Our summary: lack of transparency creates opportunity for problems. No lack, no problem. Namaste Solar is successfully transparent about salary information. SumAll is transparent about cap table. Transparency and and having everyone participate results in better culture and retention.
Our take: YES! We are big believers in radical transparency. Bridgewater is worth mentioning. That said, it is important to ensure structured communication and distribution of information, or transparency may affect scalability. It is also important to couple transparency with fair treatment/compensation and a voice.
Radical Transparency Makes Employees Happier, More Productive And Loyal
By Max Nilsen
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.”