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Month: January 2015

Fake transparency

One of the characteristics of open cultures is transparency, which is, in my opinion, a cornerstone necessity for trust to exist. One of the ways that this transparency is expressed is salary transparency.

However, what I’ve noticed frequently happen and be masqueraded as transparency is a kind of half-way salary transparency that doesn’t quite do it. It’s better than complete secrecy, for sure, but it’s just not enough, and I’m writing this article just as much for founders and MDs who are failing their own ideals (perhaps) by thinking this is actual transparency, when it’s not, as much as for employees or prospective hires of those companies, who might buy the “we’re transparent” line when it’s not actually true.

Trust but verify

When our primary belief systems moved from religious, mythical belief mostly handled by priests, to scientific, factual belief handled by scientists1, one of the most tangible, important differences was a shift from a system of faith, where everything had to be just accepted in the form it was handed down, from an authority figure, to a system of verified facts, where everyone could, and was invited to, test the theories for themselves2.

Of course, this is a big change for people, so it’s not all that surprising that it hasn’t percolated through all of society yet, even in four centuries!…

One of the primary ways that transparency creates trust is that everyone knows that they have the whole picture. They don’t have to take it on trust, they can check it themselves. Now, unlike high-speed relativistic physics, there is nothing in your typical business that cannot be understood by the layman, with some fairly basic training and explanations3.

The ability to verify the knowledge you rely on rather than accept it as handed down by an authority figure is so powerful, so transformational, that it turned the world upside down, and is largely responsible for the way the world works today. A society where the people cannot verify information for themselves, where the government hides things from them, is one headed for totalitarianism4.

The same is true within business. Being able to verify that what you know is actually true, rather than rely on faith alone, is a fundamental feature and benefit of transparency, a huge driver of the increased trust that is typical of open cultures.

Unverifiable data is not transparent

Many companies claim to have transparent salaries, but when you scratch the surface, you find out that what they have is transparent salary bands. Now, that’s a starting point, but it is not at all the same as having transparent salaries. Any company that says “we have transparent salaries” but has only a transparent salary scheme is likely to be hiding something, for the simple reason that compensation is a really high-pressure topic where people will naturally apply a lot of tricks and tactics. Any “transparent salary bands” system will almost immediately be corrupted by people who will apply the right pressure to the right points and argue convincingly that they don’t quite fit within the regular bands and deserve some sort of premium. Soon enough, you end up with a majority of people on the transparent scheme, and a small but growing number of people with special deals. Those deals are allowed to exist because they are hidden.

If a company has a “transparent” compensation scheme, but doesn’t actively publish its accounting and payroll data internally, you can bet your bottom dollar that there are people with special deals in the system. You know for a fact there is unfairness in the system. Apart from all sorts of other impacts, it means that unless you’re a mug, you will be wanting to get your own special deal as well. I’d wager that your average “transparent salary bands” system has a sizeable minority (20-30% at least) of its staff on special deals. In other words, it does not have salary transparency at all.

When, at GrantTree, we say that we have transparent salaries, we mean that all the payroll information, and all the accounting information of the business, including dividends paid to shareholders, is entirely transparent and verifiable. Every member of the team has full access to all the company’s accounting data. There is nowhere for a special deal to hide.

This is the only viable way to do salary transparency. You have to open up the financial data.

Advice to founders and CEOs

If you want to get the benefits of transparency, you must make the critically important compensation system transparent. If you don’t, then unfairness will creep into the system via this critical channel and build up over time. You can keep fighting it, but it will sap your energy and eventually you’ll give in.

The best time to implement salary and financial information transparency is on day one, when there is no unfairness in the system yet. If you wait until a lot of this unfairness has built up, shining a light on it may well be politically unfeasible. You may find you have to choose between transparency and losing some of your best people (who are the most likely to have successfully argued for special deals) while demolishing company morale for a while.

Advice to prospective employees

If you apply to a company that claims to have salary transparency, be sure to ask, in the interview, whether everyone has access to the financials. If they don’t, they’re not necessarily lying – they may simply not understand what salary transparency is5.

This may not discourage you from joining that company (perhaps there are other factors that are more important to you), but you should at least be aware of what you’re walking into: a system where everyone gets a special deal if they are good enough at arguing for it.

It may also influence your initial interactions. There is little point in trying to negotiate a higher (or indeed lower) salary with a transparent company6. On the other hand, if the company claims to be transparent as a negotiation tactic, then you should probably feel free to push for a higher salary – you probably will get it if they want you enough, though they’ll probably ask you not to tell anyone what your actual salary is.

A final thought on transparency and access

The same flaws that affect verifiability in science can affect verifiability in financial information. Namely, things can become too complex for anyone but a small cabal of compensation experts to understand. Or maybe the company has twenty thousand people and a supposedly transparent, but hard-to-access payroll information system7.

If the information is not easily accessible, it is also not transparent. And as information becomes more complex, it inevitably becomes harder to access. So, even if you do have completely transparent and easily accessible financial data, it will take some consistent effort to keep things that way as the company grows. Bear that in mind and don’t let inaccessibility creep in through complexity or other access issues.

TL;DR

  • Transparency is not real without verifiability
  • Transparent salary bands are not at all equivalent to transparent salaries
  • If you can’t verify the payroll for yourself, there are certainly going to be some unfair deals in the system
  • If you’re a CEO or founder, you need to push for total transparency to reap the benefits of a transparent culture (e.g. increased trust)
  • If you’re a prospective employee, be aware that a company without verifiably transparent payroll is not actually transparent, no matter what they may claim
  • Making the information available is not enough if it’s hidden away somewhere inaccessible.

  1. a big move no doubt, but two models with a number of striking similarities

  2. Of course, modern science has gotten so complicated that many areas are way beyond the average person to even understand, let alone verify for themselves, which leads to a perfectly reasonable perception that scientists and priests are not all that different in practice, for people who aren’t themselves scientists. And some sciences have used the cover of scientific training to exclude rather than include, thereby creating a cabalistic clique of insiders who are effectively operating like a priesthood. But I digress… this could be an article all by itself!

  3. Mostly about how to read accounts, and the basic principles of profit, loss and cash flow

  4. Yes, I realise there are several world-leading countries at this very moment who are exactly in that state – in fact, those where secrecy is not the dominant mode are very few and far between – a sad state of facts

  5. One bold move might be to ask, during the interview, if they can show you the payroll. If it’s not possible, that’s suspicious. If it is, and isn’t a big deal, and is even seen as a great question to ask – that’s a great sign.

  6. Incidentally, this is why we don’t work with companies that provide “free” interns. This is just as unfair as someone being paid twice as much as someone else for the same job, and so is totally unacceptable in a transparent system that values fairness at all.

  7. Beware of the Leopard!

Six steps to open cultures

Leo Widrich, cofounder of Buffer, shares, via this Zapiers article by Fred Bauters, six steps to getting to an open culture. In summary:

  1. Check yourself: are you personally transparent?
  2. Be sure other company values are in place
  3. Hire with transparency in mind
  4. Start slow and steady
  5. Equip yourself with the tools for transparency
  6. Remind yourself: transparency is not for everyone

The whole article is packed with insight and well worth a thorough read. The only point I disagree with is number 2. I think that if you are the right sort of person to run an open culture (i.e. your personal rather than company values are in place), and you stick to transparency as a company policy, then the rest will follow. The reason why I believe that is because it is what happened at GrantTree.

As a company, we didn’t have our values explicitly described for a long time, but both Paulina (my cofounder) and myself were clear on our personal values of respect for people, personal growth, generosity and, most importantly, transparency. And it’s transparency that enabled us to create a culture which, while not open yet, was open enough for our team to start pointing out where the company wasn’t aligned with our own values1.

There were many challenges to our culture’s evolution along the way, and many, many chances to compromise, but the uncompromising approach to transparency ended up being one of the key drivers that kept us going in the right direction through all these changes, because of the way it tends to infect everything around it and force it to become more transparent.

So, my deviation from Leo’s advice would be that even if your company values aren’t quite sorted out (which will certainly be the case at the very beginning), sticking to transparency through thick and thin will do a lot to help you keep the culture evolving in the right direction.

Just make sure you yourself are committed – because ultimately, whatever you truly believe will come through in your actions and your choices when faced with challenges. As I’ve argued before, you can’t hide from yourself.


  1. A watershed moment was when, during a 121, I was told by Ellie, one of our Client Managers, that the motivational system that I’d designed as insulting and infantilising

The fungible worker – or not

Here‘s an interesting article by Jeff Lonsdale about what he calls the “fungible worker”. Jeff examines some of the old arguments about whether technology spells the end of the human worker, whether it will drive everyone out of work, etc. He dismisses the classic Luddite argument and instead lands on an interesting point:

Amazon can quickly train employees as well as track them to make sure they are not underperforming. There is a smaller difference between one employee and their potential replacement. If an employee decides to leave their replacement is guided by technology that makes the new worker’s productivity very close to that of a good worker.

Before these technological advancements, workers enjoyed mini-monopolies. The warehouse worker couldn’t be easily replaced because their replacement might be way less efficient as they learned the layout of their workplace. As technology more directly guides low and mid skill workers in their jobs the workers are losing their mini-monopolies. Workers don’t need job specific experience to be hired so the supply of workers available to every technology guided job has increased. A higher supply leads to a lower price (the price of a worker is their wage). After full employment is reached the general wage level may increase for low skilled workers, but for now the impact of the Great Factor Price Equalization and the More Fungible Worker are suppressing the wages of middle and lower class developed world workers.

It’s actually quite hard to disagree with this point, and in fact I won’t – because I believe it’s true. Certain kinds of applications of technology turn human beings into replaceable, indistinguishable cogs and levers and wheels and bolts in the name of efficiency above all things.

Now, I’m a big fan of efficiency. Huge fan. I love being able to buy stuff on Amazon for cheap and getting it delivered the next day. Yay for efficiency.

However, I think there’s all sorts of ways to measure efficiency. Which efficiency are we talking about anyway? The efficiency of providing the service is the obvious one. How about the efficiency of use of natural resources? Debatable, off topic for this article, perhaps. Efficiency of fulfilling the right orders, those that add the most value to humanity, instead of just fulfilling every online shopping spree no matter how useless, selling whatever the hell is in demand right now no matter whether it’s actually useful or even downright dangerous? We’re starting to get somewhere.

How about the efficiency of the human capital being put at work – is it really delivering its highest potential value to the rest of humanity? Er, no. A human turned into a robot that follows instructions and turned into a fully replaceable piece of a large and complex logistical machinery is definitely not delivering on his or her potential.

Ultimately, I think that situations like Amazon are temporary. Eventually, all low-skilled jobs will be replaced with automated machinery1. In the meantime, however, while I see that “fungible workers” are inevitable for the time being, I’d like to propose, to entrepreneurs, managers, and other people in charge of creating or managing such jobs, a different philosophy of efficiency:

Aim to improve the efficiency of how the potential of humans is being deployed at work.

If you do that, you’ll probably build a different business. You’ll certainly do so – a business whose fundamental principles include enabling every person within it to develop to their full potential will not end up looking like Amazon. In this business, the very concept of fungible workers will be bizarre and alien. But such a business will  be far more efficient (in the sense of reduced waste and overheads, as well as in the human potential efficiency) than Amazon can ever dream of being, and the tradeoffs of shop-floor efficiency vs. human potential efficiency may well turn out to be surprisingly tilted to the latter side.


  1. And then we’re going to have to decide, as a society, that low-skilled people still deserve to have a good life even if there’s no work for them. If we don’t figure out how to decide that, the next step is probably World War III.

Charlie Hebdo: A victory

CharlieHebdo

 

On this glorious first week of the year, it is worth considering who it is that won the day yesterday, in the 11e Arrondissement in France, so that we may stop them from winning the days and weeks and months and years and decades ahead, or at the very least not join them in their orgiastic banquet, which, rubbing their hands with a broad, satisfied grin, they are already making ready for.

For this sombre celebration, I will borrow the words of a great Author, Romain Gary, who spent his life fighting this battle, as a self-described “champion of the world”, and described these old enemies of humanity in 1962.

Meet the monkey gods:

First comes Totoche, the god of Stupidity, with his scarlet monkey’s behind, the swollen head of a doctrinaire and a passionate love for abstractions; he’s always been the Germans’ pet, but today he prospers almost everywhere, always ready to oblige; he is now devoting himself more and more to pure research and technology, and can be seen frequently grinning over the shoulders of our scientists; with each nuclear explosion his grin gets wider and wider and his shadow looms larger over the earth; his favourite trick is to hide his stupidity under the guise of scientific genius, and to enlist support among our great men to ensure our own destruction.

Then there is Merzavka, the god of Absolute Truth and Total Righteousness, the lord of all true believers and bigots; whip in hand, a Cossack’s fur cap over one eye, he stands knee-deep in a heap of corpses, the eldest of our lords and masters, since time immemorial the most respected and obeyed; since the dawn of history he had us killed, tortured and oppressed in the name of Absolute Truth, Religious Truth, Political Truth, Moral Truth; always with a capital T raised high above our heads, like a scaffold. One half of the human race obsequiously licks his boots, and this causes him immense amusement, for well he knows that there is no such thing as absolute truth, the oldest trick to goad us into slavery or to drive us at each other’s throats, and even as I write these words, I can hear above the barking of the seals and the cries of the cormorants the sound of his triumphant laughter rolling toward me from the other end of the earth, so loud that even my brother the ocean cannot raise his voice above it.

Then there is Filoche, the god of Mediocrity, full of bilious scorn and rabid prejudice, of hatred and petulance, screaming at the top of his voice: “You dirty Jew! You nigger! Jap! Down with the Yankees! Kill the yellow rats! Wipe out capitalists! Imperialists! Communists!” – lover of holy wars, a Great Inquisitor, who is always there to pull the rope at a lynching, to command a firing squad, and the most eagerly listened to; he is to be found in every political camp, from right to left, lurking behind every cause, behind every ideal, always present, rubbing his hands whenever a dream of human dignity is stamped into the mud.

Yesterday, then, was clearly a resounding victory for Filoche (with some help from his brother Merzavka). And as the events of the coming weeks unfold, other champions of the world might remember that no matter whether the “terrorists” are caught, whether or not this law or that law is passed or rejected, whatever glorious or vile articles, comments, tweets and words of wit are written or spoken in response, whether anyone distinguishes themselves with their humanity or lack thereof in these sad circumstances, the only one who has won this day is the monkey god Filoche, who has succeeded in sullying all of us, wherever we are, whatever we do, whatever we dream, whatever we achieve, whatever we strive for.

This is the genius of the beast in us: when it wins, everyone loses, just as much those who think they won the day as those who feel hurt and aggrieved. Its genius is to lower what is good and worthwhile and human in all of us without distinction, to throw mud and shit into the face of humanity wherever it stands, and then sit back and watch as we do its work of rubbing it on ourselves.

What to do then? Don’t join the monkey gods.

Realise that reactions of hatred, however justified, however rationalised, only consolidate Filoche’s victory (and perhaps call out to his brother Totoche to join the fun). This is true whichever “side” you’re on. The beast is on all sides and in all of us. Don’t feed it, at least within you and those around you.

Do not join the ranks of their followers on all political, religious and ideological sides.

Continue to be, do, dream, achieve and strive, and live, a champion of the world – that is also within you, along with the beast.

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