Tag Archives: corporate culture

Pay Transparency: Where Is Your Organization on the Spectrum?


In August 2015, I wrote a post that took a decidedly guarded position on the benefits of pay transparency. That post was written in the context of the SEC’s pay ratio disclosure rules, requiring the disclosure of executive pay as compared to the average worker’s pay. I’ve been mulling the topic of pay transparency ever since then, wondering if I was too conservative. I recently attended a webinar on pay transparency sponsored by PayScale and BambooHR which caused me to adjust my thinking. This post deals with the merits of pay transparency as a management philosophy, rather than as a response to a government mandate.

The thrust of the PayScale/BambooHR webinar was that pay transparency is really a continuum of pay strategies. Each organization must decide where on the continuum to place its pay philosophy, based on the organization’s goals and desired culture.

If an employer decides to migrate further along the pay transparency continuum, then management and Human Resources in that organization need to be more disciplined in setting pay and in discussing pay with employees. Making pay transparency work requires good market data and an understanding of what skills and performance the organization needs from its employees.

The PayScale Pay Transparency Spectrum

pay-transparency-spectrum

As depicted in the webinar, there are five stages on the “PayScale Pay Transparency Spectrum.” The remainder of this post describes the five steps as outlined by Payscale and Bamboo HR, but many of the attitudes expressed regarding the pros and cons of each step are my own, and not necessarily those of the presenters.

1. What — Employees understand what they get paid — how much, when pay day is, etc. This is a bare minimum, and certainly all employers should at least be willing to tell their employees this much.

Even conservatives like me would not object to this step on the spectrum. If this is part of pay transparency, then I can easily support any company getting to this first level.

2. How — Employees are told how the organization uses data to make pay decisions. If the employer uses market pay data, then employees are told how market studies are conducted, or at least which companies are considered comparable. If jobs are graded on a point factor system, then the factors are described.

Opening up pay calculations to this level on the spectrum can be a big step in helping employees accept the fairness of pay scales and understanding the value of their job versus working at another company. But employees will ask questions about how jobs are defined and whether the benchmark companies are good comparators, so managers and HR do need to be educated in how to respond to such questions.

Again, I can readily support this step on the continuum for most companies. Assuming that an employer does have a pay structure with job grades and salary benchmarking, then the employer should be able to explain to employees how that system works. Not all companies will choose to pay to market, but if they don’t, they should be able to explain why (“we choose to be an entry-level employer, and we understand turnover will be higher,” for example). By contrast, when a company wants to be an employer of choice and to pay at or above market, then they should be happy to explain that philosophy.

3. Where — The third step on the spectrum is explaining to individual employees where they fall in the pay range. This goes beyond explaining what the salary range for a position is (Step 2) and requires telling individuals how their individual pay was set and what their future salary expectations are.

For certain (typically non-exempt) positions, salary increases are based on seniority or time-in-grade or the achievement of specific skill sets. In those instances, where pay increases are based on objective factors, it only makes sense to tell employees about the factors. In addition, when a company wants to focus on employee development and career opportunities, reaching this step on the transparency continuum can enrich the career planning and performance discussions.

The more subjective the criteria for offering pay increases, however, the more managers and HR need to be trained in how to discuss pay with employees. I think this was my hesitancy when I addressed the topic before. I’ve seen too many instances when managers handled these conversations poorly.

4. Why — The fourth step on the spectrum is explaining to employees why the organization pays the way it does. This requires a good understanding of the desired workplace culture and how pay fits with that culture. At this step, employers not only tell employees how they can increase their individual pay within the pay grades and ranges, but the organization also explains what is important for the future success of the organization.

At this level, management training is even more important than at Step 3. The questions about paying to market or not must be answered to deal with pay transparency at this level. Not all managers are able to talk effectively about workplace culture and employee engagement and retention. Particularly when managers themselves are not satisfied with their pay—or don’t understand how their own pay is set—they will not be effective communicators.

The webinar presenters stated that this level might be a good goal to reach on pay transparency, although they did not advocate it for all employers. They did emphasize the need for management training. I am not sure that many employers are ready for this level. Certainly many that I have worked with would need significant improvement in their management ranks before reaching full transparency about the links between pay philosophy and culture. But organizations with professional employees and highly skilled managers might well have this level as a goal.

5. Whoa! — Yes, this was the fifth level on the pay transparency continuum. This is the level that is often discussed in the media—where there are open discussions about which employee makes what salary, and everyone knows what everyone else gets paid.

The presenters indicated that this level might not be desirable for many organizations. And this is certainly where I balked when I wrote about pay transparency before. I’ve worked in departments where everyone had access to what everyone else made, and it was a difficult environment in which to manage. That may be in part because we were not as data-driven as we purported to be—subjective factors such as performance and prior job history played a role on where employees ended up within their salary ranges.

I’m still of the opinion that most organizations are not ready for this level of pay transparency. Some might be, but they had better be ready for a lot of difficult discussions with employees.

How to Reach the Desired Level

The last aspect of the webinar I’ll mention was the emphasis by the presenters on the need for the organization’s leaders to determine their pay philosophy and set a target for where on the pay transparency spectrum they want to be to suit their culture.

It’s likely that the organization will have to evolve a step at a time. An organization that currently does not even discuss pay ranges with employees is not going to get even to Step 4 without a few years of transition.

And the more transparent a system company leaders want to have, the more they need to invest in management training. Not all managers, and not all employees, will make the transition easily. Some turnover of those whose philosophy does not align with the desired culture will happen.

The webinar was a huge help to me in defining my personal perspective. I’m somewhere between Step 3 and Step 4 in what I would personally recommend. But I can now better articulate to clients what their options are and how they could develop from where they are at present on the continuum and why they might want to change.

Where is your organization currently on the pay transparency continuum?

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The Stories We Tell: Corporate Culture, Large and Small (Nike and Pocock)


On a recent trip to the Pacific Northwest, I was privileged to tour two corporate headquarters—Nike near Beaverton, Oregon, and Pocock Racing Shells in Everett, Washington. I love touring company facilities, so I looked forward to both tours. I like to see things being made, and I hoped to see these companies’ products and processes.

Although both Nike and Pocock make premier products in their fields, the company cultures I saw on these tours could not have been more different. I saw again—as I have seen at so many other companies—that corporate culture is created by the stories businesses tell.

The strongest cultures and brands develop when leaders send the same messages to employees, suppliers, customers, and the public. Consistency in message brings the right people together, both inside and outside the company, to deliver on the brand’s promise. Inconsistency in message sows confusion and strategic incoherence.

Nike
Nike 20150731_102922Nike’s headquarters is huge. It encompasses blocks of office buildings and includes soccer fields, a football field, indoor gymnasiums, and two child care centers. We were told that Nike has around 60,000 employees worldwide. I think about 6,000 of them are in the Portland, Oregon, area.

Nike doesn’t manufacture in the U.S., so we could not observe product lines. We were kept far away from any product design and development areas. We didn’t even see any employee offices. We were shown displays of old products, as well as as the state-of-the-art employee amenities. An employee soccer match was underway as we walked through at noon.

The headquarters complex is a paean to the company’s products and history, as well as to the champions who have endorsed Nike’s products. Most prominently, of course, is Michael Jordan, and some of his Air Jordans were under glass. Statues and plaques of famous athletes from all sports line every hallway and outside walk. (Some people on our tour became starstruck when Serena Williams rode past us in a golf cart.)

Nike was founded in 1964, and adopted the Nike name and swoosh trademark in 1971. It has, as we all know, grown into a worldwide conglomerate. Our guide told us about the early days of Nike, when Bill Bowerman developed the waffle bottom for the original shoes (allegedly after being inspired by his wife’s waffle maker).

Thus, despite its current size, the stories Nike tells still revolve around its humble beginnings. However, the tour guide also stressed Nike’s commitment to health, environmentalism, and charitable giving, in addition to improving sports equipment and apparel.

Nike also emphasized its relationship with the University of Oregon athletic program. One person on our tour had been to Eugene to see its athletic facilities and came away impressed with Nike’s contributions to the physical complex as well as with the products Nike provided the Ducks.

Pocock

pocock logoIn contrast to Nike, the headquarters facility of Pocock Rowing Shells is a large metal shed, not far from the large complex in Everett, Washington, where Boeing manufactures airplanes. Although Pocock has been in operation in the United States since 1911, today it boasts only about twenty employees total. The company runs just one day shift of craftsmen making its synthetic rowing shells. Each boat is made one at a time from mold to finished product in that shed—no assembly line production for Pocock.

The small administrative area is on the second floor of the building, where there are a few offices holding dated furniture. Its inventory management system consists of a single whiteboard that shows the delivery schedule for each boat on order.

Knowing the reputation of the Pocock boats for quality, I was underwhelmed by what I saw. I had expected a much bigger facility, with far more boats being manufactured. Our guide indicated that Pocock intended to keep its small size and hand-crafted products.

Like Nike, Pocock’s public spaces feature athletes using its products. The difference is that there is only a single hallway, instead of a multi-acre property. Like Nike, Pocock maintains a close relationship with a college athletic program—in this case the University of Washington crew team.

At Pocock, too, the mythology around founder George Pocock and his son Stan (who died last year) were part of the story. Our guide pointed out George Pocock’s involvement with the University of Washington crew team that won the 1936 Olympics, as described in the current bestselling book, Boys in the Boat, by Daniel James Brown.

Unlike Nike, Pocock let us watch its products being made. We observed a rowing shell under construction for about half an hour. (I wasn’t allowed to take pictures.). We weren’t allowed on the manufacturing floor, but we could see several layers of material laid down during the space of those thirty minutes. Our guide was fairly open about the materials and processes used on the shell, though it is a proprietary process. This was the type of experience I wanted out of both tours, but only received at Pocock.

* * * * *

Both Nike and Pocock operate in the world of sports. There are similarities in their stories—both talk about excellence, from the foundation of their companies to the present. But Nike’s stories also emphasize its worldwide reach and size, while Pocock emphasizes family and craft. Each is successful in its arena, but their cultures are different.

Another Pacific Northwest company’s culture has been in the news recently—Amazon. Amazon’s culture is said to be hard-charging and performance-driven. I’m sure if I toured Amazon’s headquarters, I’d see something quite different than I saw at either Nike or Pocock.

I wonder if the stories Amazon tells about itself match the stories that have been reported.

What company culture has impressed you? How do the stories told foster that company’s success?

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