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Blog: The Business of Management
 

February 3rd, 2009

Repeat After Me: Talking About Pay Is Never a Good Idea

I don’t respond much to reader comments left here at the Business of Management, but I really should do it more because sometimes readers say the darnedest things.

For example, take the comment left by one follower of this humble blog, commenting on my post from last week, “When It Comes to Pay, Don’t Ask and Don’t Tell.” In that item, I was writing about the passage of the Lilly Ledbetter Fair Pay Act. Compensation expert (and Compensation Force blogger) Ann Bares and I both took issue with the notion that the passage of this legislation should somehow create workplaces in which everyone knows what everyone else is making.

I also made this point, which comes from a lifetime of dealing with workers and pay issues: “My experience over many years as a manager has led me to a simple conclusion: No one is really happy when people talk about pay and wages in the workplace, and the Lilly Ledbetter Fair Pay Act is not going to change that basic dynamic. Comparing paychecks creates bad feelings, bad blood and bad karma. It’s also an HR nightmare to have your workers focused on everything other than the job at hand.”

That’s my argument and I’m sticking to it. But my reader—let’s call him Al— had a different take on this issue.

“In cases dating at least as far back as 1987, the clear holding of the National Labor Relations Board … is that it is illegal for any covered employer to have a rule, written or oral, prohibiting employees from discussing their wages or other earnings. More recently this aspect of federal law was upheld by the 6th Circuit Court of Appeals in NLRB v. Main Street Terrace Care Center, 218 F.3d 531 (2000). Thus, while it is interesting that Suze Orman agrees with federal law while other management consultants do not, the discussion among them is purely academic. It is simply illegal under federal law to prohibit employees from discussing their wages.”

Reader Al is clearly right on the law, but I think he somehow missed the larger point. It’s not illegal for workers to talk about their wages; it’s just foolish and dumb. I’m not advocating that managers illegally prohibit their employees from talking about pay. It’s just that I can’t recall a single occasion in more than 30 years of managing people where any good came from people talking openly about what they earned.

Do workers do it anyway? Of course they do, but I always tell people that knowing everyone’s pay nearly always seems to do more harm than good. People are hired at different times, under different conditions and for different reasons. No one worker knows what all of those factors are, and as Worker A tries to compare his salary to Worker B’s, he invariably misses most of that. As with many things in life, knowing close up how the sausage is made only makes you sick to your stomach.

Ann Bares made this point as well when she wrote: “I have had many, many one-on-one discussions with employees about their pay, and this experience serves to convince me that most of us simply cannot be completely objective about our compensation (and some of us have wildly improbable ideas about the value of the work we do).”

So let me make this clear for Reader Al and others: It is perfectly legal for workers to chatter with one another about pay, but that doesn’t mean it’s a smart thing to do. Talking about compensation is almost NEVER a good idea, and opening the Pandora’s box of pay rarely makes you feel better about yourself—especially if the knowledge comes with the inability to do anything about it. You’ll know a lot more, but there’s also a chance you’ll feel a lot worse. And that’s terribly demotivating for any worker.

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Comments

I agree with you (sorta) that talking about pay is a bad idea. I think the problem is that people don’t know how to talk about money. That’s true at work, in families, and in marriages.

So maybe we should spend some time educating our workforce on compensation instead of trying to create a cloaked, super-secret compensation system based on weird grades and bands that no one usually understands.

I can’t speak for companies larger than say about 300+ employees, but in the smaller companies it IS possible to have complete transparency. Unfortunately old-school HR becomes irrelevant in those organization. I have seen HR actually eliminated in such organization. Human capital development was the only function close enough resembling HR. Recruiting became the most important thing. Teams chose new members, decided on the base, and split up bonus \\


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