Dane Atkinson has no qualms telling you how much he makes for a living: “I make $145,000, which is the top band for our organization.” He’s the CEO of SumAll, an analytics company in New York City. For Atkinson and his 50 employees, knowing each other’s salary is just part of working there.
It reduces what he calls the “evils” of traditional hiring. “I’ve never been in a company where salaries haven’t leaked out at some point and caused a huge amount of damage,” says Atkinson. “I’ve also unfortunately acted evilly in the past where I’d meet with a woman and a man and they’d both offer themselves up at different salary ratios and I’d happily pick whatever they were looking for,” he said. “And in the end you create damage in your cap tables, you create damage in your salaries that will come back and haunt you.”
“When you get to a world where everyone has individualized bonus goals and manager discretion, all of a sudden it gives people a big black box that gives people anxiety,” says Linda Barrington, executive director of the Institute for Compensation Studies at Cornell University.
So when Atkinson created SumAll, he built in an open-salary policy. Every employee can look at an internal wiki document to see what every other employee is making. It’s part of a growing trend of companies that have decided transparency is king.
SumAll employee Scott Pollack says working in an open-salary company has been “both uncomfortable and comfortable at the same time.”
“There is absolutely a growing momentum from the employee perspective talking about salaries and talking about pay in a more open way,” says Barrington. “One of the forces driving this is certainly social media like Glassdoor.com, where people can anonymously post salaries. It forces the conversation.”
The organic grocery store giant Whole Foods has practiced pay transparency since 1986. Universities and the governments of 40 U.S. states make a regular habit of posting employee salaries online. For many bosses, the idea of an open salary system may seem like a recipe for disaster. Not so, says Barrington. “You think about the argument that this will cause complete chaos and collapse, but this hasn’t happened in states. You can see from public school teachers to university professors — there are a lot of workplaces where this happens. The startups are new and sexy, but it happens everywhere.”
The social media company Buffer goes so far as to list staff salaries on its web site. The moment it posted its salary formula, the company says, it was inundated with résumés.
Research also shows some benefits to an open salary system. A study from the Cornell Center for Advanced Human Resources Studies found that pay transparency worked much better than pay secrecy in keeping employees engaged and productive.
But a transparent salary isn’t for everyone. “I’m sure it’s cost us hires,” says Atkinson. “But conversely, we’ve gained far better people. Because people who think they’ve earned their salary and have no issue with that tend to be better teammates.”
An open salary policy can make negotiating a new job a somewhat bizarre experience. Atkinson says that when he engages in salary negotiation with a new hire, he reveals his salary and the salaries of those in the room with them. “It was both uncomfortable and comfortable at the same time,” says Scott Pollack, who started at SumAll in May. “It removes a layer of something that can be frustrating in other companies. Knowing your colleagues, either they know something about you or you about them. But here it removes that layer and you can focus on doing the best work you can do.”
The larger strategy for companies that have pay transparency is fundamental: They say it builds trust. But there are downsides as well. Atkinson says he has to have a lot more tough conversations with his employees about why they aren’t paid as much as a colleague. “The communication tax is much higher here,” he says. “In most cases you can lean on the fact that no one knows anything to get around lots of awkward moments. Like ‘Yeah, the board wants this, so let’s go this way.’ Here you actually have to express what’s happening and communicate across the board, which is a lot more work.”
But Atkinson says having open salaries helps him work with employees to define their career trajectories and measure up to higher-paid workers. “He will tell you things, and then you just have to take it with a grain of salt and try and take it as a good indicator of where you need to be,” says Marcela Caicedo, who has been with the company for nine months.
Atkinson believes the pros outweigh the cons, and says more companies should give it a shot. “We think it prevents evil,” he says. “We think it creates better equality. We think it makes better companies. It’s a really good step for people to try this.”