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.
Did RethinkDB do away with the whole thing or just the pay info? I have always read that the Pay part is a bit to much info to share as these problems with arise.
I don't think you should share anyone's salary. Being in sales, I already have too many haters based off of what they THINK I make. However, I love the open book managment idea. People want to please (we are all puppy dogs deep down). When you have that open and trusting relationship with your management, you naturally want to help them out. If you know where the company sits now and share the goals of where you want to be…I think most of the employees will work hard to make it happen. Here puppy, puppy 🙂
Andrew@1: Sorry I don't have an answer for you re: RethinkDB.
Jodi@2: Thanks for those thoughts. As part of that open book management strategy, I think management has to disclose how profits over-and-above original business goals will be used. That is: If a team easily exceeded company profit goals, will a portion of the profits be shared with the team?
-jp
@JP – Glad you addressed OBM and the question of salary. Over the years, I've had companies share salary ranges for each position, not individual salaries however. I've found that employees often over estimate what their peers earn and this resets the expectation. This dovetails nicely into the OBM philosophy by sharing “payroll burden” per department. My clients who have successfully rolled out OBM have done so with departmental salary load with great success. As @Jodi says, sales is always the hardest pill for other employees to swallow so we have often shown the base salaries separate from the commissions so it demonstrates the risk a sales person has by not performing.
Regarding portion of profits going to staff; that has definitely been a key to the success of OBM in the companies I've worked with. When everyone sees a shared goal and a reward for meeting that goal it's amazing the creativity and participation in problem solving.
@Jodi – best of luck with OBM at your organization. The “haters” are taking their cue from management. If management resents paying sales people the rest of the staff picks up on that and runs with it (remember your puppy dog comment?). It's great to see a sales person who sees the bigger picture!