“Make sure that people understand your reasoning and process. If you decide that some information is just too sensitive to share openly, that’s okay. Just be sure that the process you use isn’t seen as secretive. In the absence of openness, people will imagine the worst,” says Scott Blanchard in a recent column for Fast Company.

One area where companies often run into trouble with this is sharing information about employee compensation. Most companies keep actual salaries confidential but that doesn’t mean that the process of determining salaries has to be confidential also, explains Blanchard.  “If you have a good reason for paying at the level you do, let people know. Keeping it a secret doesn’t help things. It just causes unnecessary discontent.”

A Case in Point

To illustrate his point, Blanchard shares a story about the experience of a CEO who serves on the company’s board of directors.  This CEO went through something just like this when an internal employee survey showed dissatisfaction about the fairness of pay in his company. This was really frustrating to the CEO, who believed that the company’s pay scales were well above industry averages.

“It was purely an openness issue,” explains Blanchard. “The company had been operating fairly for a long time but leadership had not taken the time to fully disclose the way they were making decisions. When they eventually did disclose the process, perceptions went up.”

For this company, the first step was to conduct a highly visible and transparent study with an outside firm to analyze the company’s whole compensation system.

“What it showed was that the company’s base pay levels were almost exactly at the 50th percentile for organizations of a similar size and with the same demographics. It also showed that the company had a generous bonus plan in place available to all employees. The bonus plan, together with the base pay, resulted in employees being compensated at the 75th percentile–well above average.

“Armed with this information, the leadership team went on an organization-wide campaign to talk about the procedure they used to determine pay scales and the rigor they used in applying it. As a result, they were able to change people’s perceptions of the level of compensation in the organization and its relative fairness. Because people had a greater understanding about the way pay scales were determined, they had a better capacity to understand and accept the results, even though they still wished—like all of us—that they were making a little more.”

How open is your company when it comes to sharing information about how decisions are reached? 

Are you more of an “open book” or a “closed book” culture?  Remember that your approach will have a definite impact on employee’s perceptions of fairness.

As Blanchard concludes, “When people aren’t able to point to a process that is known, published, and understandable, they start to make up their own stories. If there isn’t clarity about the way decisions are made, the stories people make up are typically a lot worse than reality.”

You can read Scott Blanchard’s entire column in Fast Company, The Just-Right Approach To Social Media And Transparency, And What It Says About Your Company and also check out Blanchard’s other thoughts on compensation at The Role Money Plays in Engaging Employees.  To read more about money’s role in creating an overall engaging work environment, download the new Blanchard white paper, Employee Work Passion: Connecting the Dots