Despite a long-standing taboo around sharing salary information, some leaders, such as Dane Atkinson of SumAll, are discovering that keeping them secret might be hurting employees even more.
As a serial entrepreneur who started his first company at just 17 years old, Atkinson used the secrecy of individual employee salaries to his advantage. “I have been downright abusive; it’s an abusive system. Many times I paid two people with the very same qualifications entirely different salaries, simply because I negotiated better with one person than another,” said Atkinson, referring to the practice of leveraging salary secrets to pay as little as possible to get the talent he needed for his growing companies.
“In past companies, when you’re negotiating, you’re always fishing for information. You want to get the candidate to reveal what they want first, so you ask them what they’re expecting salary-wise or what they made in their past job. One person will say they made $80,000 and another person will say they made $50,000,” Atkinson explained. “You would rarely tell the $50,000 person: ‘Oh, that’s insane. You should make 70 here, no problem.’
“Instead, you tell them you really like them and can probably get up to your number.” To the person who made $80,000 in his last job, Atkinson would give a similar response. The end result? If both people are hired, his company has presumably acquired $160,000 in talent for only $130,000. For Atkinson, it was just a part of growing a company while saving on payroll. “If you’re working with investors,” he rationalized, “undercompensation is a shareholder value tactic. If you can get talent at a discount, your board will cheer. That’s why it’s an abusive system.”
Despite this, a significant number of thriving companies of all sizes are now making salaries public knowledge. A growing body of research suggests that keeping salary information from employees can actually damage employees’ engagement, as well as their pocketbooks by keeping salaries below fair market rate. Not only that, but sharing salaries may even increase productivity.
Dane Atkinson's experience and solutions are in line with the insights of economists who studied the problem in the 1970s. For Atkinson, the issue was distraught coworkers' anger at each other and the company when they found out how much their salaries differed from their peers. “At past companies, people would cry or scream at each other if they realized they had been undercompensated,” he said. “It can cause a lot of strife. I’ve seen tears dropping from their eyes as they yelled and screamed at each other or at me.” For Atkinson, the pain of watching honest and talented employees degraded emotionally just wasn’t worth the savings in unpaid salaries. So when he and his partners launched SumAll, a Manhattan-based data analytics company, they decided to try something different. Rather than keep employees in the dark about each other’s salaries, they would instead be completely open.
When SumAll was launched, its 10 employees started with totally transparent salaries, and that remains the case today. Each employee knows exactly what every other employee is being paid. When new employees join, they are assigned to one of nine salaries, all fixed based on the position. The salaries range from around $35,000 to $160,000. Salary raises are tied to market conditions and to company performance. Every employee’s name and corresponding salary is posted on the company’s internal network, where any employee can view it at any time.
SumAll grew quickly and now employs over 50 people. For many of them, open salaries took some adjustment. Most employees are used to the double-blind negotiation process that most corporations require. Instead, when SumAll managers make an offer, they basically say, “Here’s what this position pays,” and allow the potential new hire to accept it or turn it down, but the offer is fixed. “I often interview and make offers to people who expect to negotiate,” said Atkinson. “Some of them are a little uncomfortable with the fact that they didn’t have a chance to negotiate.”
Once employees accept the offer and start working on the inside, however, they see that sharing salaries is a way to make sure everything stays fair. If an employee looks at what he is paid compared to similar positions, then he can bring it up with his boss. If a new employee is brought on at a higher rate, older employees can have a conversation about it and find a fair resolution.
In fact, that exact situation has happened at SumAll. An engineer at SumAll was on a three-person panel to interview a new hire and discovered that the candidate was going to be offered more than he himself was making, despite having less experience. So the engineer brought it up to Atkinson and others, saying that he felt this wouldn’t be fair. SumAll responded by raising his salary. “But if you’re in a traditional system, you have no recourse,” Atkinson said. “You could find out exactly what someone else makes and be distraught by it, but you can’t address the issue because you’re not supposed to know.”
Being able to have that open conversation is perhaps why SumAll team members find it so easy to stay with the company, even when other offers come to them. Atkinson said that SumAll employees regularly get offers from companies like Google and Facebook and turn them down because they’d rather work in SumAll’s open salary culture.
Atkinson has become a champion of sorts for total salary openness. “We just want to be the counterpoint to the corporate culture that’s out there,” he said. “We want to help people understand that there are other ways to build successful organizations.”
While sharing salaries may seem counterculture to much of the current corporate world and even to established social norms, the practice is spreading quickly.
