WD-40 Goes with Salary Transparency

 

Roy Maurer By Roy Maurer October 24, 2019
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​Household products manufacturer WD-40 Co. started telling job applicants upfront what salary they would earn, to build trust with job candidates, create salary structure consistency and "do the right thing" as a corporate citizen.

"Being transparent about compensation will help to reduce the salary gap," said Rachelle Snook, global talent director for the San Diego-based company, at the recent ERE Recruiting Conference in Washington, D.C.

Consumers and legislators have been demanding that companies stop asking job candidates for their salary history during the recruitment process and be more transparent about compensation in order to balance what many see as an information imbalance.

"Talent acquisition has a high degree of information asymmetry because, as a recruiter, you hold most of the cards," Snook said. In many cases, candidates are provided a salary range for an open position "but don't know where they sit in that range and don't know much else," Snook said. On the other hand, candidates going through the hiring process at highly transparent companies "know exactly what they will be paid, the entry point and high point to the salary range, what career progression looks like at the company, and developmental opportunities, all before they step in the door."

Snook said that WD-40 decided to adopt a model of salary transparency to create a consistent methodology for evaluating roles for compensation, rein in ballooning labor costs and, most important, build trust.  

"Our employees couldn't say with certainty that they were being fairly compensated," she said. "They could research self-reported salary sites, but they really don't know what they're looking at. That's what our employees were doing—disengaging from their roles and trying to figure out where they fit in the market."

[SHRM members-only toolkit: Building a Market-Based Pay Structure from Scratch]

Assessing Competencies

WD-40 partnered with Hay Group (since acquired by Korn Ferry) in 2012 to define and communicate its compensation philosophy to its workforce.

"We explained to all of our employees that we wanted to be transparent, competitive in the local market and have evaluations built on a consistent methodology," Snook said.

Then a new job-evaluation methodology was introduced. The company reviewed job descriptions, focusing on the top two or three functions determined to be core to each job. Assessments were created to evaluate candidates' competence to perform those functions in the role.

"For example, for a candidate in marketing, we might give them 10,000 lines of point-of-sale data," Snook said. "We ask them to do an analysis based on a new-product introduction. We may also ask them to survey the market for a new product and come back with a presentation and price recommendation for that new product."

Based on the assessments, candidates are categorized as developing, fully competent or advanced, and their base salary is tied to that determination, Snook said.

That helped candidates and employees understand their compa-ratio, or compensation ratio, the formula commonly used to assess the competitiveness of an employee's pay level with industry averages.

"We discovered that once we communicated with our employees what the methodology was and that we would go to the market every 12 months to update salary structures and provide that to them, their trust and engagement in the process and where their jobs were leveled increased dramatically," she said.

"When managers present an offer, they let candidates know where they fall in the range, their compa-ratio, their evaluation results and development opportunities at the company," she added. "Coming in the door, new hires know what their development plan is for the first six to 12 months."

WD-40 also published job maps, with job titles that link to job descriptions; salary structures for all levels posted in local currency, by country; and an organizational chart showing career progression for each role.

"Employees can look to see where they are and what it takes to get to the next level—what they need to do, what they need to learn and how to demonstrate accountability to get to that next role," Snook said. "And we did training—lots and lots of training. Our employees now know how to improve their compensation. We made it very clear to them, and discretionary effort went up because they know what they are working toward and how to get there."

Compensation transparency is not just making employees happier, Snook said. It's also a competitive advantage in closing the deal with finalist candidates, who each receive a total compensation package, including projected bonuses, to take home to review.

"If a candidate is considering three offers, and I give them this level of transparency, with long-term incentives, 401(k) match and profit sharing—even in a case where the salary might be lower—and the others [employers] don't provide that, who do you think the candidate will choose?" she asked. Snook said that the company's offer-to-acceptance ratio increased from 90 to 95 percent since implementing salary transparency.

One operational outcome of the strategic shift—and a key resistance point, initially—was transitioning the salary conversation away from HR to people managers.

"Managers took accountability for making the job offer to the candidate, explaining why their salary is what it is, and then continuing that conversation with the employee throughout the life cycle of their employment," she said. "That stopped the revolving door in HR, where we found ourselves continually triangulating these conversations between employees and their managers."

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