Back Nine Finance

Money, specifically how much you make, has been a taboo topic as far back as I can remember. Part of me thinks that the biggest reason a person’s salary typically remains personal is that people, in general, are insecure. For whatever reason, we believe that a good measure of our self worth is measured directly by how much we earn.

I’f you’re like me, you are fascinated to read articles that talk about how much money people in different professions earn. Even more fascinating is having access to salary data for the exact profession in which we are employed. Websites such as salary.com or payscale.com are decent resources, but I often wonder how accurate sites such as these are.

If you are really curious whether or not the salary you are earning is fair, the very best source of information possible would be actual salary data from the very company in which you work. Duh. So, that makes me wonder…

Why do so few companies make the salaries of all workers freely available to all employees?

First let’s consider the negatives of having such data available to everyone in the company:

• For whatever reason, people tend to think that people above them in the company didn’t earn their position. I can’t tell you the number of times I hear people criticizing the boss, or perhaps the President or CEO of the company. We all logically know that these people make more money than we do, but seeing it in black and white could cause even more ill will toward the leaders of the company.
• For organizations that have several people performing the same job function, data that revealed large discrepancies in salary could cause hurt feelings – to say the least. Even if top performers were earning the most, we all think we are top performers! Honestly, who ever thinks they are a poor or mediocre performer?
• What if men and women performing similar jobs within a company had drastically different salaries?

But, for all the possible pitfalls of making such data freely available throughout the company, there are also several ways in which such data could have a positive effect:

• It is likely that in preparing to release such data, there would be some last minute salary adjustments to make sure that the data didn’t reveal any favoritism in the organization.
• Employees would now be on a level playing field with their bosses and managers when it came time for annual reviews and raise discussions.
• Employees who aspire to climb the ladder would have a good idea how much they could be earning in the future and possibly become more motivated to perform better in their current position (admit it, you really want to know how much your boss makes and how much the CEO makes!).

Keeping salary data such a secret really only benefits the company – not the employees. It is easier for the company to maintain a policy of “salary data is strictly confidential” than to be absolutely certain that everyone in the company is paid fairly. Who wants to deal with a ton of employees who all of a sudden think they are underpaid? Plus, it might cost the company money if, in fact, several employees were underpaid and salary adjustments had to be made. In the case of your company, ignorance is bliss. For you, not so much.

Salaries truly are a hot button issue. I often think about questions like:

• Should a worker with 20 years of experience make vastly more money than a worker with 5 years of experience, even if the 2 employees’ performance on the job is equal? I’d say no – but most likely the worker who has been around longer makes a lot more.
• What if ALL salary information was compiled in a public database (would never happen, I know)? Would this make businesses more or less competitive? If Google all of a sudden knew exactly what everyone at Facebook was being paid, how would its compensation strategies change?

When we we think about the financial markets in the United States, it is often assumed that the “markets” have already taken into account all available information, and therefore all assets are priced accordingly.

But the labor markets rarely operate this efficiently. Since data is so closely guarded in the labor markets, assets (meaning talent in a given profession) are rarely priced efficiently. So many factors go into what a person earns outside of performance alone. Some people aren’t afraid to ask for what they believe they are worth, while others cannot imagine ever negotiating their salary.

What do you think – how would the business world change if all of a sudden salary information were published within every company, or even more widespread? Would you be in favor of this? Would you feel weird if all of a sudden everyone in your company knew how much money you earned?

9 Responses to “How would making salary information public change businesses?”