It sounds crazy, but some entrepreneurs are finding that salary transparency may do wonders for company culture.
Most business owners operate under the assumption that discussing compensation openly is the quickest way to incite an employee revolt. When employees know how much their colleagues make, after all, it gives them added leverage to ask for a raise, which could, potentially, eat away at a business's margins.
But Joel Gascoigne, founder of Buffer App, a social media managing tool, thinks he's found a way to make radical transparency work for his company. In fact, he's so confident in this strategy, he wrote a blog post about it Thursday, describing the salary structure for the entire company and listing actual employees' salaries as demonstration. (And yes, he did get employees' permission to tell the world how much they make).
According to Gascoigne, "One key reason transparency is a such a powerful value for a company's culture is trust: Transparency breeds trust, and trust is the foundation of great teamwork."
For several months, Gascoigne writes, he had been introducing more transparency to the company by being open with revenue numbers and publishing monthly progress reports on Buffer's customer support and blog performance. He even instituted a policy in which employees must cc their entire team on every email, even if they're writingonly to a single person.
It's only recently, however, that Gascoigne decided to experiment with open salaries. "Open salaries are a step towards the ultimate goal of Buffer being a completely open company," he writes in the post. To make it work, Gascoigne knew the salary structure had to be objective, based on real skills, experience, and levels of seniority, rather than personal feelings toward employees. So he developed a simple formula:
Salary = job type X seniority X experience + location (+$10,000 or additional equity)
That leaves salary ranging from $70,000 at a low level to $158,000, Gascoigne's salary.
The posting sparked a lively conversation among business owners. "The worst thing that can happen to company morale is when a very productive and talented employee finds out they are being underpaid by accidentally discovering the salary of a less productive but overpaid employee," writes one commenter, John Kabler. "This is a GREAT and very brave idea from these people."
Not everyone agreed. "After 15 years of startups you learn that not all contributors are equal," wrote Dan Portillo. "There are always a couple of people on each team that carry most of the water. By publishing salaries, you limit your ability to compensate outliers. It may work now, but will likely breakdown at scale."
Gascoigne's approach, of course, isn't entirely unique. At SumAll, a New York City-based business analytics firm, not only are salaries public, but when a new employee joins the team, every other employee votes on the newcomer's salary.
"It causes trouble all the time," CEO Dane Atkinson told me recently, saying there are times when new candidates receive offers that are higher than some of their existing peers' in the company. When that happens, those existing employees are more inclined to ask for a raise. And sometimes, tough as it may be to swallow, Atkinson admits, they deserve it.
"It brings those conversations up faster," he says. "But because it's so transparent and we have this structure, people understand the threshold to get more money. It's tough as a manager, because you have those conversations a lot but it's better for an organization."
More from Inc.com: