The question froze me momentarily, as it would for a majority of American corporate workers. Many companies have a policy against discussing personal salaries with other workers. At most of the rest, it’s at the very least taboo.
Yet, despite arguments against motivation being tied to compensation, it’s on the minds of most employees. Comparing oneself against others doing the same job (let’s ignore the quality issue for a moment) is natural. Let’s not deny it.
From an HR perspective, salary comparison is a touchy subject. The reality is that for organizations with strong “promote-from-within” cultures, the organization holds all the cards, and competitive salaries tend to wither with every promotion someone receives. After all, the company knows how much you make, and so, they typically offer you only a percentage of the competitive outside rate when you get promoted. We all know that if they were to offer the same position to an outside candidate, that individual would likely walk away with considerably more than the internal candidate.
Ultimately, that’s but one downside to a “promote-from-within” organizational culture (there are positive aspects, as well, though). The point is, as long as you strictly adhere to this cultural policy, comparisons can be relatively controlled. But as soon as you open the door to outside talent (which you should and MUST do in this increasingly competitive talent environment), you’ve opened a comparative Pandora’s Box. You’ve introduced inequity and increasing distrust (and often deflection and deception on behalf of the organization) between employees and between employees and management.
Add to that the difficulty organizations have in creating and maintaining truly equitable and effective pay-for-performance systems, and you have a boiling cess pool about to erupt in your organization.
Top that off with executive salaries that are neither tied to organizational performance nor based on merit nor fairly controlled with other cost reduction measures, and you’ve just transformed yourself into an employer of last resort.
Madison, Wisconsin was just ranked by Policom Corporation the ninth strongest metropolitan economy in the country. The corporations of this vibrant midwestern college town should be booming, and talent should be flocking to their doors. And at many of the biotechs and innovation start-ups, this is happening. They’re attracting top talent. But at many of the largest companies, including Fortune 500 corporations, human capital mismanagement, flawed pay-for-performance systems, and inequitable salary comparisons have undermined these organizations abilities to get top talent.
The worst part of this conundrum is that because of the larger U.S. economy, the quantity of applicants for open positions remains high. It’s the quality of applicants, and resulting new hires, that’s dropping off. This handful of major companies, which tend to all be in the financial services industry, have soiled their reputations, and word on the street is to avoid this company at all costs. Yet, either leaders are unaware of their reputation as a dirge of top talent, or they simply don’t care. Either way, the situation is breeding mediocrity for organizations on the brink of financial disaster.
In the end, I told my colleague what I made. She told me. Yep, she was making significantly more, and yep, she was an external hire. But she knew what that meant for her next promotion….and she sighed and opened the job board. She’s looking elsewhere. And I’ve already left.