On December 19th of last year, Joel Gascoigne, CEO of Buffer, wrote a blog post describing his company’s commitment to “radical transparency.” In the post, Gascoigne revealed the earnings of all of the social media startup’s employees along with the formula the company uses to calculate employee pay, making the information public in a move that was as shocking as it was uncommon. Usually, companies thrive on not being accountable to everyday people, preferring to be able to manipulate salaries and finances without scrutiny, but Gascoigne’s approach with Buffer turned that on its head.
Gascoigne believes that “transparency breeds trust, and trust is the foundation of great teamwork.” He feels that Buffer’s salary transparency, as well as other open information policies within the company, reduce or remove barriers between team members. The idea behind the policies he has implemented is that the freedom of information within the company will develop a culture of openness and ultimately increase cooperation and productivity, as well as lower the employee turnover rate. Gascoigne remarked that “in Silicon Valley, there’s a culture of people jumping from one place to the next. That’s why we focus on culture.”
The benefit of transparency is pretty clear for existing Buffer employees, but will it help the company grow and develop in the future? Apparently, the answer is yes; the number of applications Buffer received in the month following its salary disclosure was twice as large as the number it received in the preceding month. And it isn’t just quantity that has increased, either. Gascoigne said in an interview that “the percentage of [applicants] who were a good culture fit was a lot higher” and that the reveal “[scared] the right people away.” So not only has Buffer started receiving more applications, but the quality of the applications has also increased significantly.
It isn’t just Buffer that has seen positive results with transparency, though; even before Buffer’s announcement, a small number of other companies had adopted the practice and reported similar results. One of them, a research firm named Qualtrics, implemented the policy to keep employees focused and on track, and it worked. By making employee earnings, goals, and performance accessible to the entire staff, it simultaneously held employees accountable to their peers and inspired them to work harder. It also demonstrated that salaries, bonuses, and promotions were much more dependent on job performance than the preference of superiors, which eliminated a lot of anxiety and motivated employees to meet their goals. With Buffer following suit, the attention they have received has caused multiple other companies to seriously consider adopting this strategy, as well.
There is a significant worry about adopting this sort of policy; that it might decrease employee motivation. Once employees have empirical data that tells them their performance is measurably worse than eighty percent of their coworkers in the same tier of employment, hope for a raise or a promotion dwindles and they aren’t as motivated. The level of transparency can also cause enmity between employees because they might feel that they are underpaid compared to other team members.
Buffer, however, either doesn’t have these problems or handles them very well. With only fifteen employees, the company is small enough that revealing the information won’t cause a large amount of enmity. In addition, the lengthy interview process and focus on culture both help select employees that are on board with the company’s radical transparency initiative. As far as employees being over- or underpaid, Buffer’s salary formula makes that unlikely, and Gascoigne converses with each employee on a regular basis so that he can know their current attitude towards their position within the company.
The transition into radical transparency might be more difficult for larger companies, but Buffer started the policy early and used it to contribute to a larger workplace culture, allowing it to succeed. Perhaps other companies should follow its example.
Additional links: http://open.bufferapp.com/introducing-open-salaries-at-buffer-including-our-transparent-formula-and-all-individual-salaries/