7 ms·

Why Companies Keep Pay a Secret

51 points by cwan 16y ago

vinhboy 16y ago
Had to read the entire article to get to the important part "...if dissatisfaction is a motivator, they'll end up better off." I agree. Sometimes ignorance is bliss, but when it comes to your lively hood, I think knowing is better than not.
fr0sty 16y ago
I'm suprised that effects were very widespread and evenly distributed. The only people I have ever known to talk about their salary/wage seem to be union members (or other blue-collar professions). Electricians, teachers, machinists, elevator repairmen, etc. On the flip side I have never heard a programmer or other white-collar employee talk about their salary/wage unless they are griping about a previous employer/contract. Given that most of the hourly university employees probably already know what the wage scale is I'm suprised an official publication of the data would have any effect on satisfaction.
- Dylanlacey 16y ago
  My friends and I are actively trying to challenge this by discussing salaries and benefits openly. We've been told it's 'classless' by a few older mentors etc, but frankly I don't see how it's classless to discuss what you're selling your time for.
petercooper 16y ago
It's the "last conversational taboo"? Isn't it really just no-one else's business if you don't want to share that info? Most people keep their bra size, weight, penis length, or preferred sexual kinks a "secret" too, and pay is just as personal and private to most people as those things.
- roc 16y ago
  That's all 'taboo' means. It identifies things we don't talk about openly, regardless of why. Personally, I think the social disinclination to talk about salary is as manufactured for private gain as the whole diamond engagement ring 'tradition'. The practical effect of secrecy in compensation is that employers have a massive advantage in negotiations and end up paying far, far less for labor. Perhaps I'm just cynical, but in my personal experience, effects like that are never accidental.
  - petercooper 16y ago
    That's all 'taboo' means. Sure. My point was mocking how it can't be the "last" conversational taboo since there are other, far more private things we don't tend to discuss in public either. Indeed, discussing salary isn't a "taboo" at all from my POV since so many people do it in public nowadays anyway.
    - roc 16y ago
      I've had far, far more conversations that included all those other personal details than I've had that included compensation.
      - petercooper 16y ago
        You've had more conversations about your sexual preferences and anatomical details than about money you've earned? Sounds fun but I suspect that puts you in the minority ;-) At least on HN where "I made $X yesterday!" type comments and posts seem to be reasonably common.
        kscaldef 16y ago
        There's only one person I've dated who knew my salary, and vice versa.
- deleted 16y ago
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- pessimizer 16y ago
  I think the important question is what if you _do_ want to share that info, and other people are interested in hearing it, why aren't we talking about it? BTW, I'm always willing to share, and the result is usually that people are eager to share with me (to varying degrees of precision, of course.) I don't have any issue with it because I never confuse my salary with my worth as a person. It's my worth to the company commingled with my ability to negotiate. When workers share salary information with each other, it smooths the last part out. I'm not going to stop doing it until competing companies are required not to disclose the prices of their products to each other - and I see difficulties in the implementation of that:)
jdavid 16y ago
There might however be a huge advantage for 'underpaid' employee's to know they are not paid well. if pay equates to skill, or productivity, which in America is the general idea, then underpaid employees are under performing ones. Companies like GE will fire the bottom 10% annually. This is expensive and requires an administrative and legal cost. Underperforming workers are also usually unaware of there skill deficit. http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect Releasing salaries might make performance acknowledgement more visible. As a result of measured ( not actual ) performance being more visible underperforming employees might seek a new job before getting fired or getting frustrated. It might also encourage employees to seek out better mentor-ship relationships. I have even heard that on some scrum teams, there is a base salary for each employee and then a team bonus that get's distributed by your other team members, entirely in the open. The idea is that as a team you want the strongest team members to stay on your team so that all of you can look better. a sort of 'gamification' and 'collective bargening'. i've always thought that keeping pay secret was lame. plenty of people in a company can social engineer a way to figure it out, and in a startup it means you have to do a ton more work to hide your financials from others. i'm all for transparency and flatness.
- cosgroveb 16y ago
  Can you please elucidate the reasoning behind your assumption that underpaid employees are the underperforming ones? At least for CEOs the opposite appears to be true: http://finance.fortune.cnn.com/2010/10/12/revenge-of-the-overpaid-ceos/ http://finance.fortune.cnn.com/2010/10/12/revenge-of-the-ove...
  - jdavid 16y ago
    this is pricing to the market versus within the company. I guess i should have specified that employees should only price against others in a company. also salaries above $200k are silly. there are much better ways to fiscally reward a someone above $250k that are not so tax inefficient. @cosgroveb, way to pick the edge case. in general CEOs should make enough that their incentives align with investors. everyone is in a different boat.
karzeem 16y ago
My high school, a few years before I got there, once decided to post the teachers' salaries in the lounge for all the teachers to see. The salaries had no names next to them, but since they did list the length of each person's tenure, the teachers deanonymized the list quickly. There was a ruckus when people discovered that a lot of the worst teachers were making the most money. Your salary was basically determined by how frequently you had the nerve to ask for a raise, plus some consideration for how long you'd been at the school. Not exactly a winning compensation scheme. If your compensation scheme is well-reasoned and defensible, it's a lot less of a problem when people figure out how much everyone else is making. If your compensation scheme sucks, expect outrage.
- maukdaddy 16y ago
  Actually, almost all teacher salaries are based on length of service (via union contracts). Teachers seldom, if ever, are paid according to performance (at least in public schools). edit: How did this go from +4 to -1? I was just pointing out that in the US, most teachers at public schools have salaries that are set via length of service. Downmodding on HN has really gotten out of hand.
  - stretchwithme 16y ago
    Wasn't karzeem was describing how it is at karzeem's high school?
    - smallblacksun 16y ago
      Nearly all public school teachers are NEA members, and the NEA strongly opposes pay based on anything other than seniority.
      - _delirium 16y ago
        The NEA opposes it, but they haven't been able to completely stop it, especially since Obama's been a big proponent. The Teacher Incentive Fund allocated $200m conditional on underperforming schools adopting performance-pay plans, which has caused some to switch (e.g. Seattle has a trial program).
deleted 16y ago
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Tangurena 16y ago
I've worked for quite a few companies over the years who had made it a firing-offense to discuss salaries at all in the workplace. This made negotiation your top skill in the company - not the quality of your work, nor the quantity of your work. While this didn't stop employees from finding out who made what, it slowed it down, and it did little to reduce the sense of unfairness. Folks who tend to go into managerial tracks tend to think that everything is negotiable. While techies tend to be poor negotiators. This results in an arms race where one side is unarmed.
- gamble 16y ago
  Absolutely. Very few people in western countries are comfortable negotiators. The reality is that most things are negotiable, but the everyday consumer experience is crafted to ensure that average people crumble at the thought of negotiating. For every employee who is comfortable renegotiating compensation, there are a dozen who will stew in silent resentment waiting for raises that never come rather than engage in a task they hate and fear. Level-based systems with standard salary ranges and regular evaluations are superior for that reason alone. (Unless your goal is to have unhappy and unproductive - but cheap - employees)
  - Dylanlacey 16y ago
    I've worked in a company where they avoided negotiation altogether. The CEO set raises based on 'input' from the department managers. That manager then passed the raise on to the employee. The employee didn't even know when this process would occur, but it was always before the annual review. Big shock, that company also didn't pay well.
- ihumanable 16y ago
  IANAL, but as far as I understand it, in the US it is against the law to fire someone for discussing pay as this is protected speech. The is part of the National Labor Relations Act, http://www.nlrb.gov/Workplace_Rights/i_am_new_to_this_website/what_are_protected_concerted_activities.aspx http://www.nlrb.gov/Workplace_Rights/i_am_new_to_this_websit...
tptacek 16y ago
It really seems like you have two options: Classic corporate style: all salaries are private, and management has total flexibility in how salaries and raises are calculated. Fog Creek style: there's a grade system, salaries are near-public (or easy to figure out), and management is locked into pay brackets; a trade of flexibility for transparency. What doesn't seem to work is anything in between. If everyone knows everyone else's salary and management does flexible incentive/retention/recruiting salary calculation, the situation devolves to "Incentive Pay Considered Harmful"-style teamicide as people snipe at each other and invest cycles in cultivating resentment about perceived pay injustices. An employee might reasonably prefer one style or the other. It's probably nice not to stew all day wondering if the guy slacking off next to you is making more than you, but it's also nice to know that if you talk to your manager, make an arrangement, and then just completely rock out for a couple months, you can achieve an arbitrary pay bump. "Classic style" is more entrepreneurial.
- _delirium 16y ago
  I agree with that. There's some of the latter going on in science academia lately. Pay used to be Fog Creek style, determined almost entirely on a mixture of years of service (civil-service style) and rank. An Associate Professor with 8 years of experience got a certain salary; a Distinguished Institute Professor holding a Prestigious Chair got the salary associated with that position. Pay and raises were fairly easy to figure out (approximately) because they were entirely tied to these public ranks. There was still a lot of politics, but the ranks at least have some social legitimacy: people are willing to accept that the Named Chair of Particle Physics should be paid more than an Associate Professor of Physics. As things have become more market-like, it's become a lot more flexible (mainly in science/engineering). A junior professor might get offered more than a more senior and prominent professor because the school is trying to lure her away from elsewhere, or really wants to fill a particular hole, or just because of competition (if someone has offers from three schools, yours has to be in the same ballpark). At private schools, this is sometimes handled classic corporate style, but it's not that private, because sometimes faculty votes are involved in the decision making. At public schools, this combines with sunshine laws that make any state employee's salary viewable in online databases (in some states). This causes all sorts of shenanigans. Now you have professors realizing that they're paid $90k while someone much less accomplished in the same field is paid $110k, due to the histories of who got hired when. So they're going to need to be offered $120k, or else they're going to threaten to move (and there's a whole bluffing and bluff-calling game in that). This also creates the perverse incentive that people who move around a lot, or at least interview around a lot and solicit external offers on a semi-regular basis, are generally paid more than those who focus their energies on one university's research/education programs. Overall I don't think it's been a good change for there to be both: 1) disparity in pay that is not tied to clearly public things like Distinguished Professor versus Associate Professor; and 2) that pay disparity to be public, so colleagues know who makes more than who.
stretchwithme 16y ago
I wonder if it would be easier to accept the salaries of others if you knew what they were before you even joined he company. If a particular company disclosed everything to potential employees, would those who couldn't handle the information be less inclined to join?
- Someone 16y ago
  No. They can tell you the salaries of your future colleagues, but they cannot know how good their performance is relative to what yours will be, let alone how you will perceive that ratio.
empika 16y ago
We have open books at the agency I work for. Its pretty darn good to be honest. No one is over paid and no one is underpaid. We are paid what we and the rest of the company think we are worth. Simple. Well, kinda simple. When having an annual review you must present your personal development plan of what you have achieved in the past year, what you hope to achieve in the next year (and possibly beyond) along with how much of a raise you want. You then have a meeting with a review committee consisting of two normal staff and two directors where you discuss how fair and equitable it is to you and your colleagues, whether it is affordable for the company and whether it would be attractive to a potential new hire hypothetically replacing you. Proposing your own salary makes you really think about what you are worth, and if you want a higher salary can really motivate you into proving that worth and not just being a bum on a chair. Its a lengthy process but everyone is pretty happy with it (there are few things that getted tweaked everytime soneone has a review but its an ongoing process of improvement). There is no way you can be paid to much or too little as someone on the committee will complain and your proposal wont get signed off. For example, a member of the board had to go back to the committee 4 times until they accepted his proposal, each time honing their salary level and what they will be doing for the company in return. I'm not sure that opening your books like the article says is the best way to go. Salaries in most places are unbalanced and letting everyone know that would lead to proven disaster. It would be best to try and get them inline before opening them up for the employees to see, although i'm not sure how you would do this. Its just a shame the article make no mention of how great open salaries are. ps, look up Ricardo Semler and Semco for en example of open salaries on a LARGE scale. Its not just little agencies that this can work for!
- empika 16y ago
  Great book by Ricardo Semler http://en.wikipedia.org/wiki/Maverick_%28book%29 http://en.wikipedia.org/wiki/Maverick_%28book%29 All companies should be based on this.
sstone 16y ago
Making salary information available is but one, small step towards greater employee satisfaction. If it is the only step - this can be disastrous. You essentially get the problems described in the article. The company needs to give much more information than just the current salaries that got set by who knows what way. First, the company needs to make available what the company is making - this is usually available but in some big numbers like earnings per quarter. If you are working on some product you need to know how much it sold and how much is likely to get sold in the next 6 months. You need to at least be able to know how much the company can afford in the end when all salaries together with all the other costs are added together to still be profitable. Then you need to know the median salary for your job at other companies. These statistics are usually available - and if not can be found from recruiters. Finally, you need to think about what is fair in your mind - how much does your husband make, how much does the neighbor make, your friends - compared to what they do? This is something you know and the company does not know about - but it does factor into how happy you are with your salary. Armed with all this you are ready to set your own salary. This then can be seen by all others and a proper discussion can be done. Discussing things with all this in the open is at least possible. Everyone can participate and after a few months everyone will be armed with additional historical information about Joe the Slacker or Jane The SuperStar and if their salary is fair. If someone really thinks they deserve a huge salary regardless - they can always go someplace else if the majority of her colleagues disagree and get her fired.
dustingetz 16y ago
Companies keep pay a secret because they want to minimize their payroll costs, and there is enough of a margin between value-of-employee and compensation-of-employee that its worth it to pay aggressive negotiators more.
scotty79 16y ago
> likelihood of searching for a new job increased This is a good thing for the job market. There might be some companies that have some better use for those employees if they want to pay them more. And if there is no such companies then dissatisfaction from pay might be impulse to improve ones skills.
michael_dorfman 16y ago
Just a data point: here in Norway, tax information (including income and assets) are published in the newspapers every year, and are freely available via web search. It's trivial to find out what anybody is earning.
- auxbuss 16y ago
  Serious question. Do you look? And how do you think having this information changes people's behaviour?
  - michael_dorfman 16y ago
    I don't look-- I'm an American, and I find the whole thing skeevy. Many people do look, though. I live in a small town, and the year before last I was actually the top earner in the town-- which got me a whole raft of unwanted newspaper and radio stories. Meanwhile, the names of people convicted of crimes are withheld from the press. If you rob a bank, you can live anonymously. If you earn more than your neighbors, you're going to make the newspapers.
finnomenon 16y ago
I remember a blog entry that I most likely found here. It was from a company owner who makes the rules which determine how he pays employees public to everybody. It seemed pretty fair and according to him he hasn't had any complaints so far. I will keep looking for it as it was a good read, maybe somebody has it bookmarked though.
- marcinw 16y ago
  You're thinking of the Joel Spolsky / Fog Creek method of publicizing salary information amongst employees: http://www.joelonsoftware.com/articles/fog0000000038.html http://www.joelonsoftware.com/articles/fog0000000038.html There's also a sort of follow-up on why he doesn't allow for negotiation of salaries: http://www.inc.com/magazine/20090401/how-hard-could-it-be-employees-negotiate-pay-raises.html http://www.inc.com/magazine/20090401/how-hard-could-it-be-em...
rdl 16y ago
There are a lot of employers which have standard wage scales, so knowing anyone's salary is trivial with information like time of service. In the military, people wear their pay grade on their sleeve/collar/hat, so it's even more obvious. This doesn't seem to be a problem. The biggest problem is if someone perceives pay as unjust. I personally plan to publish salaries internally for everyone, along with all budgets (projected and actual). The primary benefit is making it transparent how much various resources cost -- often employees aren't expected to take into account the costs of various activities, like a meeting which uses 4-8 engineers, or the overhead of various admin tasks (like spending $20 of time to document a $5 expense). CEO (and other exec) pay seems to be most often out of line; Peter Thiel's observation about predicting the success of a company based on founder pay is great, and a founder making $0-60k/yr is in a much better position to negotiate compensation than a CEO (possibly founder) making $250k.
artsrc 16y ago
This looks at the short term effect in one organization. The effect across the economy is something else to take into account. Market theory assumes perfect information. If you want to use market economics to maximize efficiency, then you want pay information published. For example: Some companies have issues finding people with certain skills. People in other less productive companies who have those skills can use salary information to move to the more productive companies that will be able and forced to pay higher salaries. People in other fields are encouraged to retrain into higher paying areas.
njharman 16y ago
Am I a failure at a business person because my immediate (and obvious) conclusion was that if 1/2 people became miserable and other 1/2 weren't happier then the solution was to have everyone at or as close as possible to the median salary rather than being secret and under/over paying a bunch of money grubbing twerps.
known 16y ago
"Money doesn't always bring happiness. People with ten million dollars are no happier than people with nine million dollars." --Hobart Brown

51 points by cwan 16y ago

Had to read the entire article to get to the important part "...if dissatisfaction is a motivator, they'll end up better off." I agree. Sometimes ignorance is bliss, but when it comes to your lively hood, I think knowing is better than not.

fr0sty 16y ago

I'm suprised that effects were very widespread and evenly distributed. The only people I have ever known to talk about their salary/wage seem to be union members (or other blue-collar professions). Electricians, teachers, machinists, elevator repairmen, etc. On the flip side I have never heard a programmer or other white-collar employee talk about their salary/wage unless they are griping about a previous employer/contract. Given that most of the hourly university employees probably already know what the wage scale is I'm suprised an official publication of the data would have any effect on satisfaction.

Dylanlacey 16y ago
My friends and I are actively trying to challenge this by discussing salaries and benefits openly. We've been told it's 'classless' by a few older mentors etc, but frankly I don't see how it's classless to discuss what you're selling your time for.

petercooper 16y ago

It's the "last conversational taboo"? Isn't it really just no-one else's business if you don't want to share that info? Most people keep their bra size, weight, penis length, or preferred sexual kinks a "secret" too, and pay is just as personal and private to most people as those things.

roc 16y ago
That's all 'taboo' means. It identifies things we don't talk about openly, regardless of why. Personally, I think the social disinclination to talk about salary is as manufactured for private gain as the whole diamond engagement ring 'tradition'. The practical effect of secrecy in compensation is that employers have a massive advantage in negotiations and end up paying far, far less for labor. Perhaps I'm just cynical, but in my personal experience, effects like that are never accidental.
- petercooper 16y ago
  That's all 'taboo' means. Sure. My point was mocking how it can't be the "last" conversational taboo since there are other, far more private things we don't tend to discuss in public either. Indeed, discussing salary isn't a "taboo" at all from my POV since so many people do it in public nowadays anyway.
  - roc 16y ago
    I've had far, far more conversations that included all those other personal details than I've had that included compensation.
    - petercooper 16y ago
      You've had more conversations about your sexual preferences and anatomical details than about money you've earned? Sounds fun but I suspect that puts you in the minority ;-) At least on HN where "I made $X yesterday!" type comments and posts seem to be reasonably common.
      - kscaldef 16y ago
        There's only one person I've dated who knew my salary, and vice versa.
deleted 16y ago
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pessimizer 16y ago
I think the important question is what if you _do_ want to share that info, and other people are interested in hearing it, why aren't we talking about it? BTW, I'm always willing to share, and the result is usually that people are eager to share with me (to varying degrees of precision, of course.) I don't have any issue with it because I never confuse my salary with my worth as a person. It's my worth to the company commingled with my ability to negotiate. When workers share salary information with each other, it smooths the last part out. I'm not going to stop doing it until competing companies are required not to disclose the prices of their products to each other - and I see difficulties in the implementation of that:)

jdavid 16y ago

There might however be a huge advantage for 'underpaid' employee's to know they are not paid well. if pay equates to skill, or productivity, which in America is the general idea, then underpaid employees are under performing ones. Companies like GE will fire the bottom 10% annually. This is expensive and requires an administrative and legal cost. Underperforming workers are also usually unaware of there skill deficit. http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect Releasing salaries might make performance acknowledgement more visible. As a result of measured ( not actual ) performance being more visible underperforming employees might seek a new job before getting fired or getting frustrated. It might also encourage employees to seek out better mentor-ship relationships. I have even heard that on some scrum teams, there is a base salary for each employee and then a team bonus that get's distributed by your other team members, entirely in the open. The idea is that as a team you want the strongest team members to stay on your team so that all of you can look better. a sort of 'gamification' and 'collective bargening'. i've always thought that keeping pay secret was lame. plenty of people in a company can social engineer a way to figure it out, and in a startup it means you have to do a ton more work to hide your financials from others. i'm all for transparency and flatness.

cosgroveb 16y ago
Can you please elucidate the reasoning behind your assumption that underpaid employees are the underperforming ones? At least for CEOs the opposite appears to be true: http://finance.fortune.cnn.com/2010/10/12/revenge-of-the-overpaid-ceos/ http://finance.fortune.cnn.com/2010/10/12/revenge-of-the-ove...
- jdavid 16y ago
  this is pricing to the market versus within the company. I guess i should have specified that employees should only price against others in a company. also salaries above $200k are silly. there are much better ways to fiscally reward a someone above $250k that are not so tax inefficient. @cosgroveb, way to pick the edge case. in general CEOs should make enough that their incentives align with investors. everyone is in a different boat.

karzeem 16y ago

My high school, a few years before I got there, once decided to post the teachers' salaries in the lounge for all the teachers to see. The salaries had no names next to them, but since they did list the length of each person's tenure, the teachers deanonymized the list quickly. There was a ruckus when people discovered that a lot of the worst teachers were making the most money. Your salary was basically determined by how frequently you had the nerve to ask for a raise, plus some consideration for how long you'd been at the school. Not exactly a winning compensation scheme. If your compensation scheme is well-reasoned and defensible, it's a lot less of a problem when people figure out how much everyone else is making. If your compensation scheme sucks, expect outrage.

maukdaddy 16y ago
Actually, almost all teacher salaries are based on length of service (via union contracts). Teachers seldom, if ever, are paid according to performance (at least in public schools). edit: How did this go from +4 to -1? I was just pointing out that in the US, most teachers at public schools have salaries that are set via length of service. Downmodding on HN has really gotten out of hand.
- stretchwithme 16y ago
  Wasn't karzeem was describing how it is at karzeem's high school?
  - smallblacksun 16y ago
    Nearly all public school teachers are NEA members, and the NEA strongly opposes pay based on anything other than seniority.
    - _delirium 16y ago
      The NEA opposes it, but they haven't been able to completely stop it, especially since Obama's been a big proponent. The Teacher Incentive Fund allocated $200m conditional on underperforming schools adopting performance-pay plans, which has caused some to switch (e.g. Seattle has a trial program).

deleted 16y ago

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Tangurena 16y ago

I've worked for quite a few companies over the years who had made it a firing-offense to discuss salaries at all in the workplace. This made negotiation your top skill in the company - not the quality of your work, nor the quantity of your work. While this didn't stop employees from finding out who made what, it slowed it down, and it did little to reduce the sense of unfairness. Folks who tend to go into managerial tracks tend to think that everything is negotiable. While techies tend to be poor negotiators. This results in an arms race where one side is unarmed.

gamble 16y ago
Absolutely. Very few people in western countries are comfortable negotiators. The reality is that most things are negotiable, but the everyday consumer experience is crafted to ensure that average people crumble at the thought of negotiating. For every employee who is comfortable renegotiating compensation, there are a dozen who will stew in silent resentment waiting for raises that never come rather than engage in a task they hate and fear. Level-based systems with standard salary ranges and regular evaluations are superior for that reason alone. (Unless your goal is to have unhappy and unproductive - but cheap - employees)
- Dylanlacey 16y ago
  I've worked in a company where they avoided negotiation altogether. The CEO set raises based on 'input' from the department managers. That manager then passed the raise on to the employee. The employee didn't even know when this process would occur, but it was always before the annual review. Big shock, that company also didn't pay well.
ihumanable 16y ago
IANAL, but as far as I understand it, in the US it is against the law to fire someone for discussing pay as this is protected speech. The is part of the National Labor Relations Act, http://www.nlrb.gov/Workplace_Rights/i_am_new_to_this_website/what_are_protected_concerted_activities.aspx http://www.nlrb.gov/Workplace_Rights/i_am_new_to_this_websit...

tptacek 16y ago

It really seems like you have two options: Classic corporate style: all salaries are private, and management has total flexibility in how salaries and raises are calculated. Fog Creek style: there's a grade system, salaries are near-public (or easy to figure out), and management is locked into pay brackets; a trade of flexibility for transparency. What doesn't seem to work is anything in between. If everyone knows everyone else's salary and management does flexible incentive/retention/recruiting salary calculation, the situation devolves to "Incentive Pay Considered Harmful"-style teamicide as people snipe at each other and invest cycles in cultivating resentment about perceived pay injustices. An employee might reasonably prefer one style or the other. It's probably nice not to stew all day wondering if the guy slacking off next to you is making more than you, but it's also nice to know that if you talk to your manager, make an arrangement, and then just completely rock out for a couple months, you can achieve an arbitrary pay bump. "Classic style" is more entrepreneurial.

_delirium 16y ago
I agree with that. There's some of the latter going on in science academia lately. Pay used to be Fog Creek style, determined almost entirely on a mixture of years of service (civil-service style) and rank. An Associate Professor with 8 years of experience got a certain salary; a Distinguished Institute Professor holding a Prestigious Chair got the salary associated with that position. Pay and raises were fairly easy to figure out (approximately) because they were entirely tied to these public ranks. There was still a lot of politics, but the ranks at least have some social legitimacy: people are willing to accept that the Named Chair of Particle Physics should be paid more than an Associate Professor of Physics. As things have become more market-like, it's become a lot more flexible (mainly in science/engineering). A junior professor might get offered more than a more senior and prominent professor because the school is trying to lure her away from elsewhere, or really wants to fill a particular hole, or just because of competition (if someone has offers from three schools, yours has to be in the same ballpark). At private schools, this is sometimes handled classic corporate style, but it's not that private, because sometimes faculty votes are involved in the decision making. At public schools, this combines with sunshine laws that make any state employee's salary viewable in online databases (in some states). This causes all sorts of shenanigans. Now you have professors realizing that they're paid $90k while someone much less accomplished in the same field is paid $110k, due to the histories of who got hired when. So they're going to need to be offered $120k, or else they're going to threaten to move (and there's a whole bluffing and bluff-calling game in that). This also creates the perverse incentive that people who move around a lot, or at least interview around a lot and solicit external offers on a semi-regular basis, are generally paid more than those who focus their energies on one university's research/education programs. Overall I don't think it's been a good change for there to be both: 1) disparity in pay that is not tied to clearly public things like Distinguished Professor versus Associate Professor; and 2) that pay disparity to be public, so colleagues know who makes more than who.

stretchwithme 16y ago

I wonder if it would be easier to accept the salaries of others if you knew what they were before you even joined he company. If a particular company disclosed everything to potential employees, would those who couldn't handle the information be less inclined to join?

Someone 16y ago
No. They can tell you the salaries of your future colleagues, but they cannot know how good their performance is relative to what yours will be, let alone how you will perceive that ratio.

empika 16y ago

We have open books at the agency I work for. Its pretty darn good to be honest. No one is over paid and no one is underpaid. We are paid what we and the rest of the company think we are worth. Simple. Well, kinda simple. When having an annual review you must present your personal development plan of what you have achieved in the past year, what you hope to achieve in the next year (and possibly beyond) along with how much of a raise you want. You then have a meeting with a review committee consisting of two normal staff and two directors where you discuss how fair and equitable it is to you and your colleagues, whether it is affordable for the company and whether it would be attractive to a potential new hire hypothetically replacing you. Proposing your own salary makes you really think about what you are worth, and if you want a higher salary can really motivate you into proving that worth and not just being a bum on a chair. Its a lengthy process but everyone is pretty happy with it (there are few things that getted tweaked everytime soneone has a review but its an ongoing process of improvement). There is no way you can be paid to much or too little as someone on the committee will complain and your proposal wont get signed off. For example, a member of the board had to go back to the committee 4 times until they accepted his proposal, each time honing their salary level and what they will be doing for the company in return. I'm not sure that opening your books like the article says is the best way to go. Salaries in most places are unbalanced and letting everyone know that would lead to proven disaster. It would be best to try and get them inline before opening them up for the employees to see, although i'm not sure how you would do this. Its just a shame the article make no mention of how great open salaries are. ps, look up Ricardo Semler and Semco for en example of open salaries on a LARGE scale. Its not just little agencies that this can work for!

empika 16y ago
Great book by Ricardo Semler http://en.wikipedia.org/wiki/Maverick_%28book%29 http://en.wikipedia.org/wiki/Maverick_%28book%29 All companies should be based on this.

sstone 16y ago

Making salary information available is but one, small step towards greater employee satisfaction. If it is the only step - this can be disastrous. You essentially get the problems described in the article. The company needs to give much more information than just the current salaries that got set by who knows what way. First, the company needs to make available what the company is making - this is usually available but in some big numbers like earnings per quarter. If you are working on some product you need to know how much it sold and how much is likely to get sold in the next 6 months. You need to at least be able to know how much the company can afford in the end when all salaries together with all the other costs are added together to still be profitable. Then you need to know the median salary for your job at other companies. These statistics are usually available - and if not can be found from recruiters. Finally, you need to think about what is fair in your mind - how much does your husband make, how much does the neighbor make, your friends - compared to what they do? This is something you know and the company does not know about - but it does factor into how happy you are with your salary. Armed with all this you are ready to set your own salary. This then can be seen by all others and a proper discussion can be done. Discussing things with all this in the open is at least possible. Everyone can participate and after a few months everyone will be armed with additional historical information about Joe the Slacker or Jane The SuperStar and if their salary is fair. If someone really thinks they deserve a huge salary regardless - they can always go someplace else if the majority of her colleagues disagree and get her fired.

dustingetz 16y ago

Companies keep pay a secret because they want to minimize their payroll costs, and there is enough of a margin between value-of-employee and compensation-of-employee that its worth it to pay aggressive negotiators more.

scotty79 16y ago

> likelihood of searching for a new job increased This is a good thing for the job market. There might be some companies that have some better use for those employees if they want to pay them more. And if there is no such companies then dissatisfaction from pay might be impulse to improve ones skills.

michael_dorfman 16y ago

Just a data point: here in Norway, tax information (including income and assets) are published in the newspapers every year, and are freely available via web search. It's trivial to find out what anybody is earning.

auxbuss 16y ago
Serious question. Do you look? And how do you think having this information changes people's behaviour?
- michael_dorfman 16y ago
  I don't look-- I'm an American, and I find the whole thing skeevy. Many people do look, though. I live in a small town, and the year before last I was actually the top earner in the town-- which got me a whole raft of unwanted newspaper and radio stories. Meanwhile, the names of people convicted of crimes are withheld from the press. If you rob a bank, you can live anonymously. If you earn more than your neighbors, you're going to make the newspapers.

finnomenon 16y ago

I remember a blog entry that I most likely found here. It was from a company owner who makes the rules which determine how he pays employees public to everybody. It seemed pretty fair and according to him he hasn't had any complaints so far. I will keep looking for it as it was a good read, maybe somebody has it bookmarked though.

marcinw 16y ago
You're thinking of the Joel Spolsky / Fog Creek method of publicizing salary information amongst employees: http://www.joelonsoftware.com/articles/fog0000000038.html http://www.joelonsoftware.com/articles/fog0000000038.html There's also a sort of follow-up on why he doesn't allow for negotiation of salaries: http://www.inc.com/magazine/20090401/how-hard-could-it-be-employees-negotiate-pay-raises.html http://www.inc.com/magazine/20090401/how-hard-could-it-be-em...

rdl 16y ago

There are a lot of employers which have standard wage scales, so knowing anyone's salary is trivial with information like time of service. In the military, people wear their pay grade on their sleeve/collar/hat, so it's even more obvious. This doesn't seem to be a problem. The biggest problem is if someone perceives pay as unjust. I personally plan to publish salaries internally for everyone, along with all budgets (projected and actual). The primary benefit is making it transparent how much various resources cost -- often employees aren't expected to take into account the costs of various activities, like a meeting which uses 4-8 engineers, or the overhead of various admin tasks (like spending $20 of time to document a $5 expense). CEO (and other exec) pay seems to be most often out of line; Peter Thiel's observation about predicting the success of a company based on founder pay is great, and a founder making $0-60k/yr is in a much better position to negotiate compensation than a CEO (possibly founder) making $250k.

artsrc 16y ago

This looks at the short term effect in one organization. The effect across the economy is something else to take into account. Market theory assumes perfect information. If you want to use market economics to maximize efficiency, then you want pay information published. For example: Some companies have issues finding people with certain skills. People in other less productive companies who have those skills can use salary information to move to the more productive companies that will be able and forced to pay higher salaries. People in other fields are encouraged to retrain into higher paying areas.

njharman 16y ago

Am I a failure at a business person because my immediate (and obvious) conclusion was that if 1/2 people became miserable and other 1/2 weren't happier then the solution was to have everyone at or as close as possible to the median salary rather than being secret and under/over paying a bunch of money grubbing twerps.

known 16y ago

"Money doesn't always bring happiness. People with ten million dollars are no happier than people with nine million dollars." --Hobart Brown