibly want to hire salary consultants or access databases to help you determine what the going rate is for these roles and expectations for your type of business. You also need to factor in where you're hiring, because cost of living and demand in certain locations will greatly affect what is considered competitive. Equally important is when you're hiring, because certain markets generate greater urgency or instability. Right now, for instance, we are in a definite job seeker's market, and you might have to pay more to hire someone than you would in a sluggish economy. Finally, remember that who you're hiring also impacts what you pay. Not just because of varying experience levels or backgrounds, but because some people might not be actively looking for new jobs and will require more incentive to make a change.
Once you've determined what the acceptable ranges are for your roles, you need to decide how aggressive you want to be with your pay scale. Will you come in at the middle of the range for every position? Do you need to step up in more competitive areas or during a time crunch and come in at the 60th or even 75th percentile? Are you targeting more passive candidates and in need of highly attractive offers to lure them in? Whatever you decide, create this plan in advance for each role, and stick to it.
3. An objective, merit-based compensation strategy will always reflect openness.
When you work within ranges and according to dynamic variables, it can appear that you're favoring certain people or jobs. This is a definite downside to salary transparency--but it can be avoided by applying solid performance management practices. Be the kind of business that requests regular feedback from employees. Conduct frequent employee evaluations and assessments. Try as much as possible to make compensation a function of merit, where you reward those who produce the most. If nothing else, you want your workforce to feel fairly compensated, and that when they deliver consistent, good effort, it results in tangible benefits. It's this sort of perspective--more than simple numbers and dollar signs--that will ultimately permeate sites like Glassdoor, Salary.com, and LinkedIn.
We live in a time when it's easy to research the monetary value of certain things. Want to know what your boss's home is worth? Put her address in on Zillow. Want to know what a data scientist makes in Boston? Look it up on Salary.com. Admittedly, this kind of candor can be awkward for those of us who grew up not talking about money--but the reality is that today's skilled workers feel justified in seeking out compensation information. It's how they judge your company, how they compare their skills to others' skills, and how they take greater control of their career paths. Whether you like it or not, some element of salary transparency is necessary. Your best bet for deciding how open to be is crafting an objective strategy and then curating that strategy regularly to ensure it remains fair and rewards your high performers. That's something you can always feel comfortable discussing.