When Pay is Kept Secret, the Implications on Performance are Revealing

Key Findings Pay secrecy (in contrast to pay transparency) negatively affects the performance of individuals who are less tolerant to inequity; Pay secrecy negatively affects the perception of the link between performance and pay in individuals intolerant to equity, which in turn, decreases their performance; In contrast, pay secrecy is associated with significantly better task performance than pay transparency for individuals who are more tolerant to inequity

Signaling in Secret: Pay-for-Performance and the Incentive and Sorting Effects of Pay Secrecy

Key Findings: Pay secrecy adversely impacts individual task performance because it weakens the perception that an increase in performance will be accompanied by increase in pay; Pay secrecy is associated with a decrease in employee performance and retention in pay-for-performance systems, which measure performance using relative (i.e., peer-ranked) criteria rather than an absolute scale (see Figure 2 on page 5); High performing employees tend to be most sensitive to negative pay-for- performance perceptions; There are many signals embedded within HR policies and practices, which can influence employees’ perception of workplace uncertainty/inequity and impact their performance and turnover intentions; and When pay transparency is impractical, organizations may benefit from introducing partial pay openness to mitigate these effects on employee performance and retention

Looking for Assistance in the Dark: Pay Secrecy, Expertise Perceptions, and Efficacious Help Seeking Among Members of Newly Formed Virtual Work Groups

Adopting an information processing perspective, we argue that in pay-for-performance contexts, pay secrecy may adversely affect the ability of members of newly formed, virtual work groups to source assistance from those most able to provide it, referred to here as efficacious help-seeking. We conducted a repeated-measures laboratory study in which one hundred forty-six participants interacted with three confederates, each with a varying level of skill. Participants' help-seeking behaviors were recorded and efficacious help-seeking was examined as a function of the four pay transparency conditions. Our findings reveal that accurate perception of task expertise of the highest paid work group member mediates the impact of pay transparency on members' efficacious help-seeking. The findings also show that the positive relationship between pay transparency and efficacious help-seeking is amplified for average and high performers and that for these same individuals a shift from secrecy to transparency is accompanied by a significant increase in efficacious help-seeking. This study extends pay secrecy research by shifting the focus away from fairness, instrumentality, and sorting and toward information processing. More specifically, the study highlights how pay and pay comparisons can influence inter-relating behaviors in organizations in general and expertise identification and help seeking behaviors in particular. We believe this is the first study to directly examine how the availability of pay comparison information determines inter-relating behaviors in organizations. The study offers insight for pay policy in organizations that rely upon employee help-seeking, showing that efficacious help-seeking can be enhanced through transparent pay practices. This is particularly evident in the virtual teams examined in the present study

BEST NOT TO KNOW: PAY SECRECY, EMPLOYEE VOLUNTARY TURNOVER, AND THE CONDITIONING EFFECT OF DISTRIBUTIVE JUSTICE

Building on uncertainty management theory, we develop and test a model explicating how and when secrecy in pay communication may affect employee turnover-related outcomes (i.e., employee turnover intentions and firm voluntary turnover rates). Underlying this model is the notion that employees triangulate perceptions of pay secrecy (i.e., a pay-related procedural justice cue that also reflects uncertainty) with their own or others' perceptions of distributive justice as a basis for assessing organizational trustworthiness, with the latter serving as an important driver of voluntary turnover intentions and behavior. Results of two studies (Study 1 at the individual level and Study 2 at the firm level) indicate that, rather than being universal, the relationship between pay secrecy and turnover is contingent upon perceptions of distributive justice, with turnover intentions (at the individual level via organizational trustworthiness) and voluntary turnover rates (at the firm level) differentially affected by pay secrecy under conditions of higher and lower levels of distributive justice. These findings suggest an important extension to organizational justice theories; namely that, when procedural justice cues are confounded with uncertainty (as they are with pay secrecy), the assumed compounding interaction between procedural and distributive justice cues may be replaced by a more antagonistic interaction