There’s this company, Buffer. They do some pretty awesome stuff; they help folks to take control of their social media presence, they operate fully remotely (just like we do at Automattic!) and they offer $1000 for employees who go on vacation – I obviously like that idea.
Buffer recently announced that their approach to radical transparency will also apply to salaries, and the process that defines them. I am very excited about this idea, and I think this is an awesome way to approach salaries. Here’s why:
1.) Being open an up front about your current employee’s salaries and the process that brought them to those salaries eliminates one of the most distasteful, uncomfortable and confrontational parts of the hiring and onboarding process: salary negotiation. Traditional hiring is like a volcano: you and your potential employer climb a mountain together, deciding if you’re right for one another, trading stories and testing one another in little but important ways. If you reach the peak, and decide that an ongoing relationship is in both parties’ best interest, you then suddenly arrive at a place known for deception and hurt feelings – a pit of molten lava. Nobody likes a salary negotiation. Having a transparent process that covers all of the bases means that you know what you’ll make, and why, and how it’s decided, meaning that both parties can continue up the mountain, rather than dive into a lake of lava.
2.) It eliminates the need for trust. This is not to say that there are many HR departments and hiring managers and CEOs who are totally trustworthy, and really do behave in the best interest of their employees. It’s worth noting that there’s an argument for publicly traded companies to pay their employees as little as they can (without alienating them) – as that would theoretically maximize the value of the company’s shares – but that’s a discussion for another time. Using Buffer’s model, you don’t need to place that trust, since the bones are right in front of you: you make X per year, and here is how we got to that number. I would suggest that in general, trusting data and clear systems is preferable to placing trust in other humans using an opaque system. Trust, but verify.
3.) It reminds us that it’s not the individual salaries that are important, but the system that arrives at those salaries. In my mind, this may be the most subtle but important part of this whole picture: rather than focusing on any individual’s pay, we can take a step back and look for equity across the entire system of salary assignation. This system prevents many of our existing systemic problems around salary, simply by excluding them from the equation. Do you see an adjusting factor for gender? For race? For Ivy League / Non-Ivy League?
4.) It allows us to ask better questions. In a system like Buffer’s we are given answers that are normally withheld – the COO at Buffer makes $161,000 per year (plus equity). We can see how that salary was decided – part of that equation is this variable: “COO +20% and 10k/$m revenue.” In this case, if we want to have a serious question about pay and value and equity in the workplace, we can move from a question like “Is executive compensation fair?” – which is a largely theoretical or philosphical exercise – to a question like “Does our COO add $10,000 per month in value to our company?” – which is a question that can be investigated and answered, rather than just debated. Sidebar: I don’t know Leo, but I’m sure he adds well over that amount of value. Just using him as an example!
5.) It increases information parity, which balances power. Think about one of the most reviled of all human interactions – going to a dealership to buy a car. It’s almost impossible to leave that interaction feeling good about yourself or the situation. Did I get a good deal? Will this car be worth the price? Did I really need the rustproof coating? We can see this problem as a problem of information asymmetry: the dealership has access to heaps of data that you do not have access to, which puts them in a position of power over their customers. If the situation were instead one of information parity, a place where both parties came to the table with the same data at hand, it would be a much different situation, one where (we can hope) more equitable and fair transactions would occur. Transparent salaries and salary assignation processes take us, as employees and employers, from a place of information asymmetry, to a place of information parity. This is a good thing.
I know that radical transparency around pay is a touchy subject, and there are many arguments against it. I’m hoping to gather some of those arguments up for a future post, so if this rings your bell – stay tuned!