Open Cages’ Approach to Salary Transparency

The following is a guest post written by Dobrosława Gogłoza. Dobrosława is the President of the Polish animal protection organization Otwarte Klatki (Open Cages) and the CEO of Anima International. Open Cages has been an ACE Standout Charity since December, 2017.

It’s easier to inspire your team if you run an NGO than if you run a regular company—your employees are motivated by the mission and excited to work on changing the world. If you are a leader of an NGO, this trust you are getting from employees is a huge responsibility, because they care. People are the most important asset of the organization and as leaders we should invest in them, support and appreciate them.

We should concentrate more on systems and rules of work than on slogans. It is easy to tell people we value them and appreciate their input. But if our everyday practices do not express the same attitude, our words mean nothing. Telling people they are doing a good job is necessary. But it’s more important to create a structure, and then think about verbalizing the gratitude.

For me, one means of showing that I care about my team was to establish a system of salaries that is fully transparent. It is not the only way to make people feel appreciated and it‘s not enough to have a motivated organization, but I believe that it is easier to motivate people if you offer flat and transparent pay schemes. In my opinion, everyone—especially nonprofits—should give some serious thought to this solution.

Our salaries are flat and transparent

We all earn roughly the same amount of money, so even the difference between leadership and non-leadership positions is not big (20%). All our earnings are based on the same base salary and there are only a couple of clearly defined factors that can increase it. Those factors are measurable and clear for everyone, like the number of years of experience in a similar position. Some companies using a similar system include the cost of living in different cities as a factor in calculations, but those differences are not big when we all live in the same country. At this moment, the algorithm and the earnings of individual employees are all published on our website. We not only decided to not use other economic incentives but also determined that salaries are not negotiable, and that the income of employees cannot be influenced by their supervisors.

One reason behind this solution was to limit the power of leaders. Leaders are important for the growth and success of organizations. But they are also all just humans. We don’t want to create a situation where an employee can be punished for voicing criticism or signalling their supervisor’s wrongdoings. Transparent salaries discourage favoritism and unfair punishment—if there are advances or missing bonuses that employees don’t understand, they will start asking questions. The least leaders can do is have good answers.

Another goal was to make discrimination less likely to occur. Men are more likely to negotiate their pay and my experience in recruitment confirms this rule. I even witnessed female candidates trying to persuade us to pay them less than we wanted to. The phenomenon of punishing women for negotiating to improve their own position is also well researched, and assuming that we are immune from taking part in this discrimination is not sufficient. Understanding the problem is not enough to cure us of biases. It’s much better to build a system where biases don’t matter and cannot be a factor in the success or failure of an employee.

Transparent salaries and fair salaries are two sides of the same coin. If you are sure you pay fairly, and all the discrepancies between salaries can be explained with unbiased reasons, then why not also make salaries transparent? If you are afraid to make them clear, maybe they are not so fair after all.

We want everyone to be a star

If you treat people as competent, smart, and trustworthy, they are likely to live up to such standards. The Pygmalion effect (the employer’s expectations about employees) and the Galatea effect (employees’ expectations of themselves) are strong predictors of productivity and success. Why recognize only a handful of people in the team as stars (by paying them more than others) if you could look at all the people you work with as the real elite, and by doing so, help them recognize their own potential that could have otherwise stayed hidden.

One person to make a persuasive case in favor of such systems is Daniel Coyle in his book “The Culture Code: The Secrets of Highly Successful Groups.” He explains how groups become creative and effective in their work. Part of the success is in avoiding power struggles and being judged as better or worse than others. Money is not a good motivational tool, but it’s an effective signalling tool. It shows which of the employees are valued more by the leadership. We want all of the team to receive the same signal: we are happy that you are here and we value your work.

We value all positions we create even though in some of them, it is easier for people to make the case that they should be given more (e.g. a fundraiser after a successful fundraising campaign that brought a lot of resources to the organization). But an organization is a big organism where all the parts are inherently interconnected. Great fundraising campaigns are based on a great social media following that was built by other people, materials provided by campaigners and videos made by other employees. Some of the most significant positions—like accounting or operations—are only visible when they are failing at their job. When everything runs smoothly and you barely notice the work being done in this area, the people are doing their job well. Those are also the last people you would want to leave your team because they assumed they were not being treated fairly.

While thinking about either employees or volunteers, I keep the mindset of “creating future leaders.” This approach is important because the problems we are trying to solve will still be there when we retire. We need new leaders, better leaders, and more organizations. It’s also hard to imagine a better place to develop leaders than effective and goal-oriented NGOs. There are a lot of examples showing that people with experience in non-governmental organizations do well as political leaders. Why bet only on a couple of people who seem promising (or just more extraverted or more confident) if you could make everyone in your team feel trusted to be a possible future leader?

We wanted a cooperative working environment

I started thinking more about the pay scheme in my NGO after reading “Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management” by Jeffrey Pfeffer and Robert I. Sutton. The Researchers explain that “when work settings require even modest interdependence and cooperation, as most do, dispersed rewards have consistently negative consequences on organizations.” Financial incentives work best if the success of an employee is easily measurable, mostly the result of individual effort, and entails little or no interdependence. The authors also found out that the negative effect of pay disparity was especially visible in firms with the greatest need for collaboration and teamwork. Both NGOs and many companies need their employees to cooperate a lot. It would be hard for me to find even one position in the organization where the employee can be successful without any help or input from others.

Any form of rewarding individual work in an interdependent environment and expecting people to still cooperate is what Steve Kerr called “the Folly of Rewarding A, While Hoping for B.” A misguided incentive system can seriously damage team spirit, creativity, and the willingness to cooperate. An interesting example of how focusing on individual input can damage the team was presented in another book written by Robert I. Sutton, “Good Boss, Bad Boss”:

One of my graduate students was on an engineering team renowned for its creativity. The team was assigned a new boss who believed that injecting competition would propel them to even more impressive feats. He started paying individuals a modest bonus for each idea they generated during group brainstorms or e-mailed to him. He paired these modest incentives with a large bonus for ideas that ultimately were used in the company’s products. Before this system was implemented, brainstorms were rollicking and noisy, routinely producing a hundred or more ideas in less than sixty minutes. After the change, the engineers rarely generated even a dozen ideas during these gatherings. Before, no one cared much who got credit for ideas. Afterwards, engineers insisted—when they proposed an idea—that their initials be placed next to it on the whiteboard. These engineers had once spent their days talking openly about ideas, bouncing them off one another, and blending them in new ways. Under the new system, things devolved quickly—rather than going to lunch together as in the past, each ate alone in his cubicle. The boss finally abandoned the system after devoting most of a brainstorm to arguing with two engineers about which one deserved credit for an idea. When he insisted on giving them both credit, they degenerated into a debate over which of the two deserved more credit. None of the engineers complained when the boss announced the system was a flop and would be terminated. Slowly, over several months, their old, constructive patterns returned.

Financial incentives are a tricky tool. There are specific situations in which they work, but overall we should avoid them, unless there is clear proof that they are going to work in a particular context.

My organization values cooperation, to the point where people are also paid if they work to help other parties. Each of the employees can use their time for “movement building”—it is basically the time they spend working for other NGOs. Usually, it is used for training sessions or consultations for other organizations, which can sometimes last even a few days in a row. We feel that we learned so much from other groups that we are committed to giving back to the movement. The reason we do it is also connected with the commitment to focusing on the tasks that can bring the most good to the animals. If our corporate outreach Director or communication manager is able to train their colleague from another organization to be good and independent in what they do, it might be more beneficial to our cause than their usual job. By training others, we can make our impact grow exponentially.

We understand the downsides and we accept them

One thing we were sure we are strongly against is the idea of negotiating salaries. We know it might mean that some really good candidates might not even consider coming to work for us, but we also decided that we are completely fine with that, since our focus is on the team. Sometimes we might think we are missing an opportunity to hire someone who looks really promising but expects to be paid much more than the rest. What we decide to focus on is how it will impact the rest of the team and if the overall effect would be net positive, especially since data shows that “stars” from other organizations or companies don’t necessarily perform as well in a new environment.

Trying to scale up excellence by purchasing lots of people who have done stellar work elsewhere is also risky because most stars aren’t portable. Harvard’s Boris Groysberg and his colleagues spent years tracking top performers, including CEOs, Researchers, software developers, and stars in investment banking, advertising, public relations, management consulting, and law firms. Groysberg reports that, again and again, “We found that top performers in all those groups were more like comets than stars. They were blazing successes for a while but quickly faded out when they left one company for another.” […] When stars joined a new firm, “their performance plummeted by an average of about 20% and had not climbed back to the old levels even five years later.” The performance of the new teams they joined and their new investment firms also suffered. This plummeting performance was probably caused, in part, by what statisticians call regression to the mean or, less kindly, reversion to mediocrity: over time, the odds often catch up to people who enjoy a stretch of exceptional performance—which eventually drifts back down to the performance levels of their average peers. But other forces also worked against these stars. Groysberg found that when an external star arrives, insiders become demoralized; senior analysts often start looking for jobs elsewhere, and “junior managers take the star’s induction as a signal that the organization isn’t interested in tapping their potential.” —Scaling Up Excellence: Getting to More Without Settling for Less by Robert I. Sutton, Huggy Rao

That’s just one more reason to focus on hiring great people and then developing them to become star employees. All of them.

To achieve many of the positive effects mentioned above, having equal salaries is enough. Nonetheless, also making them transparent gives additional protection against potential abuse. People tend to behave better and cheat less when they know someone might be watching. We also wanted to play a role in making it acceptable to discuss salaries. If we ever want to end the gender pay gap, we need to be able to discuss it freely.

One additional reason for always being more transparent is the fact that trust is the most essential value in our work. It’s hard to earn it, it’s easy to lose it, and having it makes a lot of difference. Much of the information that you could share openly is not that difficult to obtain. Getting back to salaries—no matter the situation, employees will talk to each other and can find out if they make more or less compared to colleagues in a similar position, so why not make it transparent in the first place and build trust along the way? It’s not only about what employees say between themselves, but also about the narrative that our opponents can create. It would not be smart to share all our secrets and strategies, but if we are transparent about our decisions and motivations, we can control the surrounding narrative.