Money matters
December 15, 2008 · Print this post
Do you talk openly about salary with your team?
Money is a sensitive topic in US work culture (I don’t know if it is in other countries, perhaps someone will enlighten me). But “sensitive” doesn’t have to mean “taboo” — and if you’re promoting transparency as a management value, you need to consider being open about how your company manages salaries.
I never talked about money with anyone at work except in the context of negotiating a job offer, or having my boss tell me what kind of a raise I was getting. Except for the year when I got a 2.5% raise (when others around me were getting 5% – 10%) — that year, my boss let me find out the good news when I got my paycheck and did the math.
I was devastated. I thought I was on the fast track to getting fired. I went home feeling sick. And when I finally gathered my courage to approach my boss, he told me that no, I was so close the top of my pay grade that 2.5% was as much as he could give me, but he was working on ideas about promotion for me.
Imagine how much better my day would have been if he’d just told me up front? But he was embarrassed about the raise and “didn’t know how to disappoint me.”
I was lucky: I could at least find a way to start the conversation with him. Many people are much more wary of approaching their managers, especially in times when everyone’s job is less secure.
When I managed my own large team, I sat with everyone during their performance review and showed them the company’s salary range chart. I showed them what salary grade they were in, and explained that everyone at their job level was somewhere in that grade. We talked together about how they could get an increase (performance goals), or get to a higher grade (promotion). And I found out that no one had ever shared any of this information with them before. They didn’t even know for sure that the people in the same jobs were in the same pay grade.
People won’t always be happy with their annual increases or their bonuses. But when you share information, you make it easier for people to let go of suspicion or dread, and instead to focus on how they and their team can go farther. When you share information, you make money less personal. You show that it’s a process, not simply a crap shoot or a favor-based system.
And if you can’t share information because you know that salaries are unfair? Well, I guarantee that your people already know that too.
Have any salary stories or ideas to share? I’d love to hear them.
I’ve read Patrick Lencioni, and also The Seven Day Weekend by Ricardo Semler. And a big long-time fan of Paul Hawken. All of whom convinced me to open up about our finances with our (one!) employee, despite decades of taboos about talking about money like that.
It’s been incredibly helpful- it’s helped us not only have a compassionate and responsive discussion about pay, bonuses, and profit-sharing. But, it means that she’s jumping in to help us make the business work, and she’s got the information she needs to do that.
I feel MORE relaxed and secure sharing the financials with her. Thanks for bringing up this great topic.
Any particular recommendations you have about being open when there is pay disparity? For instance, the next person we hire won’t be working at Kate’s level, and so won’t be receiving the same pay.
Ah, pay disparity.
I think that context is always important in talking with people, and it’s doubly important IMO when talking about money, since money is so closely and emotionally linked to “personal value” in our culture.
And people have a lot of fear around talking about money. I’m so impressed by Kate’s story of her interview and your willingness to be authentic. That’s the real key: salary is the employer’s decision, but I think the conversation needs to be two-way. As I said in my post, if my boss had just told me up front why I was getting an insulting raise, at least I wouldn’t have been so insulted.
Here’s what I think is important to be clear about:
1) The standard on which your pay system is based.
Whether you go with “salary grades,” or annual raise of X% plus Y% for bonus, or commission, or whatever, it’s important that there be some starting structure that you can describe clearly, and that applies to everyone. Even if it’s “everyone here starts at minimum wage.”
If your structure is “this is what I can afford to pay right now,” then you still need to be able and willing to explain that. The overall point is being transparent about the criteria.
If someone’s coming in to do the same kind of work as Kate, it’s fairly easy to explain why they are making a different rate of pay — you can compare apples to apples in terms of time/experience on the job, hours worked, etc.
If it’s a different job completely, then you need to be able to explain to both Kate and the new person what criteria you are using to determine the base value of their respective work.
2) How people can advance in pay, and when they should expect to have the next conversation about it.
I really believe in telling people what it will take to get you to pay them more. If it’s tied to the growth of the overall business, great. If it’s tied to individual performance goals, that’s great too. The only requirement is to be clear.
I think it’s important to be open to talking about money anytime, but I believe in structure in these matters. If you’re going to review salary annually, say so right up front. If you aren’t (or might not), say that too — people have a default assumption about annual reviews.
Hmm, I have gone on a while about this. Is it helpful? If I’ve missed the boat and there’s a different quality of input you were looking for, please let me know. And thanks for a great question.