I once worked in a company where the salary was transparent for everyone. A sophisticated Excel spreadsheet was distributed each year before the Christmas dinner. There were all the salaries of everyone listed, from junior to CEO, for over a hundred employees. In a level of detail that gave you the satisfaction of being able to analyze everything in detail if you wanted to. In fact, this was then actually not so important to me at all. I could trust that the company could not afford any great injustices – an example of security through openness, much like it works with open source software.
For many people with whom I speak, however, such a principle is completely inconceivable on the subject of wages. There are still companies that simply forbid employees to talk about their wages. Nevertheless – or maybe even because of this – the salary is quietly a huge issue. Female managers wonder if they really earn the same as their colleague. The colleague, on the other hand, is not really comfortable with personnel management tasks, but is struggling with an internal move to an interesting expert function because it would be less well paid. Internet sites that publish information on industry- and function-specific salaries are diligently consulted. Job starters go into job interviews with steep demands and companies with strong values inwardly shout "fie, fie" when money is already talked about at the first appointment.
Discussions about salary and money feel unfashionable and conservative compared to what everyone is talking about today – purpose, meaning, values, corporate culture. That's exactly why we lead them here and, by means of an iceberg model, we dive into the dimensions that the phenomenon of wages has.
Dimension No. 1: The constraints on wages
Let's start at the tip of the iceberg, at the "thing". This has two sides: On the one hand the company side. Wage payments account for the largest share of annual expenses in many companies. Thus, the upward flexibility here is not unlimited. In addition, there is always a risk here, since the turnover can only be predicted to a limited extent, but the wages and salary components are mostly agreed in advance. From the company's point of view, the issue of wages is, in fact, above all a distribution problem with risk: to whom do I promise how much of the cake, of which I only know approximately how big it will eventually be??
On the other hand, we all need money to live, and employees get this money through their wages. If the money is not enough to live on, the wage is too low. What "enough to live on" means, however, is entirely up to the individual. What would be a good salary for some is no longer enough for the mortgage or the maintenance payments to the ex-wife and children for others. Most people, however, only deal with the borderline of "what I really need to live" when they become self-employed or plan to take a break. For one's own wage satisfaction, it would be quite useful to do this calculation from time to time otherwise as well. Thus, a certain calmness and satisfaction can be achieved on the subject of wages: Objectively, everything would actually be okay. With emphasis on "would be". But later on.
Dimension no. 2: The continuous improvement
However, companies often also use wages and wage components as an incentive system. It is assumed that employees will be motivated to work harder by possible wage increases. Still other beliefs are that employees who no longer have a raise to look forward to will let themselves go and take it easy. You can calculate that these two ideas will eventually collide with the constraints from the first dimension: At the latest, when there is no budget left to grant these wage increases if the employees behave accordingly, you will inevitably demotivate some committed employees. Extrinsic motivation also has far fewer positive effects than is commonly assumed, as I have also pointed out here in this blog post. Many dissatisfactions and conflicts around the salary have exactly to do with these mechanisms – here also the dimensions "comparison"/"esteem" play a role, which will be discussed later on.
Wages have to grow every now and then to compensate for inflation, according to the constraints mentioned above. Of course, this can be combined with other interpretations and conditions, but this does not necessarily have to be the case:
- Only those who show up and work hard on a regular basis get paid more (see example above).
- If you get a (technical) university degree, you get more salary than before.
- If the company performs well, everyone receives a bonus at the end of the year.
- If the company performs well, the top performers get a bonus.
- If you ask your boss and negotiate well, you'll get a raise.
- Those who stay with us for several years get paid more than those who are just here.
- We compensate for inflation every year. That's all there is to it.
Which linkage exists in your company? Whichever one is chosen, this is where the organizational culture is shaped quite significantly. With this we have already reached the waterline – visible phenomena have an effect on invisible ones.
Dimension No. 3: Neighbors, comparison and fairness
"L'enfer, c'est les autres" – if only one did not know what the others earn! This desire is not only behind the ban on talking about wages within the company. The HR departments of SMEs also sigh when they learn about the fantasy wages with which the competition is wooing its key personnel or young talents. But is more always better? Studies show that it is not the absolute but the relative comparison that is important: It is more important for my satisfaction that I earn the same as my colleague in a similar function than that I earn as much as possible. This is most true for the female colleagues within the company.
Another important factor is the traceability and transparency. Are the criteria why I earn less clearly defined and measurable (z.B. no university degree, only 3 years on the job), I have less trouble with it. A feeling of fairness is created. On the other hand, a criterion like "he performs more" often triggers dissatisfaction. Whoever can sell himself better and does not do what is necessary, but what is visible, is preferred in such a system (see also "Performance measurement – useful or dangerous").
The relative (internal) possibility of comparison, traceability and transparency were things that the Excel spreadsheet mentioned at the beginning of this article ensured with aplomb. With these principles, a company can score points on the subject of wages, so apart from the wage level. If you add tasks that are perceived as meaningful, a good atmosphere in the team and a supportive manager, there is a good chance that you will not leave the company lightly despite higher wages elsewhere.
Dimension no. 4: Wage as appreciation
Often the dissatisfaction with the salary has as a deeper reason namely the lack of appreciation by the company and the managers. In many places, the year-end discussion about performance and possible wage increases is the only place where employees can experience appreciation. As discussed above, linking wage increase and perceived "performance" is fatal in this regard. If no pay increase is possible, performance must inevitably be devalued and employees feel their commitment is not seen.
Internally as well as socially, there are also some "valuations" hidden in the wage topic:
- Those who lead people are "worth more" than those who are led.
- Who has rare skills (z.B. IT) is "worth more" than someone with more common skills.
- Those who work with their heads are "worth more" than those who work with their hands.
As a company, it is a balancing act to what extent one wants to subscribe to these cultural "beliefs" or not. There are companies that do not implement these valuations in their internal wage system, and e.g.B. Paying managers the same as subject matter experts and even being successful as a result. Employees can change their tasks within such a culture without losing status or pay. You thus create a pioneering culture of togetherness, which has an attractive effect on many people. This is true not only for those who are disadvantaged by common beliefs, but quite possibly also for those who actually benefit from them, but see them in conflict with their own values.
It is therefore important to decouple the topic of appreciation from the topic of wages as far as possible – as already alluded to in the "Continuous Improvement" dimension. This way you can avoid the constraints and motivate the employees better. Appreciation does not have to be linked only to the achievement of hard targets either. Spontaneous positive feedback for small activities, with a positive impact, a thank you, or expressing trust when being given responsible tasks promotes a positive corporate culture far more sustainably than sporadic pay increases for a few, tied to obscure conditions.