Transparency is a topic that has always fascinated me, and many of my clients as well. In the Human Capital / Reward space, transparency usually speak to openness and candor around career progression and pay opportunities. So, what is the big fuss about it, what is the resistance, and where is the market heading?
As in most relationships (hopefully), the employer / employee relationship includes a value exchange. We ask someone to do some work and we give them money (or training, or health insurance, or career satisfaction, etc.). Firms considering a more transparent approach to managing talent must make some fundamental decisions:
- Shall we be clear about the work we expect?
- Shall we be clear about what one will get in return for completing the work?
- Are we willing to sacrifice some discretion towards this end?
At first blush, it seems hard to imagine why we would want to be unclear about either of these things. Imagine the massive spends firms incur on talent – presumably with the intention of getting a lot of value back (work completed). It would seem that firms would want to be as clear and open as possible about what this work is, how they would like it executed, etc. This is a good argument for having world class job architecture and performance management. It also seems reasonable to assume that firms would want to be clear with employees about what they can expect in return for completing the work. Surely this would motivate the employees to do a better job. And imagine what a one-sided relationship we would be forging if we were not transparent:
“There is this work I would like you to do. I will be very clear about what I expect you to do for me, but I cannot tell you want you will get in return, at this time. Hope you don’t mind!”
One of the truly fascinating moments, and memorable quotes, I have stumbled across in my years of designing incentive plans for clients, came when we discussed transparency around how performance would be measured. Again, we were designing an incentive plan, so the intent was to create an economic reward for performing an activity. When we considered how transparent to be, a member of the client team became agitated at the thought of sharing how performance would be measured: “But, if we share that info, then people will know EXACTLY what they need to do to get bigger bonuses”. This was stated as if the risk in this was obvious!
I tried to point out – politely, of course, as is my wont – that having employees know exactly what we want them to do, and them actually doing it would represent a very successful incentive plan. Isn’t that the point? I think the intended meaning was that being transparent maybe had some risks:
- If people knew the criteria on which they were being measured, maybe they could “game” the system, and get payouts for things other than intended.
- If people knew the criteria, they could come into the office and complain if pay wasn’t as high as they expected.
- If people knew the criteria, then they are performing a good job on a selfish basis, and not because they are loyal, and hard-working and willing to do whatever is asked with no expectations in return.
Times have changed. It isn’t realistic to expect employees to see their relationship with firms as a one way street, where the firm gets to dictate what is expected, and employees should be pleasantly surprised by pay. Employees want to know “what is in it for me”. It is a reasonable ask.
The concerns around losing discretion are fair ones. But we can create systems of career advancement and pay that include discretion – just be transparent about what they are and how they work. For example, we can say, “you have the opportunity to get a 30K bonus, based 75% on the number of units you sell, and 25% on my qualitative assessment of your teamwork”.
Let’s design job architecture, performance management, and reward systems openly, with candor, and be clear about how the value exchange will work. We will get more for our money from employees this way. And – closing thought – with all the info that is now shared on the internet and otherwise – people find out everything anyway. At least when you are transparent, you can control the messaging.
Meritarc enables your business to realize the full value your people can create. We are a human capital software company and provider of advisory services, specializing in financial services, fintech, and consulting firms. Our job architecture, performance management, and reward tools anchor business strategy in all people processes. Visit our website to learn more.