The following is a letter to the editor of HR Executive Magazine published in the Jan/Feb 2011 issue.
As the article suggests, pay transparency is more than just revealing everyone’s pay. Rather than opening a Pandora’s box of emotions and unhealthy thoughts (“Ha – I’m way better than X” or “Waah – I can’t believe the injustice of it all!”) that will consume managers’ time and energy, pay transparency should be focused on everyone understanding the rules of the game.
When employees have the context of how salary and bonus budgets are determined, how individual pay outcomes are decided and how those outcomes relate to their performance relative to their peers, there is likely to be much less angst and awkwardness about pay discussions and employees can work on improving their future pay outcomes.
However, a lot of groundwork needs to be in place to ensure that all of this actually works. The company culture needs to emphasize openness and trust, employees need to have faith in the fairness of goal-setting and performance evaluation and there must be a proven history of pay-for-performance compensation decisions.