Transparency in organizations creates buy-in and engagement.
Team members feel more accountable, responsible, and connected when they are invited to discuss decisions and strategies openly and candidly.
Contemporary leaders purposely expose the workings of the organization to build trust, fairness, and alignment.
The benefits of sharing and discussing such issues as capital expenditures, promotion criteria, performance ratings, financial health, and engagement metrics far outweigh the disagreements some team members might register from knowing more about how the sausage is made.
Despite the trend of more openness and transparency, organizations tend to highlight process transparency more than they do outcome transparency.
In other words, they more readily share how things work than they do the outcomes generated by the process. For instance, leaders are more likely to share how performance is measured than they are the actual ratings of individual team members.
But the push for more and more transparency has led some leaders to openly disclose and discuss just about anything of importance in the organization.
In full-transparency workplaces, anything that directly affects team members is fair game and open to examination.
Issues that were once held closely by leaders are now shared openly across the organization, including shifts in priorities, budget constraints, revenue growth, personnel changes, team realignments, promotion criteria, and team engagement scores, to name just a few.
Like all trends, some organizations and leaders go too far and create quite a mess by being too transparent. Sensitive matters and issues that require privacy remain off-limits in good organizations, lest they create conflict and litigation exposure.
Ongoing legal matters, sensitive negotiations, and personal conflicts or disciplinary actions are topics good leaders don’t share or discuss.
Add to that list individual compensation.
Transparency of individual compensation is fraught with danger for leaders and organizations.
While good organizations are transparent about how compensation decisions are made and often discuss salary bands by level, full transparency of compensation invites social comparison, resentment, and negative inquiry from team members who lack the full context for why a particular decision was made.
Once team members are aware of peer compensation, comparisons intensify, feelings of undervaluation surface, and performance disagreements often become personal.
Leaders come under assault for a lack of fairness, perceived bias, and inaccurate performance assessment. People focus on pay gaps, not on the rationale that explains them.
Research suggests it is high performers who are often the most disgruntled and feel the most underpaid.
Because of this transparency, average performers feel exposed and sometimes even humiliated. The more competitive the environment, the more these perceptions and feelings intensify.
Foggy or vague performance criteria also magnify the resentment people feel.
In companies and enterprises where everyone can see everyone else’s salary or where open formulas for compensation are tied to role, experience, and performance, team morale plummets, and collaboration is severely curbed. Exceptions to the rule are short-lived.
The power of transparency clearly has its limits, and good leaders avoid the trap of openly sharing compensation between team members.
While the process for how pay is determined is essential to create goodwill and fairness, the transparency of individual compensation is a train wreck waiting to happen.
Don’t get on that train.
A Daily Dispatch from the Front Lines of Leadership.
