Open Salaries: Why

Transparent salaries are becoming increasingly popular. I know more and more companies that decide to change the traditional approach and make salaries known within the organization. Buffer goes as far as publishing their salaries to the world on their blog.

We did the same at Lunar Logic.

Pursuing open salaries just for the sake of doing it doesn’t make sense, though. What were our motivations to go down that path?

Transparency - Open Salaries

 

“Decentralizing control requires decentralizing both the authority to make decisions and the information required to make these decisions correctly.”

Don Reinertsen

First of all, we are evolving toward no management. This means that we want everyone to be involved in everyday management. Now, for a service company, such as Lunar, more than 80% of all our costs are labor-related. Without information about salaries, involvement in leading the organization simply can’t go too far.

“Collective intelligence was much more predictive in terms of succeeding in complex tasks than average individual intelligence or maximal individual intelligence.”

Anita Woolley

Another reason is fairness. The rule I’ve followed for years, whenever discussing salaries, is that I want them to be fair. Fair for an employee but more importantly fair for the whole team, group, organization. The problem is that it was me who was deciding what’s fair and what’s not.

Individual intelligence won’t beat collective intelligence on that account. I wanted to get more people involved in the process as this would let us make better, fairer decisions.

Transparency-OpenSalariesLunarLogic

Finally, I realized one thing when looking for stories of companies that either had open salaries from the beginning or changed to such model at some point. Transparent salaries, once in place aren’t much of a problem.

What happens to be problematic is the moment of the change. This, however, may be prepared for and managed so that the negative impact is not that strong.

There is one more thing that is a consequence of arguments pointed above. I do assume that a single person acting in best faith won’t be as fair as a group can be. This means that despite the fact that I chased fairness I must assume our salary list unfair to some degree.

The outcome of this is that sharing information about salaries alone would trigger frustration. Some people would consider some salaries unfair and, unless they could do something about the situation, the only reasonable outcome would be frustration. This means that it’s not only about information but also about control.

Transparent salaries must go along with a mechanism that allows everyone to influence how salaries are set. As Don Reinertsen points: it is information and authority.

That is, in short, why we decided to make salaries transparent and at the same time introduce a mechanism that allows everyone to influence what everyone’s salary will be in the future.

  • Congratulations Lunar Logic on taking such a courageous decision! We introduced in SoftwareMill a completely flat organization structure with full transparency (including financial) in 2013 (https://softwaremill.com/20-ceos-in-one-company/). Good luck! It’s a good direction!

  • So, I’m curious if you will ever lose someone because they disagreed with the way the groupthink influenced their salary.

  • Paweł Brodziński

    @Patrick – You seem to assume groupthink. I wonder why.

    There is a challenge related to groupthink and typically its root cause is poorly understood cultural fit. What I often hear when people mention cultural fit is that we want to work with people we get on well with. That typically ends with very homogeneous culture and thus groupthink.

    We do understand cultural fit differently though. What we look for when hiring is someone who fits a broad understanding of what our culture is but at the same time is as different from everyone who’s already on the board as possible. In fact, I’m often surprised how diverse we are.

    It is not to say that everyone is super-happy with their salaries right now. The goal is not to make everyone super-happy with their own salary but to make the whole system as fair as possible.

    I can give you an example. Imagine someone who thinks very highly about themselves. Such a person would value their work, skills and experience way above what others would value them. Would it be better to go with that person’s self-assessment or rather with collective knowledge of the group?

    While I don’t say there is one good answer for such a question, I do know which option we went for at Lunar.

    It is a part of a bigger puzzle. Diversity is one part. The culture is another. Transparency one more. What I often say is that if someone is all for money they can find a job that pays more than what we do. It is not to say that I don’t want our salaries to go up. Pretty much the opposite. However, I want them to go up as the whole system at the pace that is sustainable for the whole system.

    If someone’s expectations don’t fit such a model, that’s OK — they’d leave eventually. They would do it either way as in the past my (non-transparent) decisions were made with the same principle in mind. I simply might have not been as fair as we collectively can be right now.

    Finally, there’s one argument that frequently pops up in this line of discussion. What market would pay someone versus what they get now. Well, my answer is that salary should refer to value someone adds in a specific context. Change the context and you change the value. No wonder that different companies are willing to pay the same person vastly different salaries. That’s fair. And expected.

    Oh, and if someone boils it all down to the salary only, then we’d be a bad fit anyway :)

  • Maciek

    Hi,

    cool move on trying open salaries. I’m curious if management/ owner salaries are also open?

  • Paweł Brodziński

    Yes. Every salary is transparent, including ones of the CEO and the owner, as well as information about profit shares and dividends that we pay out.