3 Things We Learned Moving To A Transparent Pay Approach

Building an equitable and transparent workplace culture

In Q1 2022, Next Street made two major changes to its compensation approach to make it more equitable and transparent. First, we created consistent compensation bands for the entire firm, so team members at the same level, regardless of function or business line, are compensated the same. Second, we shared those compensation bands along with a clear, rigorous methodology for merit-based pay increases and promotions, with the full firm. We shouted the new approach from the rooftops, ensuring staff understood the new approach and felt empowered to navigate within it.
 

At Next Street, a mission-driven technology and solutions firm which designs and develops solutions to connect underserved small businesses with the right resources at the right time, we as a leadership team had always felt ok (ish) about our compensation approach. We tried to pay competitively for a mission-driven firm. We published our compensation bands and had clear parameters for promotion. However, it always felt a little squishy – our bands were readily available on our shared drive, but we hoped no one looked too closely and we could never quite say why someone got a merit-based pay increase in one cycle and not the other.

So earlier this year, we created a new, radically transparent approach. Let me tell you, these changes felt uncomfortable. Were staff going to be satisfied? Would there be unintended consequences we could not foresee?

However, as a leadership team committed to leading with our values, we knew that this was what we needed to do. Here is what we learned:

(1) Compensation has to be aligned with your organizational values: Values should be enforced and felt in companies’ informal culture and ways of working, as well as formal structures and policies. Many companies imbue their values into their culture or perks, but stop short of driving them all the way through their infrastructure. We refreshed our values last year and realized that in order to live into them authentically, specifically our Antiracism and Sustainable Growth values, we needed to update our compensation approach. Doing so allowed us to show our commitment to these values to staff and bring them to life.

(2) Pay transparency is an excellent recruiting tool: As we communicated more about compensation with staff, we began being more intentional about discussing salary expectations and our compensation methodology with candidates. Hiring managers asked candidates about their salary expectations on phone screens, opened up discussions around the company’s compensation approach, and shared more about our methodology when making a formal offer. This had two benefits – it helped candidates get to know the ethos of our firm early in the process and it made efficient use of our team and the candidates’ time if a candidate was not aligned with the compensation for the job.

(3) Pay transparency empowers staff and managers: Before refreshing our compensation approach, staff members knew the lower and upper thresholds of their compensation band and what it took to be promoted, however, did not know how to advance within a band. Going into each review cycle was like going into a black box for staff and people managers; no matter how excellent their performance, they did not know if they would receive a pay increase and it caused confusion and frustration. Our new methodology now clearly ties pay to performance and gives staff a roadmap of what is needed to advance within a band.

As the City of New York becomes the largest jurisdiction in the United States to require posting salary ranges in job requisitions this month, it is requiring more and more companies to look critically at their compensation philosophy. I am hopeful that this mandated transparency spurs the right changes and drives to the desired outcomes: pay equity across race/ethnicity and gender.

There is more that can be done by Next Street, other companies, and lawmakers, such as reviewing salary negotiation practices and mandating annual pay audits. However, pay transparency is a step in the right direction, reinforcing organizational values, recruiting aligned candidates, and empowering team members.

Author Bio

Cydnee DeToy is a Partner and Chief of Staff at Next Street. Connect Cydnee DeToy