Open Book Management: Time to Share Employee Salary Info?
Open Book management — where business owners share financial and profit information with employees — can often lead to a more informed, more responsible staff. But just how much information should CEOs share with their employees? That question popped into my head again yesterday when The Wall Street Journal profiled several companies that disclose just about everything (each employee's salary, pay scales, bonuses, performance reviews, etc.) with all staff members.
On the upside, The Journal said, complete open book management “builds trust among workers and makes employees more aware of how their particular contribution affects the company as a whole.” The Journal noted that SumAll, a data analytics company, has a shared drive that allows employees to view investor agreements, company financials, performance appraisals, hiring decisions, employee pay, workers' equity and bonuses.
The Open Book management approach can be especially valuable for MSPs (managed services providers) that are shifting to an ESOP (employee stock ownership plan). Since employees ultimately are the company owners, they need to have a feel for all costs, revenue opportunities, profit margins and so on.
Still, there are plenty of companies that tried and abandoned Open Book management. The Journal noted that RethinkDB, a database company, experimented with open pay information but potential recruits saw the salary figures as a starting point for negotiations — which frequently upset the apple cart. So RethinkDB abandoned the open approach.