SumAll, a data analytics company, makes all of its employees’ compensation public to everyone in the company. While it has taken some investment to make the system work, it has come with benefits that far outweigh the costs, CEO Dane Atkinson told ThinkProgress.
Atkinson has started a number of companies and “through each of them have gotten smarter hopefully, a little bit each time.” One lesson he learned was the costs associated with keeping wages a secret. “I’ve seen team members break down and come to tears when they realize later on where they have been valued by the company,” he said.
So when he started SumAll three years ago, he and his core team decided to make transparency a “foundational concept,” from compensation to documentation to reviews. “We made sure everyone had a chance to see what was happening in the business,” he said. And there have been many quantifiable benefits to the company’s performance ever since.
“The real benefits where you get money back from your team is in much more productivity… a much higher degree of trust,” he said. People are less focused on trying to figure out if they’re being paid fairly and more focused on their jobs. “It’s stunning how much stress exists in the workplace around compensation, how much time is spent by employees trying to be treated fairly,” he said. “When you take that all away, it’s not only more productive for the company but a huge relief on the team.”
Productivity is also boosted because workers don’t feel compelled to impress the boss to get a raise or to move up, but to do work that will be recognized by everyone, given that it’s made clear up front how and when they’ll get increases.
“They strive to achieve in the eyes of the people that really matter… not just make me the CEO feel good,” he said. And with all of the company’s financials out in the open, employees often help make decisions to boost the bottom line. “You end up getting a much bigger brain trust for running the business,” he said.
These aren’t just touchy-feely benefits, but ones that drive profits. “The way to mathematically calculate that… you see significantly less churn in a company like this,” he said. “One of the major reasons people leave companies” is because they end up feeling undervalued, he added. Turnover is in fact quite costly, and can consume around 20 percent of an employee’s salary to replace her.
On the other side, it’s helped the company attract more talent. “We have a 1.6 percent acceptance rate, so it’s almost harder to get into than an Ivy League school,” he said. “Candidates get really excited about being in a different environment.”
And in an industry that is 83 percent male and 94 percent white or Asian, transparency can make a big difference. “For a tech company, we’re higher density female than most,” he said: A third of SumAll’s employees are female. “But we are still way under-balanced in our own recognition,” he added. The transparency “certainly makes women candidates feel more comfortable and in a way it offers them better wages,” he said. “They’re not necessarily negotiating for themselves; the environment negotiates for them.”
In fact, he noted that salary transparency can help women and people of color in particular. “When someone’s coming in, if they offer themselves too low of a salary, it’s almost irrelevant,” he said. And once they’re in, getting a raise isn’t on them. Atkinson described a situation recently where one of his worker’s colleagues noticed that his pay was lower than it should have been given his work. “He hadn’t asked for a raise, but everyone else could surround him and say he’s underpaid.”
The policy does come with challenges and costs, although he said the benefits outweigh them. Still, it took “considerable” overhead to get everyone on board. “One of the things we didn’t anticipate was the amount of education necessary to bring them to understand why compensation is as it exists across an organization… It’s a tough conversation and it varies person to person, but it’s such a better conversation to have openly and on a more organic timetable than when someone accidentally prints out payroll information.”
Other companies in the tech space have similarly moved toward salary transparency. Social media startup Buffer not only makes its pay scales public to employees, but to everyone. The federal government has long adopted this practice, where salary rates are public and the system is highly structured. It’s no coincidence that the gender wage gap is far smaller there than among the general workforce and is actually shrinking. Among all workers, about half say they can’t talk about their salaries with coworkers at all, making it difficult to root out any potential discrimination.
Atkinson thinks transparency will spread, however. “Our expectation is over the next decade the tech industry will be the lead for it, but we believe it will be adopted more widely,” he said. “It works, so things that work in efficient systems tend to get taken to.”
“If we’re able to infect this virus,” he added, “it will make for a better country, a better world, where transparency will block out a lot of these issues.”