1、A R T I C L E When Salaries Arent Secret by John Case P R O D U C T N U M B E R 6 7 5 7 New sections to guide you through the article: The Idea in Brief The Idea at Work Exploring Further . . . Imagine all your employees knowing each others salaries. Guaranteed disaster? Or a radical approach to bui
2、lding fairness, trust, and a highly productive work force? HBR OnPoint FROM THE HARVARD BUSINESS REVIEW T H EI D E A F clothing retailer RightNow! faces a crisis: A vindictive employee published every- ones salariesexposing inequities that had crept into the compensation system, and spark- ing outra
3、ge among workers. Could RightNow! turn this disaster into a posi- tive opportunity by creating a deliberately open salary system? After all, salary transparency is hard to avoid, given todays information acces- sibility. But it also raises prickly privacy issues and lets rivals poach more easily (th
4、ey know what to offer to snag desirable employees). On the other hand, a radically open salary sys- tem could yield major benefi ts: a fair compensation system based on actual performance employee understanding of the business (e.g., why payroll is usually the largest cost; why certain employees ear
5、n more) a culture of trust, as employees and senior managers share more information Or should RightNow! keep its system closed and address inequities in more traditional ways? When Salaries Arent Secret RNand any companymust bal- ance the inherent tensions between tight labor- market demands and per
6、ceived inequities within the fi rmi.e., external market value ver- sus internal equity. For example, young employ- ees with “hot skills” are often recruited from the outside and paid 25% more than older, more loyal, and longer-standing employees within the same department. Four commentators on this
7、HBR case offer advice about experimenting with compensation systems openness and fl exibility, and compet- ing for talent more effectively: 1.Stop using pay as a primary weapon in the fi ght for talent. Emphasize non-monetary advantages of working for your companyprofessional challenges, stimulating
8、 colleagues, growth, fun, excitement. Recruit individuals who are ready for the job but have not yet been promoted to an equivalent level in their own fi rms. This “value hiring” lets you grab “bargains” and pay market value for the position. 2.Create a more collegial,open system with some salary tr
9、ansparency. Create and publish salary ranges (“bands”) for all jobs. Involve employees in developing this system, including setting the ranges and establishing the criteria for merit increases within each range. HBR OnPoint 2001 by Harvard Business School Publishing Corporation.All rights reserved.
10、Create enough variation within each range to absorb labor market and individual per- formance differences. This lets everyone know the potential of their current jobs and their career opportunities within the companywithout knowing what others make. Post job salaries, but without attaching individua
11、ls names. This protects peoples privacy and keeps competitors from easily knowing what to offer to poach particular individuals. 3.Create a rigorous performance-based pay system. Compensation transparency is most useful if it ensures that employees know why they earn what they doand how they can ear
12、n more. Knowing what others make is much less important. Some radical suggestions: To dramatically boost productivity, negoti- ate employees pay project by project, based on the value of work done. Defi ne objec- tives and tie rewards to meeting them. Eliminate your Human Resources depart- ment and
13、let managers and employees set salariesbut only after getting input from others that establishes the value of and compensation for each contribution. T H EI D E AA TW O R K I NB R I E F t had all happened so fast. Hunched forward, elbows on the desk,Hank let his chin sink deeper into his hands as he
14、 gazed out into the night. Outside, the fl owers in the office-park garden looked garish under the orange sodium-vapor lights. Hank didnt notice. He was thinking hard about tomorrows staff meeting, which had so suddenly been transformed from a celebration in- to awell, he wasnt quite sure what. He j
15、ust knew it wouldnt be pleasant. Hank Adamson,48,was chief executive officer of Right- Now!, a retail chain specializing in off-price clothing for young,fashion-minded women.Frankly,he had been look- ing forward to a little celebration.Five years ago,his com- pany had bought out a stodgy, 20-year-ol
16、d retailer of womens apparel,and Hank had come in to run the place. Copyright 2001 by Harvard Business School Publishing Corporation. All rights reserved. 3 HBR Case Study ILLUSTRATION BY DANIEL VASCONCELLOS When Salaries Arent Secret Salaries at fashion retailer RightNow! were all over the map and
17、that was okay when they were private.But now,thanks to a former employees parting shot,theyre publicand everyones abuzz about whos worth what.Is that such a bad thing? by John Case I 4 harvard business review HBR CASE STUDY When Salaries Arent Secret He renamed it and repositioned it, giv- ing it a
18、hip,edgy style.(Get Your Clothes Half Off was the latest slogan, with a racy ad campaign to match). He in- vested in rapid growth: RightNow! to- day had stores in 28 states,with more on the way. Last year, Hank had hired a dozen or so tech-savvy 20-somethings and charged them with creating a killer
19、Web site.Launched just last month,the site was already winning awards and generating substantial business. Hed heard that even the folks in corporate were impressed. But oh, those 20-somethings. One in particular: Treece McDavitt. Hank had noticed heryou could hardly miss the elaborate tattoos and d
20、ouble eyebrow ringsbut he hadnt really known her name.Until yesterday. “We think it was Treece,”Charlie Her- ald had told him. “It was her last day, and this was her parting shot. Not that we could pin anything on hershe cov- ered her tracks pretty well.” Charlie, RightNow!s VP of human resources, r
21、ecounted the story as best as he had been able to piece it togeth- er. Treece was hip and edgy herself, a 26-year-old rebel without much of a cause, valuable for her many skills, but not exactly a candidate for Team Player of the Month. Evidently, she had been listening to lunchroom conversations ab
22、out salaries and had heard all the usual speculation and innuendo about who made what.But where most people just gossiped and let it go, Treece got hot under the collar. She suspected un- fairness. She was put out because she and her coworkers knew so little. “Why shouldnt we know what every- one ma
23、kes?” she had blurted out one day to her lunchtime companions.“Ill bet there are all kinds of disparities.” Everyone laughed and agreed,plunging into irreverent comparisons of what they imagined various managers were paid. One recounted an old IBM com- mercial in which a malevolent computer hacker e
24、-mails his companys payroll in- formation to all his colleagues. Treece had smiled.And then the con- versation had gone on to other things. Today,two months later,life was imi- tating Madison Avenue all too closely. Treeceif it was Treecemay have had help from a friend (another recent de- parture) w
25、ho worked in HR.Or she may have relied solely on her own consider- able computer skills. Whatever, as she herself might have said.No one seemed to think that Treece was a malevolent employee. “Just mischievous,” one per- son said. But it hardly mattered. Even as she made plans to leave the company,
26、she somehow got access to HRs fi les. Yesterday was her last day,marked by a small farewell gathering and a few cupcakes. This morning, every Right- Now! headquarters employee came in to work to fi nd a camoufl aged e-mail waiting on his or her computer. The e-mail bore an attachment,which listed th
27、e current salary and most recent bonus of every one of the 165 people who worked in the building. When Hank had arrived a little after 8:30, Charlie was waiting for him. The vice president got the CEO a cup of black coffee and briefed him. Hank lis- tened but wasnt unduly concerned.“So what?”he had
28、said with a shrug.Every- body talks about moneythey always have, always will. Chances are, every- body at the company already has a good idea of what everybody else is making. “Is this really a problem?” he remem- bered himself asking. Charlie had looked straight at him. “Its 8:30 in the morning,”he
29、 said evenly. “I already have four voice mails asking for appointments. I have to think peo- ple have something on their minds.” Hank asked Charlie to take some sound- ings around the company, and the two agreed to touch base in the afternoon. But Hank was talking with store man- agers all day, and
30、it was fi ve oclock be- fore Charlie could fi nally catch him without a phone tucked under his ear. As Charlie walked in to Hanks office,Harriet Duval followed. Harriet was Right- Now!s chief fi nancial officer. She and Charlie were Hanks top advisers. As they bustled in, a tune popped into Hanks he
31、ad and he suppressed a chuckle. Harriet and Charlie always made him think of the line about Iowans from the old show The Music Man: they could stand touch- ing noses for a week at a time and never see eye to eye.Harriet and Charlie didnt come from Iowa, so far as Hank knew, but the description did f
32、i t which, of course, was one reason he found them both so valuable. Charlie looked haggard. “Its worse than we thought,”he said. Hank raised an eyebrow; Charlie went on, glumly. “Seems like nobodys been talking about anything else. If you had walked the halls today, youd have seen little groups all
33、 over. People are furious! My assistant Tammy says shes never heard so much griping. And you know those voice mails I mentioned? I must have had a dozen people in my office today, every one of them upset over salaries.” Suddenly refl ective,he added: “Funny thingsome were teed off because they felt
34、they were earning too little. Youd expect that,right? But others were mor- tifi ed because now everybody could see they were making more than their buddies. They wanted to know how to handle it.” Harriet nodded.“For once, I have to agree with Charlie. People are really upset. Heaven knows Ive fi eld
35、ed my may 2001 5 When Salaries Arent Secret HBR CASE STUDY John Case is author of Open-Book Man- agement(HarperBusiness,1995) andThe Open-Book Experience (Perseus, 1998), as well as several other business books. His article “Opening the Books”appeared in the MarchApril 1997 issue of HBR. HBRs cases
36、present common managerial dilemmas and offer concrete solutions from experts. As written, they are hypo- thetical,and the names used are fi ctitious. “Some were teed off because they felt they were earning too little. But others were mortifi ed because now everybody could see they were making more t
37、han their buddies.” share of complaints today. At the same time,though,I have to believe itll blow over in a day or so.” Charlie shook his head.“I dont think so. People get crazy when it comes to money thats why this company and nearly every other company in the world keep salaries confi dential. We
38、re all scared of the reaction.Just today,four or fi ve people actually threatened to walk. One guy even wanted another 30 grand!” Hank started to ask a question, but Charlie held up a hand. “Wait,” he continued. “You need to know the whole story,and it gets worse. You both know how tight the job mar
39、- ket has been recently, especially for marketers experienced in this business. Weve had to pay top dollarand now everybody in the company knows that our four new hires in marketing make more than people whove been around for years.”He paused for effect.“And it really doesnt help that three of the f
40、our new marketers are men in a department thats almost all female. Can you say lawsuit?” His listeners winced.“But it isnt just in marketing,its all over.In the dot-com group,some of those 23-year-olds make north of $50,000. That doesnt look so great to an old-timer in HR whos pulling down $42,000.
41、As for IT, well, dont even go there. We hired that Rus- sian programmer, Arkady, a few years ago at $38,000. He was ecstatic to get the job and is anything but a squeaky wheel when it comes to pay,so hes had only a couple of increases since then. Meanwhile, we bring that young guy Josh in to do the
42、same work. He knows hes good,and he makes sure you know it.He negotiated a high salary when he came on, and hes been relentless in pushing for raises ever since. Now hes making $75,000.” Hank and Harriet sat silent. Harriet refl ected uneasily on how her con- trollerloyal,quiet Edith,who had been at
43、 the company more than 20 years now knew that her salary was less than one-third of Harriets. Hank thought of Allan,his brothers pal,who was laid off from a much larger apparel chain. To placate his brother, Hank had hired Allan to head up store relations and had matched his big-company salary.It wa
44、s far more than what RightNow! would otherwise have paid. And oh, yes: there was Max, Hanks golfi ng buddy,who was hired as director of international marketing. Max was a great guy. His wife and Hanks wife were close friends. On the job, he tried hard,but he never got the kind of results a savvier,
45、more aggressive marketer might have achieved.His boss had never given him much in the way of raises,so he earned signifi cantly less than others at his level.Now heand everyone else knew it. Finally Hank spoke: “So weve got a real mess on our hands. And I guess Im as much to blame as anybody.Weve ha
46、d to add so many people in the last couple of years. Ive always told Char- lie,Get em in here. Pay them whatever it takes.” He thought about men- tioning Allan but then decided against it. “And I guess there have been cases where we havent brought the lower end up fast enough.” Charlie nodded tiredl
47、y. “But wait,”Harriet said.“Are we really so different from other companies? Everywhere Ive worked, there have been pretty big pay disparities.The fact is, you cant really avoid it these days. You have to pay for hot skillsand you have to pay what the market dictates.” “But other companies havent ha
48、d their salaries released to the world,” Hank said.“And now were facing this staff meeting tomorrow with 165 teed- off people. Any thoughts about what I should say? Better yet, any thoughts about what we should do?” “Tell them were going to keep mak- ing the salaries public.That were going to post t
49、hem.”The speaker was Charlie. Hank and Harriet smiled, ready to laugh at the joke.But Charlie wasnt jok- ing.He was staring at a spot on the fl oor, his brow furrowed.Suddenly he looked up. “I mean it. Ive heard of a couple companies that do this. I think theyre on to something.” Now Harriet was incredulous. “Are you nuts? This stuff going public is whats causing all the trouble! A fi re breaks out and were going to douse it wit
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