The Unexpected Step That Led Us to Transparent Salaries

We’ve decided to create a completely transparent salary system. It’s the last piece of the transparency-puzzle needed to complete our company transformation, and alas we’re almost there!

Note: This post originally was written by Kristóf Bárdos, the CEO of Digital Natives. In it he tells the story of how our company became fully transparent, with making the salaries transparent. I wanted to share the story with you, as I think it can be valuable for those, who planning to do the same. I hope you’ll like it. Enjoy!

We admit this was a hard one, with more than a couple of bumps in the road. Once again we realised that there is nothing harder — and fruitful at the same time — than changing the mindset and behaviour of an existing organisation.

For the last couple of years all of our financial data and contracts have been available for viewing across the company. I know I can trust my colleagues and didn’t feel that they needed to be kept confidential. So why then are salaries kept secret?

My default answer was because of historical reasons. But once we got talking about this as a company it seemed that the problem was more complicated than that. Many of us started to speculate “what if I earn too much and others believe I’m overpaid?” “Will they want to reduce my salary?” OR “What if it turns out the guy next to me earns more but is less experienced?”

So when society has worked this way for so long, why would we want to shake things up and risk tensions in the workplace?

Well, I had to realise making available our company financial reports to everyone is a totally different animal than publishing wages. The latter is attached to the person’s ego and for many expresses the value of that person (which is actually not true, but that’s a longer story). The long story short of it is that salary is connected to the lowest level in the Maslow pyramid, and this elementary level triggers the inner fears that ensures our life-surveillance system. Without a trustful environment it doesn’t make sense to play with these triggers, since we can easily lose more than we gain.

So why did we decided to move forward?

Recently, we were hiring a couple of new team members, and we’ve realised that the salary expectations have been pushed up in the last two years (20.000 IT professionals are missing only from Hungary — we work hard to solve this with Green Fox Academy). It’s easy to figure out what this means to for our company; we have to offer more to the newcomers than to our loyal talents on the same experience level — which is obviously unsustainable for many reasons.

This created a wage pressure tension in the organisation, so we wanted to prepare a fair salary system to overcome the issue.

What are the attributes of a fair system?

  • Based on more or less measurable factors: skills, experience, loyalty (years in the company)
  • Independent from the personal negotiation / political skills
  • Transparent, both the salary policy and the actual wages are available to everyone

Many of us agreed on the first two points, but not the 3rd one, see the mainly emotional reasons above.

So, me personally I didn’t want to get into a war at this point, so Balo (a respected tech lead guy from the team) and me accepted the challenge, and committed ourselves to researching this topic, which included interviewing people to come up with a new salary solution — without touching the transparency itself.

The first obstacle to overcome was this: how can we model a new method of salary calculation without having the current data of salaries?

There were only three people who had access to these numbers and Balo wasn’t one of them. Despite my desire for a transparent system, even I as the CEO didn’t want to give him access without the permission of the DiNa community. So how did we get around this? Well, we decided to create a voluntary Salary Group, where individuals could put forth their salary details for use exclusively with the salary modelling process — it was quite successful and we collected ten data points from 25 members of staff. (Yes, it was a bit of a weird process, and immediately highlighted some possible tensions).

In the working group, we’ve researched a couple of models and we came up with a formula, that incorporates proficiency level of the major skills, relevant work experience and loyalty — the number of years that one had spent in the company. We used the Buffer salary formula as a major guideline.

At the beginning it seemed like we were making good progress and interviewed ten people to ask their opinion about our formula ideas — everyone seemed accept these parameters as key drivers of the salary calculation.

The next step was to put our theory into practice activating our salary formula with the voluntary data and it still worked well. So we gave ourselves a pat on the back and agreed to publish our formula-proposal in the next regular all staff meeting.

24 hours before the All staff meeting I couldn’t really sleep, I woke up in the middle of the night and started to use this model for the entire company — doing it by myself meant I could apply it to salaries outside of the voluntary data, across a wider variety of positions, from junior and intermediate to higher level salaries.

The results were shocking, our formula may have worked well for ten people, but it didn’t work for 25! I discussed it with Balo and he and I agreed that the out-coming numbers are even less fair than the existing ones — our formula had failed and we needed to start from scratch. We were more than disappointed.

Everyone in the meeting shared our disappointment when we explained that despite our good progress, our formula didn’t work.

The team began to challenge us:

· What went wrong, everyone who volunteered their data thought your formula was a good idea?

  • Correct, but when we put it into practice we realised it was flawed
  • Who say it’s not working, Kristóf and Balo?
  • Yes, because we’re the ones with access to the salary data and since we don’t have permission to publish the salaries, we can’t really tell you why it hasn’t worked!

Insane, isn’t it?

We were stuck between a rock and a hard place. The lack of transparency in salaries meant we couldn’t adequately explain the issue with our formula. We couldn’t ask for help or promote belief if the idea of a new salary system.

Just as we were ready to give up, there was a dramatic twist… Just like in a fictional story, when a community faces a serious challenge, a hero shows up with a “crazy” solution.

In our case Amr showed up, one of our developers who is super committed to transparency, pluralism and non-hierarchical organisations. He sent a message to the entire organisation on Slack that night to declare that he doesn’t accept this situation, and he really wants to move forward to solve this tension.

He suggested that the only way of realistically moving forward was for the entire company to publish our salaries so that we could all work together to solve the issue.

So, in a brave and psychologically well placed move, Amr published a spreadsheet, where we could all enter our current salaries, or declare if we still didn’t want to participate.

The result? In less than 24 hours every single team member had filled in the spreadsheet with their salary.

If I, as the CEO had told everyone to publish their salaries in this way, it wouldn’t have worked, but because one of the team did it, there was just enough positive peer-pressure to encourage others to follow suit.

Next, another member of the team, Pepusz put forward the idea of voluntarily putting ourselves into seniority and work-experience ‘baskets’, which would help us test our salary system.

Follow-up

We’re still not quite there with our new salary system, but we’re certainly making progress. We have learnt so far that whatever difficulties we face as a community, there is enough trust and power in the organisation to get us over it.

As the process goes by we will share our further experiences, so stay tuned for the results.

If you’re interested in implementing a transparent salary structure, we recommend reading these:


Originally published at blog.digitalnatives.hu on September 20, 2016.

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