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September 14, 2004

Openess

Great article, if a bit old, in Fast Company on Whole Foods Market. It describes how John Mackey built a winning company and a culture of openess, or what he calls "no secrets management".

Personally, I think openess is something folks pay a lot of lipservice to, but don't really do anything about because it's hard to do meaningfully. Are you ready to, as Whole Foods did, publish everyone's salary on your Intranet?

Each store had a book in the office that listed the pay of every employee for the previous year. The book was available to anyone -- and was especially valuable if you were promoted or if you relocated, and wanted to see how your pay compared with your colleagues'. The pay book, surprisingly little used, set a tone of what Mackey called "no secrets management."

Sure, people think it's a crazy idea, but I think it does something important. It keeps people honest. Too often, some VP of such-and-such gets hired in a desperate situation and the CEO or someone high up in the company offers the guy a sweetheart deal. Big salary, big bonus, big stock options, guaranteed severance, the works... Deals are never secrets for long. This information spreads rapidly. And, usually the guy fails because he was hired in desperation and wasn't really a good fit in the first place. Then, all the folks in engineering and other make-it-happen disciplines are bitter and angry. How did this happen? Why does he fail and get rich and I work hard and don't get 1/10th as much?

Putting everyone's salary in the open forces:

1. decision makers to be able to openly defend why they paid so much for the person. It's not wrong to pay incredibly talented people extraordinarily well. You just need to be able to explain it to others.
2. the person hired to know that he better perform. The pressure is on.
3. the person hired to consider compensation equality going into the negotation because he knows his salary, options, bonus and severance are going to be public immediately. It actually gives the company more negotiating leverage in salary discussions.

Despite the fact that everyone tends to know everyone else's comp package anyway, people are afraid to make it truly open. Instead most prefer it to be an open secret. Bummer.

September 14, 2004 | Permalink

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» Is there a downside to Transparency?... from My Virtual Office
Joe Kraus, co-founder of Excite, jumps into the blogging scene with an interesting post about transparency in business. Check out his blog: Bnoopy I have to say the utopian idea of [Read More]

Tracked on Sep 15, 2004 2:27:05 PM

» Openess at Whole Foods from Infloop
Joe Kraus, one of the founders of Excite, has a blog where he talks about entrepreneurship. In one of his first entries, he writes about Openess at Whole Foods Each store had a book in the office that listed the... [Read More]

Tracked on Oct 7, 2004 11:41:16 AM

Comments

Can you imagine what a transparent business world would do to the advertising industry!?

...good post. :-)

Posted by: Ben Smith | Sep 15, 2004 1:55:43 PM

I agree.I sell used cars and have worked at several lots. Transparancy is crucial in my work environment. The worst lots keep the most secrets. They treat employees like mushrooms (keep them in the dark and feed them full of shit). The best lots have open books and equal payplan's. The "secret" lots have the most back biting and coniving and usually are always struggling to meet sales goals. The "open" lots have the most long term employees and usually make lots of $$$. Plain and simple.

Posted by: Robert Dobbs | Sep 15, 2004 2:23:24 PM

Really like the direction of your blog. I now know of a few valley companies where everyone is paid purely in equity. I think there are mixed incentives in that type of model, but it certainly lets you know why people are showing up for work (the venture's success). I would imagine we're going to see a lot more 'open source' type companies which are virtual and the responsibilities and ownership is 'componentized'. With the advent of IM video the virtual corporation is really not that far off.

Posted by: Will Johnston | Sep 15, 2004 2:41:59 PM

Hey Joe... fellow stanford grad here... nice blog.. some great stories I've heard from other channels, and nice to see they're becoming part of the lore.

I wanted to drop you a note because the topic of this particular post of yours is very well discussed and researched by ExtraordinaryOrganizations.com

I highly recommend getting in touch with Don (who runs the operation), because he's helped some really big companies get their frameworks in place early on, and when done using his progammatic ideas, things really work, and teams really outperform.

Posted by: Zac | Sep 24, 2004 11:48:23 AM

joe~

some of what you are saying sounds very similar to ricardo semler's stuff in "the seven day weekend". a stimulating read, if you haven't read it before. you might find his ideas really useful at this startup phase, rather than trying to implement later when it is too difficult to change culture.

hope it goes very well for you,

ob1.

Posted by: ob1 | Sep 24, 2004 6:05:52 PM

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