The workplace has been undergoing a metamorphosis, never more evident than in the years following the COVID-19 pandemic. Employees have flipped the script on employers and now, for the first time in modern history, have the upper hand in the relationship.
What does this mean for your business? You’d better learn what it is your employees want, whether it be more autonomy, better flexibility, or stronger benefits.
And then there’s always money.
We’ve seen tremendous progress in the workplace over the years – paying for the skills and the fit, regardless of gender, race, ethnicity, or sexual orientation – but we still have a long way to go. The issue of pay secrecy is deeply rooted in our institutional thinking, based on years of bias but also for a couple of other factors. Personal finances – what people make, what financial burdens they have – have long been a taboo discussion in the corporate world. Additionally, it benefited businesses, that believed it fostered teamwork and harmony by keeping wages fair but quiet, ensuring employees didn’t feel envious or upset upon learning about small differences between colleagues’ salaries and theirs.
In reality, however, pay secrecy today elicits the exact opposite. Organizations still fostering pay secrecy are doing so to save money, impacting all workers, but especially women and other vulnerable work groups. Women earned 17 percent less than men in 2021, black and Latino men earned roughly three-quarters of what white men earned in the first quarter of 2022, and LGBTQIA+ workers earned 90 percent of non-LGBTQIA+ workers.
More has to change. More than half of workers in the U.S. are still subject to pay secrecy, despite two-thirds of organizations prioritizing pay equity analysis in 2022. If organizations want to look for a beacon within their own businesses, they need to look no further than sales.
What businesses can learn from their Sales teams
Sales has always had more transparency baked into its compensation strategy than other industries because their pay is typically performance-based. According to Indeed.com, the standard salary versus commission split is 60 percent to 40 percent, respectively, so much of what sales professionals make is based on how well they do their job.
Is it feasible to move an entire business to variable compensation? Doing so means rebuilding the compensation structure, certainly, but also job titles and job descriptions, which need to conform to an organizational standard set across the business. This creates enough structure so you can put people into multiple tiers based on work experience.
It also benefits rockstars, who can make more money on a variable compensation plan; however, that has its advantages and disadvantages, namely that we’ve learned from years of organizational design – and playing or watching sports – that teams of rockstars only rarely succeed. Egos eventually get in the way and, culturally, it can create an ultra-competitive workplace.
Moving an entire business to a variable compensation plan is a huge undertaking but companies can take small steps to get there. For instance, one thing we’ve seen organizations do is make variable compensation optional outside of Sales. Doing so saves the organization money, but what’s the benefit for the employee? What we’ve seen is that employees who move to variable compensation plans are more loyal to the business and have a greater concern over the bottom line. In fact, in one instance, a company has had success in moving more than half of its employees to a variable compensation structure.
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As businesses move toward pay transparency, they can also borrow these best practices from their sales organizations to facilitate more transparent and equitable compensation practices at their organizations:
- Compensation and commission structures are clearly documented and distributed to the team. Employees know how much everyone on the team is paid and knows where to look for important information about how and why they’re paid.*
- Sales performance depends on leadership’s ability to communicate pay structure. The C-Level has a vested interest in compensation communication and how compensation plans are rolled out because it will have a direct impact on how the team performs.
- Pay is tied to performance metrics. It’s not as subjective as it is in other professions. There’s less conversation around who deserves what because the team knows exactly what actions each person took and what they accomplished to earn any given paycheck.
How pay transparency benefits the business
The benefits of pay transparency extend beyond the employee. Organizations swore by pay secrecy for so long in an attempt to protect their bottom line. The irony here is that, if employers were more transparent about compensation all along, they’d likely be seeing better results. Poor performance is less tolerated by the group when everyone knows how much other employees are making. Pay transparency drives employees to do better work because all of the facts are known and it’s harder to make excuses or justify when team members aren’t pulling their weight.
Pay transparency sets the standard for transparency across all aspects of the business. When there are no secrets, employees are able to trust their employer and become more invested and bought into making that company a success. They feel more valued, which means less turnover and higher levels of engagement.
While progress has been slow, most organizations recognize they must pivot and lead with transparency. Doing so will not only make their workers feel more valued but will drive more loyalty and better performance for you.
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