Pay Transparency: How to Blaze the Trail

Pay transparency. The term can be daunting for many CEOs and HR leaders to process. Lately, we’ve been hearing about pay transparency more often and, when you consider the focus on pay equity it makes sense that organizations want to be more transparent with their pay. Pay transparency can take some time for organizations to adopt. That’s not to say all organizations can’t make strides towards pay transparency immediately. The success of pay transparency relies on three key facets.

First, what is your culture like today? Before organizations embark down the path of pay transparency, it’s important to take a deeper look at your culture. Is your culture agile, respectful and transparent in other areas already? Do employees know your organization’s compensation philosophy? Do managers routinely communicate with employees regarding performance and pay? If you answered yes to these questions, then you may be closer than you think to leading the way in pay transparency. If an organization’s culture is stagnant, bureaucratic or in its infancy of being established, pay transparency is a great goal, however you should make working on your culture a priority. 

Second, determine if pay inequities exist today in your organization. Discover the gaps and see if these pay inequities can be explained or solved quickly. When organizations are going through periods of hyper-growth, it’s important to remember that your early-stage employees may have more equity and lower base salaries while the employees you’re looking to hire during this next phase could have higher base salaries and potentially less equity. If you decide to be transparent with your pay practices, a pay equity analysis is necessary. It’s important to have a pool of money available to make any adjustments based on the results of this analysis. If you’re organization has been in business for a while, your pay equity analysis may look a bit different. Often times, longer tenured employees are lower in their range versus new hires in the same position. Whatever growth stage you’re in, if you’re not prepared to put some money behind fixing pay inequities, you may want to wait for full pay transparency until you are able to make the proper adjustments.

Lastly, how capable are your managers of having open and honest conversations with their employees regarding pay? Let’s face it, employees talk to one another about their pay and unless a manager is ready to have an honest dialogue about performance, they most likely aren’t ready to have a pay discussion. Newer managers may lack the experience and knowledge to answer difficult questions from employees regarding their pay. It’s important to remember that training is essential with pay transparency. Managers need to feel supported and they need to understand how and why an employee is paid at a specific tier before they can have a meaningful discussion with their employees. This is a great place for HR to be strategic partners and help managers navigate these difficult but necessary conversations.

So, how do you become a trailblazer when it comes to pay transparency? You do these three things and do them well:

#1 Create a roadmap. Start with where you are today and why you need to create a change in your organization’s philosophy on pay. Take heart of what you need to do in order to be fully transparent with your compensation. This roadmap should include any cultural shifts you may need to make, an analysis (and any subsequent adjustments) of your compensation structure/pay practices and a communication plan. As this roadmap is created, it’s important to gain Executive buy-in and feedback along the way.

#2 Don’t rush it. Be realistic with where you are and where you want to go. Remember, we’re talking about people’s pay. If not done correctly, a high functioning and high performing individual and/or team can lose motivation quickly, not to mention faith in the company and leadership. Some people who place a higher value on compensation may equate how much they are paid with their self-worth or value to the company. Be sensitive to this, and work with your communications team to develop an approach on the best language and way to communicate any changes to the organization’s philosophy on pay.

#3 Constantly communicate. Don’t treat pay transparency as a one-time “event”, but rather something that needs to be constantly (and consistently) communicated. While more communication goes into the initial rollout of pay transparency, the compensation structure, pay practices and pay philosophy should be communicated throughout the year, especially during various cycles, such as merit and bonus. In addition, managers should have plenty of resources and trainings they can refer to throughout the year to assist them in their conversations.

According to a March 2018 Forbes article, “A transparent work environment leads to greater trust, and trust in an organization is paramount to its success.” Pay transparency doesn’t have to be a difficult undertaking. If done thoughtfully and strategically, it can lead to high performance, cultural alignment and increased employee engagement, all resulting in better business results and outcomes.

Do you want to be a leader when it comes to pay transparency? Summa Strategies can help! As a Total Rewards and Talent Management consulting firm, we assess your current compensation structure and cultural readiness, build a pay transparency roadmap to include a communication plan and help drive messaging. Email me at [email protected].