Employees today are more likely than ever to demand transparency about compensation practices at their organization. Total rewards leaders agree that pay transparency would benefit the organization in numerous ways. Yet even though everyone seems to be on board, organizations are slower to adopt this practice than you might expect. In our latest research at Gartner, 60 percent of the organizations we surveyed said they had not yet acted on pay transparency at all, while only 14 percent had fully realized it.
So why aren’t we making faster progress toward an outcome all stakeholders agree is the right thing to do? In a session at Gartner’s ReimagineHR event in London last Thursday, Advisory Leader Ania Krasniewska armed the total rewards leaders in attendance with strategies for surmounting obstacles to pay transparency and getting senior leaders and line managers at their organizations on board. Here are some of the most common reasons why organizations shy away from pay transparency, along with some counterarguments HR leaders can use to win over a skeptical CEO:
“It’s just a trend.”
The pressure organizations are facing today to be more transparent about their compensation practices comes from several directions: Millennial employees expect more transparency than previous generations did, employees have more access to (often inaccurate) pay information from outside sources like Glassdoor or PayScale, and governments and the media are advocating transparency as a means of driving pay equity. For an executive wary of pay transparency, it may be tempting to reason that these trends will eventually pass, but there is good reason to believe otherwise.
While Millennials and Gen Z are the employee cohorts most commonly associated with demands for pay transparency, they’re not the only employees who want it. Like other Millennial-driven trends in the workplace today, the younger generation of employees is simply more vocal in demanding things that in fact, employees of all ages would like. Their attitudes also influence their parents, neighbors, and older colleagues. Millennials aren’t the only ones using Glassdoor: Many of the employees who use these external sources to compare their salaries with those of their peers are in senior positions at their organizations. Furthermore, Millennials aren’t going away; they are already the largest segment of the workforce and Gen Z will eventually be even bigger. Gambling that these generations will stop caring about pay transparency later on is a very risky bet.
Sites like Glassdoor also aren’t going away. In January 2012, Glassdoor registered 9.2 million visits; in March 2018, that number had risen to over 57 percent. If the current rate of growth holds steady, the site will be receiving over 100 million visits per month by 2020—and Glassdoor is just one of several sites offering external views of compensation. Business leaders in Europe and other parts of the world may think of Glassdoor as an American thing, but in fact these sites are having an impact globally.
“Pay transparency doesn’t align with our culture.”
In our pay communication benchmarking survey for 2018, only 37 percent of organizations agreed that pay transparency fit into their organizational culture. Those that did not think their culture was aligned with transparency were twice as likely to anticipate difficulty in securing stakeholder buy-in for a pay transparency initiative. Does your organization need to change its culture to make pay transparency work?
Fortunately, it doesn’t. In our research, we tested 25 different cultural values, from integrity to efficiency to innovation, and found that none of these values had a statistically significant effect on whether the organization had taken action on pay transparency or how much of a priority it was for senior leaders. Whatever your culture is, we found, there’s a way to align pay transparency to it. Indeed, approaching this issue in a way that fits your culture helps engage employees and managers in the process and helps build an authentic narrative around pay transparency for employees.
“I can’t rely on my managers to communicate this information.”
While pay transparency initiatives are born out of the HR function and the C-suite, the task of actually delivering on these initiatives falls to line managers, who may not be adept at discussing compensation frankly and transparently with their direct reports. Fewer than half of the managers we surveyed said they felt prepared to discuss pay or comfortable talking about it. Meanwhile, even though organizations are devoting more resources to training managers for pay conversations, organizations are becoming less confident in their managers’ abilities in this regard.
The best practice we uncovered for involving managers in pay transparency entails using them to reinforce a narrative that originates from business leaders and the HR function, rather than to introduce it themselves. High-level communications about compensation strategy and practices should come from these central sources, while managers’ role is to discuss with employees how their performance affects their pay on an individual level, respond to employee concerns, and escalate questions to HR. Guidance for managers is most effective when it focuses on what managers know best: Rather than getting managers to master all the technical details of your compensation process, effective guidance prepares managers for the questions they are most likely to face and prepares them for pushback from employees.
Gartner Total Rewards Leadership Council members can view our pay transparency benchmarking report and sign up for one of our upcoming meetings on Creating Effective Benefits Communication and Communicating Pay in the Age of Transparency.