Pay Transparency: It's the How and the Why, Not the What

In my opinion (and that is what you're stuck with here), a lot of the debate about pay transparency is misframed.  Too often it is focused on what employees are paid and the idea that employee pay data should be made (more) public.  This is not transparency, this is an invasion of privacy.  Employees do not have a need or right to know what their co-workers are paid (all public sector and other regulated mandatory reporting aside), at least not one that outweighs their coworkers' right to privacy.

There is, however, a legitimate discussion of pay transparency that we should all be tuned into.  Hat tip here to a great article in the August issue of workspan magazine ("Pay Satisfaction: A Practical Approach to a Challenging Issue" by Terry Satterfield) which examines pay satisfaction in the context of three key questions:  What?  How?  and Why?  These three questions also provide a terrific frame for examining pay transparency, and so I gratefully borrow them to make my point.  To my mind, the discussion of pay transparency that we should all be tuned into is not about the what, but rather the how and the why.

• The How is about the mechanics of pay in your organization; how jobs are valued, how increases are determined, etc.
• The Why is about your organization's pay strategy, the objectives management is seeking to achieve and the rationale underlying the pay program.  This includes questions like how the organization defines its competitive market for talent and the way in which performance influences an employee's pay.

An appropriately transparent pay program is one where we have clearly communicated with employees the why and the how of the organization's pay practices.  As Satterfield points out in her article, this helps create the proper context for employee thinking regarding pay satisfaction.

Conclusion?  The what is information personal to each employee, but a sound understanding of the how and the why helps employees put their personal pay situation into context.  And we owe them that much.  The wise organization communicates this proactively; in the absence of this proactive communication employees are left with no choice but to draw their own conclusions about the organization's intent and practices.

Comments

[Career Encourager]

Ann - You rock! Another great commonsense posting that demonstrates why you are always able to transcend traditional comp mystique and manipulation and function as a business leader. Enough of HR folks "trying" to get a seat at the table - just follow Ann's lead by elegantly blending the facts with common sense and executives will beg us to sit front and center!

[Sylvia Doyle]

Hi Ann

I'm new to your Comp blog and this posting on transparency is spot on. Here in the UK, there is also plenty of debate that deals with the 'what'. Of course this overlooks the expectations of employees' to understand the company rationale for pay decisions which affect them. Recent UK attention has focussed on the shortcomings of line managers in managing the 'how' and 'why' of pay communications - is this an important issue of organizations in the US?

[Ann Bares]

Peggy:

Wow - thank you. This is me blushing.

Sylvia:

Welcome and thanks for checking in from across the pond! I don't mean to suggest that there is any shortage of debate here - either - regarding the "what", my point is that our efforts at greater transparency shouldn't be focused there. And yes, we tend to fall short on communicating here in the U.S. as well. Whether it is because we don't provide our managers with the information they need to do an effective job of communication, or because we give them the information but don't hold them accountable for passing it along - either way, we have work to do.

Best wishes with your blog www.justrewardsblog.co.uk - and thanks for sharing the observations here!