Entrepreneur.com explores the issue of employee compensation transparency in a recent article weighing the related pros and cons.
As a business grows, making case-by-case salary decisions may no longer make sense, and may “cause employees to speculate, often inaccurately, and gossip about who earns how much. This dynamic can distract them from doing their jobs.”
Some entrepreneurs are adopting an open stance on what everyone’s earning, while others consider this “crazy.”
Core issues regarding employees’ views of their compensation package:
- Employees perceive salary decisions as arbitrary and presume they’re unfair.
- Employees view their performance differently than you do.
- Employees are confused about how the performance and compensation system works.
Strategies to address these issues include:
- Define every position in the company and develop a salary formula for each.
- Regularly communicate to employees about performance expectations and where they stand in living up to them — both officially in an annual review and informally on an ongoing basis.
- Educate employees on your performance and compensation system, department by department, whether they ask or not.
“Once you’ve followed these three steps, you’ll have an objective, systematic and well-communicated approach to inform your company’s performance and salary decisions. At that point, whether or not you make salaries transparent will be a moot point because you’ll have effectively eliminated the underlying issues.”
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