Saturday, October 23, 2010

LinkedIn Question: Do closed pay-packets drive Performance/ Competition or Discrimination/Exploitation?


Consider the employment contract as a private business deal, between the employer on the one part and employee on the other. Should then the details of all private business deals in the country be made public in the name of transparency?

One gets what one can negotiate. The current system of closed pay packets is a self-authenticating language that has evolved over ages. Attempting to 'even the playing field' by making pay packets open would not work to motivate or retain the right people, as one man's perception of 'fair play' does not match another's.

Those that know how to play the game (read 'successful professionals') view closed pay packets as an 'entry barrier' that they have learnt how to overcome. If someone wanted to find out what figure they should be making, given a particular industry, year, their experience and specialisation, they most certainly could - if they knew where to look, whom to ask and how.

The average and poor performers, on the other hand, would have good reason to justify their performance no matter what kind of system they work in.

Now consider the alternative:
What if there were open pay packets in an organisation?

This would only work to motivate the right people, if performance in every role could be measured and compared on objective terms. Promotion to a higher pay cadre might then be perceived as 'fair' by the majority of the average and high-performing employees.

This, however, is not practical for most industries and companies.

Bottom line: closed pay packets drive performance and competition, but as a part of a larger system that includes compensation benchmarking, good talent management practices, focus on learning, and strong visionary leadership.

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