Develop a Culture of Transparency & Openness with the Salary Formula

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One of the biggest challenges during the Agile transformation is to help people become agile and stay agile. Experts of Agile management encourage us to define the boundaries for our employees. Agile coaching gurus call us to set and enforce high expectations. Many managers fail to sell Agile values to their teams. Many teams consider this topic irrelevant. You may be full of good intentions, but the team can’t read your mind. Many factors could lead to this confusion, such as personality, culture, education, or background. An attempt to overcome each component may become an impossible task. 

So, let’s make your rhetoric relevant and look at the concept of ‘salary.’ Of course, different people may think of salary in different ways. Yet, the pay is the final and ultimate confirmation of an employer’s satisfaction. It expresses the employer’s vision of an employee’s performance and attitude. Use the power of this established way of thinking to help employees understand your expectations. In other words, express the expectations through salary. Don’t ‘sell’ abstract benefits of self-governance or being a high-performance team. Help employees understand what you expect for the money the company pays.

One effective example is the Salary Formula exercise. It’s a simple and efficient way to share your expectations with the team.

How to run Salary Formula exercise

Start the conversation by listening to the team. Good opening questions are: “What is the value you deliver to the company?” and “What do you think the company pays you for?” This activity will help employees feel their opinions are important. It will also help you learn their expectations and lay the foundation for future conversations. However, remember the importance of establishing a safe space. You should encourage everyone to share their thoughts but never push anyone to speak. 

The opening conversation establishes a reference point. Here is where you can help the team understand the complete picture of the company’s needs. It’s helpful to have a checklist to make sure you have discussed every relevant factor. If you run a software project, you can use my list.

  • The company pays for the outcome. The outcome may be a product or a service involved in the company’s business process. In most cases, you should have this option discussed during the initial conversation. It may come in the form of outputs. Use the discussion during the next point of the checklist to demonstrate the importance of outcome over output. 
  • Business is a cooperative game. If one fails, the whole business may fail. Companies expect employees to accept their share of responsibility for success. Responsibility is another factor to include in the Salary Formula. 

Please remember that focusing only on the outcome hurts both engagement and creativity. Often, the behavior that aligns with the company’s vision and mission is a better long-term investment. To shape the expected behavior, guide the team through the rest of your list. 

  • The company pays employees for making themselves available. Employees, even while idling, are valuable if they can timely join new or ongoing activities. 
  • The world changes, the business environment changes, and the company changes. If the company doesn’t respond to changes, it fails. If employees ignore changes, their ability to produce outcomes or join new activities diminishes. Modern business lives in the VUCA world. The environment is volatile and uncertain. Therefore, companies expect employees to be prepared to change and adapt. We may express this readiness as professional development in the salary formula. 
  • To survive, the business should never stop improving. Both management and employees are equally responsible for the improvement. Management should create a sense of urgency and define goals. The employees know the best place and methods to improve, so don’t steal their stage. Let them shine instead. 

Don’t limit yourself to these five bullet points. Consider every factor contributing to your company’s success. Then invite your employees to find their share in handling these factors. 

I found that an approach like OKR works well. In this approach, company leaders define the needs, and employees discover and offer the best options of how they could help. If they have a say, they will be more engaged. From time to time, this discussion even results in an innovative transformation of the whole process. 

What to do if you feel resistance

While you facilitate this discussion, don’t forget that compensation is a sensitive topic. Some people may perceive this conversation as an attempt to increase their workload without extra pay. This toxic attitude will destroy the whole activity, so if you feel resistance – stop instantly! Postpone the discussion and work on building trust. The Moving Motivators activity is a great option. It helps establish a dialogue centered around finding a way to collaborate. Trust will create a better environment to continue the conversation. 

Sometimes, you may decide that the situation isn’t worth your efforts. It’s impossible to run Agile with people who don’t trust you enough to have an open conversation. It’s a painful decision for the manager, but nobody’s immune from having such employees. 

How to use the exercise outcomes

The exercise creates a formula oriented on the people and purpose rather than on the process. You may use coefficients and percentages to express the importance of each factor for the company. The formula will require established metrics and measurement. However, that’s a topic for another discussion. You can always start with metrics defined in the Evidence-Based Management Guide.

Once developed, the formula doesn’t have to stay the same forever. The company will change, the people will change, and the needs will change. You’ll have to reflect all the changes in the formula. It’s vital to keep formula changes transparent. If you fail to do so, employees may lose trust in the formula. 

If you do it properly, the Salary Formula will become an essential part of any further conversations. You can use it to discuss responsibilities, competency development, and the corporate culture. 

How the Salary Formula helps to create the inclusive culture

The Salary Formula also creates a framework for transparent and fair compensation. A 2019 study demonstrated that:

  • 68% of millennials are looking for salary transparency. 
  • Only 9% of generation Z employees feel comfortable discussing compensation with the managers.

These numbers make it crucial to provide openness and transparency surrounding compensation. A perception of salary fairness is an essential part of an inclusive and safe environment.

Stay Agile!

Don’t forget that Agile is all about dealing with complex problems. Compensations, responsibilities, and expectation management are perfect examples of complexity. Therefore, don’t expect that a one-size-fits-all method exists. Instead, apply the Salary Formula in the Agile way. That includes the following steps: state a hypothesis, stage the experiment, study the outcome, and adapt.

Being Agile will be an efficient way to succeed in people management.

It’ll also set a perfect example for your employees to follow.