Choose Your Salary
– Remove taboo and introduce rationale.
Arguably, Semco’s most controversial initiative is to let its employees set their own salaries. Pundits are quick to bring up their dim view of human nature, on the assumption that people will obviously set their salaries much higher than feasible. It’s the same argument we hear about people setting their own work schedules in a seven-day weekend mode. The first thing that leaps to mind is that people will come as late or little as possible—and this has never been our experience.
IN A NUTSHELL
The secrecy that surrounds what employees of an organization get paid is legendary in its power to create disengagement. In fact, a PayScale survey of over 71,000 employees proved to be quite eye-opening about the effect pay secrecy has on employee engagement. A whopping 82 percent of employees reported they would be okay with being underpaid as long as they knew why. Two-thirds of survey respondents felt their employer was not paying them the market rate, even though they claimed to do so. And a staggering 60 percent of employees who felt like they were underpaid reported they might quit their jobs soon.
The taboo that surrounds conversations on pay is a form of organizational paternalism. It stems from companies refusing to treat their employees as adults and misguidedly limiting their autonomy. Managers often believe that their employees don’t want coworkers to get wind of how much they earn. And, they’ve been conditioned to think that having an open conversation about pay might lead to people making “irrational” decisions, like quitting. In the end, employees feel like they’re being controlled by an invisible hand while managers wrongly assume they’re doing whatever’s best for their people.
However, a number of companies like Buffer, SumAll and WholeFoods and have shown that it is possible to do away with pay secrecy. That open access to relevant information can actually drive up engagement and positively impact culture. And Semco is one of the pioneers when it comes to transparency around salaries. For more than three decades now, Semco employees have been setting their own salaries, based on salary ranges derived from market research done by a trustworthy external partner. It was a practice that raised a lot of eyebrows when it was first introduced but, in the end, it brought about a tremendous impact on Semco’s already unique culture.