In the past year, I’ve considered salary transparency for the agency I founded, Siege Media.
For context, we’re a 40-person, SEO-focused content marketing agency with offices in Austin and San Diego.
However, after thinking on it and the context of its application for our agency, I’ve decided against it. Some recent research on Wall Street Journal also helped clarify my thoughts on the subject. Specifically, this paragraph helped solidify why I thought it might not be a fit for us:
In essence, it seems that salary transparency’s fallibilities come down to issues with human psychology and incomplete information. Understandable — in large, complex organizations, it’s hard to be fully transparent with all information available to you, if only for lack of time.
For example, in our organization, one of our key performance indicators are links. To people on different sides of the organization, they could look at our link tracking documents and wonder why Person B makes more money than them despite that person generating less outcomes.
However, given incomplete information, they might not know that that client is in a much more difficult industry to generate links in, or that that person is also dependent on other inputs from designers, clients and others to determine their success.
Given this, if we created a pay structure with absolute values, it’d be basically impossible to effectively distribute the reasons Person B makes more money/warrants that pay despite their surface outputs looking lower given the many variables that may contribute to their success or failure outside their own control.
For this reason, full transparency is difficult.
However, the goal of salary transparency is still possible. That goal, in my opinion, is to achieve fair pay in an organization across the board. People aren’t favored. Pay isn’t distributed unequally. Males aren’t paid more than females.
This idea, as a founder or leader in an organization, is achievable. It just takes deliberate focus in achieving it. In my mind, it’s possible with the following process.
1. Hire and Train vs. Hiring Experience
Hiring someone is effectively an educated guess. Referrals help, but at the end of the day you are making a directional guess about the output of an employee against their expected pay.
For this reason, the more experience/skill warranted, and the higher the pay, the less room for maneuvering you have as a business. It is much, much easier to go up in salary than it is to go down.
For this reason, the more people you hire into Senior/Management roles, the harder it becomes to functionally achieve the goal of salary transparency — fair pay throughout the organization. It is likely, if not certain, that the larger the gaps in pay you hire into, the more likely it becomes that some of those people you bring in will actually end up getting paid more than they produce.
They might not be worth firing, but will skirt right at the edge of discomfort if you had to open the kimono and tell someone that yes, Person B makes $X,XXX more than you expected.. because they just happened to be in-house or overpaid before they came to you, and/or had some negotiating leverage in your initial discussions.
Or more positively, perhaps they simply were great in the situation they were previously, but the reality of incomplete information meant that one piece of the pie was missed and you actually got a C+ employee instead of the A you expected.
By building a great system of training and developing employees from bottom up, you are more likely to create an organization where pay structures accurately reflect the outcomes they produce… thus achieving equal pay. This is because you have maneuverability to give these people raises as they deserve it and map the pay structures of the organization proportional to the outcomes.
By bringing in Senior roles, you have to either fire those people, or skirt by with the reality that they may be operating profitably, but not doing work that warrants that they make more than the person next to them. Of course, you could pay that next person more to create equilibrium, but that may also create pay structures that now increase the risk profile of the business due to upward-adjusted salaries across the board.
I’m aware that this is easier said than done. Larger companies inevitably need to bring in more senior people, management roles, and etc. But that does not change reality: I believe truly fair pay is only achievable where there is absolute salary mobility, meaning the majority of your employees started at near the bottom of the pay structure and worked their way up.
We’re in a lucky situation as an agency… we tend to hire talented, hard working junior people and train them up. We’ve never hired someone who came in directly as a manger. That’s pretty common for other companies of our type, but I’m also deliberate … given our specific offering (SEO-focused content marketing with high-volume email outreach), it’s unlikely anyone with experience in marketing has done what we do specifically.
For that reason, we rarely hire people with 3–4 years marketing experience. They meet at the intersection of wanting too much pay for asymmetrical experience doing what we do. Therefore, there’s a higher risk profile that they may not warrant the pay they come in at.
Even if they’d still produce work profitably for us, they’d sit in that exact spot I don’t want: a company pay structure that does not truly reflect the performance of the individuals within it.
2. Develop and Stick to Salary Ranges
As we started growing more aggressively, I realized I needed to take pay more seriously. I love giving large raises, but it just wasn’t a smart decision for me to be doing this YOY forever without any constraints around it. If I did, eventually those well-paid people would be out of a job.
Creating salary ranges for each level of our team structure helped put in place conditions for us to grow in a healthy fashion. Also, it creates a great structure for maintaining fair pay — if you refuse to let a new hire enter into a position at a higher pay than their range, you maintain the goal of the salary range system.
This helped me in discussions with new hires — I simply won’t budge for a given position past a certain number based on what I know about the hiring environment and our ranges. If I hadn’t, I might occasionally allow for a higher pay and start creating the cracks of a asymmetrical pay structure within our business.
That said, I’m reasonable. It’s not going to be attractive for a talented hire to get pushed down in salary or title, especially if they’re leaving another job to join us. So, the way I balance this is pitching them on a three-month salary and/or title review upon hire and revealing several case studies of the company giving aggressive raises as they’re warranted.
This process has worked universally for us for anyone on the border negotiation wise. We maintain fair pay, salary mobility, and also give a great candidate an opportunity to quickly earn the pay they deserve… if they deserve it.
Similarly, I find this helps solve a common problem: males negotiate more than females. I want to pay equally and do, but it’s still reality (in my experience) that males tend to be more aggressive on the negotiation table. These constraints make sure I don’t create inequal pay distributions between sexes even if one comes back more often with a counter than the other does.
3. Give Raises and Bonuses Outside Traditional Review Periods
It’s common for businesses to have yearly reviews. At the end of the year, salary is evaluated and a raise is given… or not.
However, there are problems with this process. 12 months is a long time. New hires often outperform their pay grade.. quickly. For the same reasons new hires can come in and seemingly underperform their higher salary request, the opposite can happen as well.
Therefore, to achieve truly fair pay, you must be willing as a business owner to give a raise as its warranted… not on the 12 month salary review cycle.
Many owners would take this as a beautiful, money making opportunity. The employee agreed to this pay! Now I can reap the benefits. However, that can come back to bite you, or otherwise, simply not reward you.
People appreciate these “sudden” raises that come unexpectedly. As a business owner, yes I care about making money, but I also care about creating fulfilling jobs that people enjoy and don’t create financial stress. This is the right thing to do, but I also know it’s a good long-term business decision. Do right by people, and they’ll do right by you.
To achieve this and accelerate the feedback cycle, we have quarterly reviews. As we grow, I know I won’t always be able to accurately perceive the performance of newer people in the organization. These reviews, as well as communicating this thought process to the management team, means I can get the information quicker and get people to fair pay, faster.
I’m not perfect, and as we grow, my time gets pulled in more directions. So, I do still formally review salaries on a yearly basis to make sure gaps do not get missed and people are rewarded.
This “ad-hoc” thought process is mainly for solving for the immediate 7–10% salary gaps between performance and pay that can happen with new hires. If you’re looking, those gaps should scream at you. If you want to do right by that employee and in turn, begin the process of building a long-term relationship with them, you should reward that great work.
I understand that one reason not to do this is financial risk. Giving raises increases costs. Deferring that cost might mean you’ll be healthier in a down period and therefore, be able to pay those employees more down the line. That’s understandable, and definitely should be a consideration.
One alternative to this if approaching a critical contract renewal or something else that could go either way is paying out with a bonus instead of a raise. This creates a short term financial loss, but also keeps their salary at the same level. Effectively, it gives you the ability to still give them a raise at the end of the year but also defer that raise in the event of a financial downturn. This gives you lower average long-term payroll risk while still rewarding that employee short-term.
However, there is still risk. For the same reason salary transparency has psychological fallibilities, bonuses do as well. Often, people do not and will not consider a one-off bonus in their total pay package if another company comes to them and offers a significantly better base.
Closed Door, Open Mind
Yes, I don’t fully offer up the ranges or salaries of each individual in Siege Media. After running it by members of our team and getting confirmation from publications like the Wall Street Journal, it hasn’t seemed like it makes sense for us.
That said, I believe it’s possible to build an organizational pay structure you wouldn’t be embarrassed about if someone happened to come across it. Or, if people talked within your organization, wouldn’t be shocked about if they happened to come across someone else’s pay.
The real goal of salary transparency is creating belief in your team that they are receiving fair pay. Ironically, salary transparency can often do the reverse.
Therefore, the best way to make them believe they are paid fairly is to do it. Show them you will reward them when they do great work. Show them promotions are given because people are deserving, not because of politics. Avoid hiring upper management externally. And do that, time and time again.
In doing so, I believe you’ll build a healthy, thriving business. And perhaps more importantly, you’ll build an ethical one as well.