Transparency: The New Competitive Advantage
One of the best-kept secrets in any company is the salary of its employees. Sure, if you’re a senior executive in a public company or in the public sector, your salary can be publically disclosed, but for the rest of us, discussions about compensation with our colleagues is a no-no. In fact, many companies have strict policies in place against it which can result in termination of employment.
Part of this is because not all compensation is equal. At most companies, despite salary structures, tiers and policies, not all employees in similar roles earn the same compensation. This creates fears, doubts and anxiety as people get rightfully concerned with being compensated fairly for the value they bring (especially in comparison to their peers). When our minds go wondering of how much more money Jimmy from two cubicles over might be making, it translates into issues such as lack of productivity and bureaucracy, but most importantly, creates a culture that is often “stuck” when it comes to moving forward and executing with an innovative spirit.
In recent weeks, Buffer, a social media startup took a bold step that would see any traditional HR leader doing a facepalm. They openly disclosed the salaries of all their employees, including the CEO, COO, CTO and others, along with their entire salary policy on their website. Making it simple to understand how employees at Buffer get paid and more importantly, why they get paid what they do. Buffer called the concept “open salaries” and also shared the formula that governs everyone’s compensation:
While skeptics will go as far as saying that Buffer is yet another startup seeking attention, the value and benefits of such radical transparency are becoming a significant competitive advantage. Since disclosing their salaries, Buffer received 2,886 applications for job openings, compared to 1,263 in the 30 days beforehand. Potential employees are clearly seeing how this level of transparency and authenticity portray an environment they would prefer to work in. For the employer, despite a war for talent, this not only drives up the number of applicants, but ensures all hires are (first and foremost), great cultural fits for the organization.
Leveraging radical transparency and authenticity in business is becoming a movement. Multiple studies and surveys have clearly indicated that customers are becoming sensitized to advertising or the classic “corporate speak” that you might hear from a company. Customers and employees alike prefer to engage with ‘humanized’ companies that communicate openly and provide access and insight into their cultures and what they stand for. They want to be part of the brand and want to understand the higher purpose for the organization (besides making money or peddling products and services, of course).
Transparency is profoundly driving loyalty, speed-to-market and innovation as customers and employees become engaged as part of the company. For a company, the benefits stack up very quickly. From attracting and retaining talent, sourcing opinions on products or major business decisions and increasing customer/employee loyalty, transparency is creating a new competitive advantage for those who embrace it and practice it.
Perhaps in a few years from now, Buffer’s Open Salary policy won’t sound (or be even called) radical if companies move quickly to realize that in the age of vast choice and information, authenticity and transparency can provide a significant competitive advantage and a pole-position for growth.
I would be careful with wishing for such a strategy as it could infact become an instrument for smothering salaries and sterilising the compensation mechanism.
Have a read of this one.
I used the example above to show that there are benefits to transparency, to the point of creating a competitive advantage. Obviously, the approach in the example won't fit many companies and would cause chaos for many existing companies, but it represents a new way of thinking that people are relating to.
yes agreed, and new ways of thinking are always important.