Where is your organization on the compensation transparency continuum?

It's an especially relevant question in today's world of instant access to just about anything. For those of you working in the HR/compensation field for more than 10 years, you probably remember when pay data was something that only a small number of  people in your organization ever saw or even knew about, and it was kept in a locked file cabinet. Today, pay data is everywhere (of course, a lot of this data isn't particularly valid, but that's a post for another day).

Some organizations are remarkably open about their pay programs and pay philosophy/strategy, while others remain tight-lipped about anything related to how compensation is determined and communicate accordingly.

Today, while reading an excellent white paper on the subject put out by the folks at KnowledgePay, it got me thinking that its time for the more "closed" organizations to re-think the whole openness and transparency issue.

To me, openness and transparency, while similar concepts,  are not exactly the same. Openness refers to the degree that the company is "willing to open up" with regard to the details of its compensation philosophy, strategy and program(s).  Openness is more of a strategic issue that HR and senior executives struggle with (what and how much do we communicate?). 

Transparency, however, refers to the degree that program participants can "see" how their compensation program works and how it impacts them.  Openness certainly contributes to this, but transparency goes a step further, referring to what we call the "what's in it for me" question ("WIIFM").  All rewards-related communications (base pay, incentive, benefits, etc.) efforts should keep the WIIFM question in mind as the communications plans are developed.  It's really the one question that virtually everyone thinks about when you communicate to employee groups about anything pay related." (Base Pay Toolkit, 2009).

Research has shown that greater openness and transparency can create greater levels of trust, which is a desirable state for any organization. For instance, studies done by Watson Wyatt have shown that companies with greater levels of management/non-management trust have achieved significantly higher levels of total shareholder return than organizations that have low levels of trust.

Am I arguing for total openness and transparency?  Absolutely not!  But I am trying to argue for enough openness and transparency to foster understanding, greater levels of trust, and so employees can answer the WIIFM question that all employees want to know.

"A lot of the debate about pay transparency is misframed.  Too often it is focused on what employees are paid and the idea that employee pay data should be made more public.  This is not transparency - this is an invasion of privacy. An appropriately transparent pay program is one where we have communicated with employees the why and how of the organization's pay practices." (Ann Bares, Altura Consulting Group).

My feeling is that if your organization has built a competitive rewards program based on sound principles and analysis, what's to hide?  Share the news!

So, in today's' world of instant communication and information accessibility, what is the "right" or "correct" amount of information that should be shared with the workforce?  Ultimately, that's up to your organization's comfort level, but we do know that with greater openness and transparency, it is likely that your organization will help to foster healthy levels of trust, and likely a stronger ability to attract and retain the talent you are seeking to move your organization forward.