But the topic of pay transparency has not gone away.
Hutton Review (and the CIPD)
Today’s interim report from the Hutton Fair Pay Review (which I’m still reading) suggests that no civil servant should get paid more than twenty times the lowest paid worker in that organisation.
As the name of the review suggests, this focuses on fairness. But most of the reporting of the review, if not so much the review itself, seems to interpret fairness as showing tax payers that their investments are being protected, and that the 20,000 public servants who earn more than £117k per year (including heads of Universities on £200k and CEOs of NHS trusts on £150k) deserve their salaries. This is about managing perception – about ensuring everyone seems to be sharing the effects of austerity. And it’s why Hutton recommends setting principles and greater transparency in what people get paid.
I’m more interested in the effect of internal pay differentials. I think John Humphrys got it right on the Today programme this morning (as he usually does), quoting Peter Drucker’s concerns that differentials over 20 x can lead to resentment, falling morale and could become socially corrosive.
I think socially corrosive organisations is exactly what we’ve got – in the private as well as the public sector, and steep pay differentials have had their role to play in this.
But the issue is particularly significant in the public sector – particularly because, as I was discussing with Bruce Warman at the Personnel Today Awards last night, the ‘profit motive’ doesn’t really exist there. These organisations aren’t going to go to the wall, so the role of the strategist (part of the role of a business leader) is a less fundamental one. This means that there’s less of a need for high differentials than there is in the private sector.
And the issue is even more significant in the voluntary sector. Here, it’s about sense of mission, rather than high pay, being even more of a focus (or should be being more of a focus) than high pay. That’s why Jackie Orme is getting some rightly deserved stick (eg from Donald Clark: 1 and 2) for her £400k salary at the CIPD.
But for me, the whole debate has echoes of Denise Kingsmill’s Accounting for People review. Kingsmill was focused on providing information on human capital for investors, whereas in truth, the people who really need better information on HCM are business leaders.
Same again here. I personally believe Hutton’s suggestions are entirely reasonable. But they also miss the point. The real need is to educate remuneration committee members and other business leaders, as well as compensation consultants and their like about the impact of such a big divide.
It’s why my bigger worry about Orme’s salary is how are the CIPD going to support Hutton’s proposals when they must have a pay differential of around 20x themselves.
cHRchat
Anyway, if you’re interested in pay transparency we’ll be talking about this during #cHRchat on Twitter tonight (7.00pm GMT). I’m not going to pretend that we’ve deliberately set out to be responsive to current topics – it’s just that, by accident, the subject came up in a tweet of mine during last week’s chat:
| Big opportunities throughout HR for more social (thinking) approaches eg pay transparency in Reward #chrchat | ||
| RT @joningham: Big opportunities throughout HR for more social (thinking) approaches eg pay transparency in Reward #chrchat >like it yes pls | ||
| RT @joningham: Big opportunities throughout HR for more social (thinking) approaches eg pay transparency in Reward - Yikes no!! #cHRchat | ||
| AlisonChisnell Why not? (if the culture's right) RT @joningham: Big opportunities eg pay transparency - Yikes no!! #cHRchat | ||
| @joningham depends what you mean by transparent but if you mean everyone sees everybody elses then would be a nightmare #cHRchat | ||
| Don't see why - just different (& more social!) RT@AlisonChisnell @joningham if you mean everyone sees everybodys then nightmare #cHRchat | ||
| @joningham Large org, legacy issues, people chage roles...we don't operate a fixed pay structure enables us to be pragmatic #cHRchat | ||
| @joningham would lead to massive increase in salary benchmarking requests & deep unhappiness, Union would have field day. More? #cHRchat | ||
| @alisonchisnell i know a company that had it's payroll posted online - the issues were re discrepancies that COULD be justified #chrchat | ||
| @joningham Just not keen. Would work with very structured pay scales and progression but not in our org. #cHRchat | ||
| @gmcglyne brave move, that's for sure. We have made so many acquisitions over the years we real mix of legacy & new arrangements #cHRchat | ||
| @ALISONCHISNELL not brave - disgruntled employee posted it #chrchat | ||
| RT @ALISONCHISNELL @joningham Looking for salary transparancy: http://ow.ly/3eRht All norwegians' salaries online. #chrchat | ||
| @ALISONCHISNELL @joningham Pay transparency can work - check out Semco. #chrchat | ||
| RT @olliegardener: RT @ALISONCHISNELL @joningham Looking for salary transparancy: http://ow.ly/3eRht All norwegians' salaries online. #chrchat | ||
| Would love someone to do a #chrchat on pay transparency sometime.... | ||
| @ALISONCHISNELL @joningham PS: as an entrepreneur, mine is decisively borning :) #chrchat | ||
| @joningham How about i do the one on pay transparency? #chrchat | ||
| RT @joningham: Would love someone to do a #chrchat on pay transparency sometime....me too wrote about that recently http://bit.ly/dMsG9L | ||
| Up to you but I'd be on for it - might engage @thehrd back again too? RT @garelaos How about i do the one on pay transparency? #chrchat | ||
| @AlisonChisnell @joningham @thehrd i find pay transparency is only a problem when there are differences that cant be justified! #chrchat | ||
| Can you be totally social unless you do? If not, there's always going to be something in the way. #paytransparency #chrchat | ||
| Lynda Gratton on pay transparency http://bit.ly/gYelyM #socialbusiness #chrchat (probably enough till next week) | ||
Join us if you can.
- Consulting - Research - Speaking - Training - Writing
- Strategy - Talent - Engagement - Change and OD
- Contact me to create more value for your business
- jon [dot] ingham [at] strategic [dash] hcm [dot] com
John - This is an interesting topic but I need more than 140 characters to do your post justice.
ReplyDeleteI think there are 2 issues here. The first pay transparency and the second is pay fairness.
On the topic of transparency, context matters. There is some evidence that when legislation made CEO compensation in US public companies available, this perversely led to massive ratcheting up of senior corporate salaries. The thinking in board rooms went something like this:
- Our company is above average (why, of course it is!).
- We want an above average CEO.
- Therefore we have to pay above the average for that CEO.
If people consistently pay above the average then the average moves up.
See here for more info: http://www.amazon.com/Searching-Corporate-Savior-Irrational-Charismatic/dp/0691120390
This partly down to the peculiar nature of the CEO market but it does indicate that transparency can have perverse outcomes.
I would also mention cultural differences in pay transparency. When I worked in a large tech multinational, our Australian employees would never think of sharing their salary information with each other. However our Indian employees would regularly discuss their salaries. If there were ever any differences then there would be trouble.
In principle, I think transparency is a good idea. But you have to be careful how you implement it.
The second issue is fairness. Here I think the recent book by Richard Wilkinson is very relevant: /www.amazon.co.uk/Spirit-Level-Equality-Societies-Stronger/dp/1608190366
For the last 30 years, Western societies have steadily been getting more unequal in terms of wealth and income distribution. And this fact concerns me.
Hi Jon, one point I want to add on your analysis of Kingsmill. Agree the focus for Accounting for People was on making the investor case for reporting HCM. Agree too that it's the CEO who needs better information. The problem lies in the fact that it's the investors - particularly sell side analysts - that have the ear of the CEO and it's those guys who tell the CEO (and CFO, majority preparers of company reports) what information they need in order to recommend to the wider investor community on the strengths and weaknesses of the company (strengths and weaknesses that determine the longevity of the CEO). Right now, sell siders are borne and bred in dealing with financial, people free, models. They aren't even aware that you can - and should - also assess the strength and weakness of a company by HCM data and balance their recommendations accordingly. So they don't ask for it. And so long as they don't ask, CFO's and CEO's not only don't tell, but don't take this stuff seriously. Kingsmill was right in going for the investor case, but wrong in not identifying the particular investors that hold the cards. If sell siders asked for HCM data from the board, the boards would move, fast (regulators would then follow). Maybe then they would also see the value of the information for themselves. But it's a mind set change, and as such a long battle. But we're on it, and would welcome your expert views at Accounting for People 2.0 www.accountingforpeople.org
ReplyDeleteThanks Matt and Stuart - HCM reporting, pay transparency, pay fairness - three different issues and perhaps I attempted too much to tie them all together. Three new blog posts - if and when and get time. Thanks for the links in the meantime Matt, much appreciated.
ReplyDelete