What is an open salary policy and should you consider having one?
Lightforge CEO Matt Schembari gave a GDC talk looking into the benefits of salary transparency within a games studio and how to normalise conversations around compensation
At GDC last month, Lightforge Games CEO Matt Schembari shared the studio's approach to salary transparency and the benefits across the company to have an open salary policy.
Schembari is part of the group of Blizzard and Epic veterans who formed Lightforge Games in 2020. He previously worked at Epic Games as Fortnite's UI director, after spending a decade at Blizzard.
"The goal here is not to convince you all to go home and enact an open salary right away," he said as a preamble to his GDC talk. "[It's] about planting a seed. When I was first introduced to this idea, I thought it was absolutely bonkers and thought there were probably all sorts of unintended side effects and downsides.
"But after three years of open salaries and reaching almost 40 employees, I can unequivocally say that, for us, it's been a really big success."
In his talk, Schembari talked attendees through the initial research and thought process that led to introducing salary transparency at Lightforge, provided a blueprint for implementation, and touched upon the various pros and cons of the policy.
What does 'open salary' mean?
"Open salary is a policy where management publishes full compensation information for all employees to all employees," Schembari first explained. "And that includes the names, titles, levels, and any other contributing factors that go into it. And this is specific, actual hard numbers, too. Not ranges. This is all forms of compensation, including bonuses and equity.
"So essentially, this is your HR nightmare scenario where someone takes your payroll and emails it to the entire company. And it's doing it intentionally. So why would anyone do that? Let's go on that journey."
Why you should consider salary transparency
Workers have increasing corporate responsibility expectations
Lightforge settled on an open salary policy from its foundation, with Schembari explaining that it was part of the core values the team wanted to implement from the get go.
"What can we do differently as a company born in the year 2020?" Schembari recalled thinking. "If a company is really nothing more than a group of people on the same mission, we looked at the people."
"Younger workers are placing a strong emphasis on corporate responsibility and transparency"
He pointed to the fact that 46% of the full-time workforce in the United States is made of millennials and Gen-Z workers.
"It's important because researchers commonly use the generational lens when trying to find what trends to expect," he explained. "And one of the biggest workplace trends is that younger workers are placing a strong emphasis on corporate responsibility and transparency."
Citing a study by Gallup, Schembari highlighted that workers have come to value employers who care about their well being, are ethical, have transparent leadership, and embrace diversity, equity and inclusion. This is combined with a growing distrust towards institutions leading to the Great Resignation and quiet quitting trends.
Schembari highlighted that these aspects of the current working life – quiet quitting, corporate responsibility, deteriorating living conditions and lower disposable income compared to previous generations – are all discussions that young people are having.
"As employers, it's really important for us to recognise that this is the environment that we're operating within," he added. "We can yell at clouds all we want, but it'd be foolish to ignore the lived experiences of half the workforce."
Open salary policies are an effective tool against structural inequalities
Schembari also explained that being open about salaries is highly related to equity building.
He quoted Morela Hernandez, a researcher and associate professor of business administration at the Darden School of Business at the University of Virginia, interviewed by the New York Times for an article about closing the pay gap and how wages transparency can help: "By keeping compensation secret, we might obscure structural inequalities and enable inequalities to persist," she said.
"If you say you're committed to creating a fair and equitable workplace for all, why wouldn't you use the most effective tool you have available?"
Schembari added that maintaining pay secrecy means that "neither the employees nor management have the full information to fight structural inequalities," saying that there's a "clear correlation between pay transparency and pay equity," as shown by this Payscale study.
"This is the most effective tool that we know of to fight wage gaps," Schembari said. "So if you say you're committed to creating a fair and equitable workplace for all, why wouldn't you use the most effective tool you have available?"
He also highlighted an increased focus on pay transparency in recent years across the board, for instance with salary ranges becoming the norm on job ads in New York, California and Washington.
"So the main message here is 'Pay transparency is here and momentum is only growing,'" Schembari said. "Given how much employees are demanding this, are you prepared to compete with companies that are practising open salaries?"
How does an open salary policy work in practice?
Having explained the research that went into Lightforge deciding for an open salary policy, Schembari then focused on how it was achieved at the studio.
"The 'how' is actually really easy," he said. "All you have to do is open up that salary spreadsheet you already have. I know you have one. That's all you do. At Lightforge, every employee has read access to our salary spreadsheet. And this is the actual sheet, there's no other source of truth, no secret one for management that we get to see too. This is the one sheet to rule them all.
"It's clearly accessible in Notion, this isn't something we have to jump through hoops or ask for permission to see. It's on the front page of the HR section in Notion. We also make it part of orientation [for new starters]."
At this point of the talk, Schembari clarified that staff's salary being transparent within the company doesn't necessarily mean it has to be shared publicly. That's up to each company, with Lightforge deciding against due to the games industry having a "history of harassment."
He shared an example of a salary spreadsheet as part of his presentation (see below). It includes core information about the staff, but also their base salaries and any adjustment that might be applied to someone's salary (equity, etc).
As part of its open salary policy, Lightforge also has a standardised pay structure and a job level system that was inspired by social media company Buffer, a pioneer of open salary policies.
"They've got a full system for a role family (which is something like programmer, designer, etc), level (junior, mid level, senior), and then step – step is basically a more granular form of level, that helps people to go up in their career in more granular steps. And in each of those steps, we list out specific job expectations, what the responsibilities are and, more importantly, what the salary is.
"So it's a rubric of job expectations with the actual salary information associated with it. And that means that conversations around hiring and promotions can be done entirely around level and not around pay. So it's not like someone's better at negotiating or someone asks for more, [it's] what are the job expectations?
"The standardisation system isn't about flattening pay. We don't have flat pay. We've got a 3.1x from our lowest paid employee to our highest paid employee. It's about having clear expectations and clarity around how salaries are calculated. It's really important for us that people can look at the job expectations and understand what the pay is for each of those steps."
The benefits and challenges of salary transparency
Discussing the pros and cons of Lightforge's salary policy, Schembari noted a massive boost in recruitment, with candidates stating that the firm's transparency was a main reason for the job's appeal. It was also mentioned as a "major contributing factor" for, later down the line, accepting a role at the company as well, with Schembari saying that it "builds trust."
"Folks from marginalised backgrounds express gratitude that this is what the policy is. We believe this has also led to a higher rate of women applying, fighting that old [belief] of 'We'd love to hire more women but they're not applying'. And we know that's the case because in our diversity and hire report last year we've found that 42% of all applicants identified as women, transgender, non-binary or other.
"The bottom line is we're getting a larger, more trusting, and more diverse hiring pool thanks to our open salary policy."
"If you believe that you're making good choices on compensation, why wouldn't you want to combat conjecture and made-up narratives with actual facts?"
As previously mentioned, it also provides a clearer path to promotions and expectations within a career, as well as better accountability within the studio as it empowers and encourages the teams to have open conversations.
"This really helps fight those narratives and conjectures that are natural – it's human nature to look around and wonder what your neighbours are getting," Schembari said.
"What we find is that, with an open salary policy, people have the information, so they don't need to fill in the gaps with made up information. If you believe that you're making good choices on compensation, why wouldn't you want to combat conjecture and made-up narratives with actual facts?"
These open conversations can also be part of the challenges though.
"It is without question that open salary definitely forces you to have more hard conversations," Schembari said. "In particular these really awkward comparative conversations – sometimes we have to say something like, 'hey, you, person in the room, do you think this person is a higher level or lower level than you?' And then, of course, it's really just a proxy for, 'Do you think this person should make more money or less money than you'? But these are important conversations to have to ensure that we are being fair."
As awkward as these conversations might be, they're at the core of what open salary policies are trying to do: normalise conversations around compensation.
"The other thing that's really hard with conversations is this idea of negotiation versus job," Schembari said. "I mentioned before how our job level system meant that we can talk about things like job expectations and responsibilities and things like that.
"But the honest truth is it's really hard to objectively know if someone is a 3.2 or 3.3 just from a couple hours of interview in a way that makes me feel really good [that] we're definitely 100% objective. I think if we're really honest with ourselves, there's been a couple of conversations where we really were probably having a negotiation conversation and using job level as a proxy for that. But the solace that we have is that, because we do have to justify and share the reasoning with the entire team, and because they will see the result, it sets a certain bar that we still have to meet."
Finally, Schembari acknowledged the challenge of transition – Lightforge had the advantage of starting as an open salary company. Transitioning from pay secrecy to pay transparency can present a challenge.
"If you currently have compensation issues that you wouldn't want people to know, why aren't you facing those issues?"
"I have zero experience doing it, but what I can offer you is this thought : imagine someone leaks all of payroll to your entire company. What scares you about that? Is it some unfair pay? Someone getting paid more or less than they should be getting paid? Is it an underpaid high performer? Maybe despite your best effort, there might actually be some accidental inequities in there?
"Well, why aren't you doing something about it? If you currently have compensation issues that you wouldn't want people to know, why aren't you facing those issues? They're not as secret as you think. People talk. So fix those issues now."
Finishing his talk, Schembari invited attendees to do more research on the topic in order to take the next step.
"Think of it as a journey and take baby steps. Learn, talk, reflect, share, post salary ranges. Find those things that scare you and then fix them. And slowly expand access as well. If you're a team member, what can you do? Start by educating yourself, your peers, HR, CEO.
"Learn your rights. Under the National Labor Relations Act, employees have the right to communicate with other employees at their workplace about their wages."
He concluded: "I genuinely believe that this is something that's better for both the employees and the employers at the same time, so make it happen."