Who Are the ‘Heroes’ of Pay Transparency?
PayScale Inc. just announced its 2018 Hero Award recipients, featuring the top 100 organizations where compensation practices and approaches are shared most openly. This year’s winners rank highest for being transparent with employees regarding pay practices, based on employee feedback from more than 47,000 distinct employers.
The firm also highlights its research showing that employees who understand how and why they are paid develop more trusting relationships with their managers, are more engaged at work and stay with the companies longer.
“People are more likely to trust their employer if it’s clear how and why they are paid the compensation they earn. There really is no downside to sharing your organization’s approach to compensation, but there is a well-researched downside to remaining silent,” said PayScale Vice President Lydia Frank. “Employees feel better about their deal when organizations are more transparent about pay decisions and practices.”
Now in its third year, restaurants and grocers dominate the top 10 spots (below) on this year’s list. Both are industries where profit margins are relatively thin, which suggests that transparency may be a distinct advantage in these highly competitive industries, according to the company:
- Aldi, Inc.
- McKinsey & Company, Inc.
- Sanderson Farms, Inc.
- Trader Joe’s Co.
- FedEx Freight
- Texas Roadhouse, Inc.
- CMA CGM
- Smith’s Food and Drug Stores
- Dialysis Clinics, Inc.
- Edward Jones
(To view the complete list of 2018’s transparency heroes, click here.)
While pay transparency is often viewed as a positive by most business leaders, a contrarian view was published in a 2016 Harvard Business Review article.
According to author Todd Zenger, pay transparency is “a double-edged sword” that’s capable of doing as much damage as good: “Broadcasting pay is as likely to demoralize as it is to motivate. While pay transparency may accelerate attention being paid to remedying pay discrimination, managers should consider moves toward transparency with their eyes wide open.”
While Zenger says pay transparency does provide more information with which to assess the fairness of pay allocation, in most work settings, “individual performance is not easily observed, in part because our performance is a joint product that reflects both our own effort and that of many others,” he says. “This seems to give us wide latitude to exaggerate our performance and our contributions to the organization—and to do it a lot.”
Zenger recalls performing a survey of 700 engineers from two large Silicon Valley companies to assess their performance relative to their peers: “The results were startling,” he says. “Nearly 40 percent felt they were in the top 5 percent. About 92 percent felt they were in the top quarter. Only one lone individual felt his or her performance was below average. This inflated sense of self-worth makes the organization’s task of linking performance to pay tremendously difficult.”