Photo: flickr/D Sharon Pruitt
At small businesses and startups, there can be a clear division between what the founder knows and what his employees do, even if they spend all day working in close quarters. Often, there’s not a leadership team, but just a leader, someone who unilaterally makes decisions about hiring, salary, and the direction of the business.That can create problems, like when people start comparing salaries, and even reduce employee motivation because they feel undervalued and disconnected from the company.
One big idea that a number of companies are trying is going in the opposite direction entirely, becoming completely, radically transparent.
One example is Boulder, Colorado based Namaste Solar, a solar panel installation company, which keeps all salary information transparent and available to employees.
“Usually, salary is an emotional and sticky situation,” co-founder and CEO Blake Jones says. “They have an emotional impact on all of us and in the end, people actually waste more time and energy wondering how much Bob or Jill is making and thinking the worst.”
Every employee at the company has the opportunity to become a co-owner, to buy stock and a voting right. Changes to company policies, including compensation, have to be approved by a unanimous vote of the whole board, which consists of almost every employee.
“We’re all employee owners, and we love it,” Jones says. “We wanted to have an elite team that’s going to contribute. When you have different people weighing in with different decisions, you create this team-oriented, open environment.”
New York based startup SumAll, which provides data analytics for small businesses, does something similar.
They also reveal everybody’s salaries, and take it a step further, revealing the company’s entire capital structure. Everybody knows how much of the company is owned by each employee, and how much is owned by investors.
“When you hide your cap table, it’s one of the easiest evils to do in your life,” Atkinson says. “You can tell an employee that they have a huge amount of value and options but you don’t tell them the total allocation of the company … and it hurts somebody else.”
It means you have to explain salaries and equity stakes, and collaborate on those decisions. But once you explain it, it’s over. You don’t run into situations where somebody finds out a peer has a higher salary, is angry or confused, but has no open way to communicate about it.
Founder and CEO Dane Atkinson told Business Insider that transparency and shared decision making have helped him hold on to top talent.
“Most of our team has refused offers from Google and Facebook and whatnot in the last few months,” Atkinson says. “They are unshakable because once they get that sense of being part of a family and that openness in a company, it’s really hard to go away from it.”
“We just want to be the counterpoint to the corporate culture that’s out there. We want to help people understand that there are other ways to build successful organisations,” Atkinson says. “You don’t have to fight over information and be overly protective. If you are open and you do take this route, it can work and it’s been working very well for us.”
It’s an idea that can apply to pretty much any decision or strategy, and saves a great deal of time. When people know why something’s happening, and have all the information they could possibly want or need, they don’t waste time repeatedly going back to their boss with questions that they could have answered for themselves at a more transparent company.
In The Collaboration Imperative, Ron Ricci and Carl Wiese write:
When you’re open and transparent about the answers to three questions — who made the decision, who is accountable for the outcomes of the decision, and is that accountability real — people in organisations spend far less time questioning how or why a decision was made. Think of how much time is wasted ferreting out details when a decision is made and communicated because the people who are affected don’t know who made the decision or who is accountable for its consequences.
People that know why something’s being done perform better than people simply told to carry out a task.
That doesn’t mean this is easy, or that transparency’s like a switch you can flip on and instantly motivate employees. When new information’s revealed, there’s going to be a flurry of questions and a lot of necessary explanation. When decision making is collaborative, it sometimes takes longer.
“It’s very, very different than anything else. I have to spend a lot more time selling things to people,” SumAll CEO Dane Atkinson told us. “I have to explain things because it’s not just me making the decisions. So sometimes it takes a bit longer for me to get things off the ground. That’s especially true for things like cap tables, accretion and dilution, the sort of venture capital stuff I usually would have handled on my own.”
It’s a hard decision for a business, and one that requires a lot of sacrifice and effort from those at the top. But there are few things more effective at making people feel like part of a company and able to talk about concerns and frustrations, rather than keeping them secret.
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