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Six Questions On Pay Transparency

As many of you probably know by now, GrantTree embraces Open Culture. One of the key aspects of Open Culture is transparency, which includes pay transparency. At GrantTree everyone knows how much everybody else is making. They are even responsible for their own salary review!

GrantTree transparent pay

Two of our team members, Paulina and Chris, were interviewed by Sky News at the end of August (here’s the video if you missed it) in relation to the pay transparency and pay gap conversations. Unfortunately television times don’t allow for much depth, which is why we decided to ask Paulina and Chris a couple more questions to find out a little bit more what’s like working with pay transparency and shed some light on the subject. 

Q: Given your position and history with the company, do you think your salary is fair?

Paulina

I do. My income is in the region of £70k from a basic wage plus dividends which depend on profitability of the business and are obviously accessible to all shareholders. Given my sufficient but overall limited experience as a founder/director (GrantTree should be able to find someone with a higher profile to replace me, if it decided to), and that we aren’t VC funded – but also stable financially – I think this is reasonable. A lot of what I, and my cofounder, have earned over the years has been reinvested back into the company because of the kind of workplace we want to build. And that requires additional funds.

Chris

Yes. We set our own salary according to a processes devised internally. First we look at an external benchmark (what are your skills and experience worth in the wider market). This provides a salary range, and then your internal progression (mastering your role / doing more complex work) justifies any additional amount on the external benchmark amount. The final amount, and the ‘research’ that goes into arriving at this figure, is published internally.

It’s the fairest, most objective system I’ve come across for self setting a salary. We go through this process company-wide once a year as standard, however you can commence a pay review at your own discretion if your role changes enough that you feel it warrants a review, or you explicitly change roles within the business.

Q: How do you feel towards your colleagues, knowing how much they earn?

Paulina

I’m currently on a mission to eliminate awkwardness, shame and lack of fairness in all possible forms from my life (and from the universe of things I have direct impact on). Financial transparency at GrantTree is 100% in line with that. In my opinion restricted access to information – financial and other – breeds politics, power imbalance, gossip and jealousy. It also discourages people from facing important issues that affect them, often simply because critical information isn’t accessible. Finally, it implicitly sends a message from founders/management to employees that they can’t be trusted or won’t be able to handle knowing other people’s salaries, let alone handling important decisions that must be taken on behalf of the business day in and day out. No wonder that as a result they – more, or less consciously – feel disempowered and unwilling to fully own their work.

Financial transparency which encompasses the entire company isn’t for everyone, and that’s why we make it super clear to our candidates what kind of environment they are potentially entering. Enough of them are still attracted to our vision and the way GT works to convince me there is a deep need for transparency, and trust in team members – clearly reflected in the way a business is structured – in the workplace in general.

Chris

I value the team for the work they do – just how people do when salaries are opaque. Given the above outlined process, a colleague’s salary only denotes the level of relevant experience they bring (if a new hire) and their development in the role (if an existing employee). I trust the above process, and believe our hiring process means we can trust employees to follow it. Outside of the annual review, and having new joiners, salary (mine or others) isn’t something I find myself thinking about much.

Q: Isn’t it weird that a founder is not controlling salaries and not making a lot more money than anyone else?

Paulina

Nope. It’s fair. A founder has taken the initial risk and made the initial push to get the company off the ground, which is important to consider. Still, she or he would never be able to scale the company effectively without a team. It is the team who carry the vision forward and give it its own life, entirely separate from the founder and what might be in their head (and is, at the end of the day, rather meaningless if not materialised). There are founders, particularly in the consulting space, who “milk” their companies ruthlessly. That’s their choice. From my experience, it’s impossible for it not to be reflected in the company culture and the attitude of the team.

Chris

When I consider GrantTree’s size, (30ish people), I don’t think it’s too strange. In smaller companies, I think it’s expected that a founder lead on hiring (including negotiating on salary), but we have a small team who looks after that. Similarly it’s not unusual for founders of small, yet profitable companies to take a small salary and be rewarded with dividends.

Q: Do you think this model is transferable to any company?

GrantTree tax credits pay transparency

Paulina

Yes. It’s down to dedication (which is ultimately underpinned by values) of founders/management. It will definitely be more difficult in companies that are traditionally closed and non transparent. That is, among other things, what I often recommend implementing other elements of open culture (such as team empowerment, effective and respectful communication, transparent decision process etc) before considering making pay transparent. It should be a logical consequence of a particular company culture that’s already in place.

All those convinced transparent pay (alongside, in many cases, self management) only works in small companies, I urge to read “Maverick” by Ricardo Semler. In the Eighties in Brazil, this visionary created possibly the world’s first open culture company with transparent pay. They had thousands of employees in the manufacturing industry, heavily regulated by trade unions and still managed to achieve this. Semco, now a big group of companies, still performs very well today while Semler himself is on a mission to create self-managed education (schools managed by students). More in his TED talk.

Chris

Our specific model: no … maybe… It would really depend on the model the company already uses. We practise open culture, of which transparent pay is just a part of. Transparent pay goes hand in hand with aspects of open culture, such as self management. I think it would be very difficult to implement transparent pay in an organisation with hundreds of employees, or a public company –  I’m sure shareholders would have strong, and potentially conflicting views. Whilst this model might not be transferable, it’s not to say that transparent pay isn’t achievable in any organisation. I believe it’s possible, but the methods and processes should be assessed case by case. In particular, in the instance of larger matrix organisations, transparent pay would almost certainly mean a broader cultural shift. It can take years to change the culture of a corporation, and it isn’t possible without the will of the employees, making such a transformation a real challenge. Better to adapt than to stagnate though.

Q: What’s the best thing about transparent pay?

Paulina

Tensions to do with pay (and all sorts of things – since money often represents people’s belief system and values) coming to the surface quicker. The way this stretches us and forces us to be adults, which means, for example, embracing all sorts of feelings I may have around money. Also, transparent pay communicates that Everyone is Worthy (one of GT’s values), can be fully trusted with information and important decisions.

Chris

Opaque pay isn’t really opaque, it’s more translucent. There’s always water-cooler chat, and people are likely to discuss their salary with trusted colleagues. When a company tries to keep pay opaque like this, they actually just create an environment where talking about pay is taboo – whilst I believe it’s intrusive to ask people outside the organisation about pay, I like the way transparent pay removes the internal taboo.

Q: And the worst?

Paulina

Tragically, I can no longer buy a Tesla on the company and pretend it was grandpa’s inheritance. LOL.

Chris

The pay review system works really well when everyone understands, respects, and follows the rules. The worst part about our system for pay transparency is its vulnerability. All it takes is one person to game the system for it to become ineffective. We know it’s vulnerable though, and so protect it by ensuring the people we hire will be comfortable / thrive in an open culture environment made up of things like self-management, and crucially, transparent pay.

What about you, people? How do you feel about Pay Transparency? Do you have an experience you want to share with us? We want to hear from you!

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