June 15, 2022
Quite recently, Microsoft made headlines by announcing that they will soon post salary ranges for all job openings. To quote the Daily Mail…
Microsoft is set to become one of the first major US employers to disclose salary ranges for all its job postings in America, in a step to boost transparency for jobseekers.
The move announced on Wednesday follows a new law in Microsoft's home state of Washington, which will require such disclosures on new job postings starting next year.
A slew of such laws have been recently passed or newly proposed in various states, meaning companies that span multiple jurisdictions may soon make similar moves to disclose salary bands to potential applicants.
This move has provoked a series of pro and con arguments inside of HR departments nationwide. Proponents of full salary transparency hail this move as necessary, believing it will bolster fair and competitive salary rates. For example...
Others saw it as virtue signaling bluster and without any teeth unless regulated by the government.
I have always seen full salary transparency as a slippery slope to avoid. Few companies embrace this strategy and there is not enough data (I feel) to make an educated strategic decision. Still there are experts, who are largely for it. Consider this quote from Time Magazine…
Companies like Whole Foods and New-York based analytics firm SumAll have adopted salary transparency policies. Buffer, a social media startup, took transparency a step further by publishing all employee salaries publicly on their website.
There isn’t comprehensive research on how pay transparency affects employees because so few companies have these policies, according to Todd Zenger, presidential professor of strategy and strategic leadership at the University of Utah’s David Eccles School of Business. But anecdotal evidence from Buffer and SumAll suggests it can make workers more productive and satisfied.
The article continues to address how salary transparency can close pay gaps.
Of course, employees will only be happy if they’re being paid fairly — and knowing colleagues’ salaries allows workers to fight to close the gap. Childers points to the case of Lilly Ledbetter, who famously sued her company for discrimination after a co-worker anonymously informed her that she made less than two male colleagues in the same job.
“She didn’t know she was being paid less so she couldn’t negotiate for higher pay — and that’s more common than we might think,” Childers says.
The reasons why I think companies should avoid full salary transparency is because once people discover that they are paid less than their peers, they will not consider their peer’s overall career experience or, how their peer negotiated during the interview process or, how their manager perceives the value of their peer’s work or, intangible assets like emotional intelligence and work ethic. Instead, they tend to look only at the salary differential, become dissatisfied with their employer and leave soon after.
Something else that happens is reduced productivity out of spite and a slow erosion of team dynamics as jealousy rears its ugly head. The groupthink becomes, why should I work as hard as I do when my peer does less (in their estimation), yet they are rewarded more? Finally, there is an absence of context. For example, Person A gets recruited into the company to perform X and is paid higher because of industry experience acquired from a wide-ranging list of companies. Person B is a peer to person A and has been working for the company exclusively so in a larger sense, their knowledge is limited in comparison. What management sees as a prudent business decision, Person B sees inequity and campaigns for a change that they might not deserve. But, I digress.
Since Microsoft is embracing this strategy, it is only a matter of time before other companies follow suit. This brings about some alarm for the smaller companies. How can they compete with the salaries of large enterprise companies when they simply cannot afford to? Would this mean that we will soon see a decline in small businesses? I don’t think so and for several reasons. For one, big paychecks do not equate to employee loyalty. Payscale.com researched the tenure of employees in Fortune 500 companies and the median salary ranges and some of the findings were quite interesting. What follows is a section of their list of least loyal employees, median tenure and median pay.
- Massachusetts Mutual Life Insurance Company – Median tenure is 0.8 months – Median pay is $60,000.00
- Amazon – Median tenure is 1 year – Median pay is $93,200.00
- Aflac – Median tenure is 1 year – Median pay is $38,000.00
- Google – Median tenure is 1.1 year – Median pay is $107,000.00
- Mosaic – Median tenure is 1.1 year – Median pay is $69,900.00
- Chesapeake Energy Corporation – Median tenure is 1.2 years – Median pay is $60,500.00
- Group 1 Automotive, Inc. – Median tenure is 1.2 years – Median pay is $33,200.00
- Ross – Median tenure is 1.2 years – Median pay is $23,800.00
- Wellcare Health Plans, Inc is 1.2 years – Median pay is $49,900.00
Another reason smaller companies need not worry is that their size gives them a slight advantage in hiring. This may sound counterintuitive but consider this, smaller companies will likely give workers more responsibility during a recession as workers may have to do more with less resources. This gives the worker more experience outside of their comfort zone which makes them a more valuable asset to their employer and to the job market overall. That being said, larger salaries can be a siren song to the talent you covet, so one of the best moves small business can make during recession 2022 is to invest in their employer brand. Why? Several reasons.
- Prove that your culture is consistent. Every marriage has a honeymoon stage but, what happens when that is over and the real work of maintaining a relationship begins? If the romance dwindles away, it becomes a question of, "Was it was ever real to begin with?" Prove internally that while economic conditions might hamper some activities (for example, company retreats) there are some cultural initiatives that are absolute. For example, at Proactive Talent we have wellness programs like Yoga sessions that we conduct virtually and virtual lunches where our tribe meets to stay connected outside of work-related issues. Little things mean a lot. If at all possible, continue what you can to preserve your culture.
- Protect your talent pipeline. No matter how bad recession 2022 may or may not be, eventually there will be a need to hire again. Promoting your company as a great place to work, even in bad times, will help it stand out in good times as well. How consequential would it be to see positive employee reviews on Glassdoor, employee appreciation messages on social media or to get consistent referrals from former employees? Such things could be the reason why your next hire looks your way instead of elsewhere.
- Protect your business profits. When there is a stressful work environment, employee engagement levels dwindle and that can impact customer relations; ultimately disrupting your business. One of the main reasons why 5-Star hotels can charge so much more is because of their level of customer service. Consider this quote from Forbes magazine...
It’s this simple: customers are willing to pay more for a better customer experience. For years I’ve looked at surveys that indicate customers will pay more for better service. Not one survey has ever said the opposite. We confirmed this, once again, in the 2021 Achieving Customer Amazement report. We surveyed more than 1,000 consumers and asked, “Would you be willing to pay more if you knew you would receive great customer service?”
Fifty-two percent said, “Yes!” If that’s not motivation to deliver better customer service and a better CX, then I’m not sure what is.
Protecting your employer brand protects your pricing strategy to an extent and safeguards it when an increase is necessary.
We take great pride in helping companies form and maintain their employer brand. Click here to review some of our case studies or click here for an employer brand budget template that can help you form an employer brand strategy today. Finally, feel free to reach out to us for any further assistance you may need. Our calendar is open for a quick conversation on how we can help you endure and even prosper during recession 2022 and every year after.
