Paper

Case: When Salaries Arent Secret

Source: John Case. May, 2001
By : Ahmad Fahmi Mubarok, Meichelani Pangaribuan
Magister of Management, UGM. International Class 31 Executive B
Lecturer: Prof. Djamaludin Ancok, Ph.D
CASE SUMMARY
After the employee sent an email which detailed the salaries of just about
everyone in the company, the entire company was abuzz. Some employees were
furious, others were shocked. The CEO did not take the act too seriously until
later in the day when his reporting executives told him of the impact it had taken
on every employee. To heighten the problem, newer employees were given more
money than there existing counterparts due to the tightness of the job market.
The core executives in the company discussed the issue in an effort to figure out
how to defuse the situation. Several suggestions were made, including the
posting of salaries for all to see going forward.

MAIN ISSUE
Making salaries transparency available while many other company are not
doing so, however has advantages and disadvantages, as follow:
The Advantages:

Tight job market Higher salary for employee who perform better
Salary information basically is already on cyberspace. For starters, it

would difficult to keep salaries secret

To treat employees like the business people

The Disadvantages:

Many people will upset since they will know that they earn too little
compared to what others make

Bad Reaction from many employess (resign, salary increase

requisite, etc)
Fairness is till subjective within each people

PROBLEM STATEMENT
1. Should make the salary information secret to become available be
taken?
ANALYSIS OF SOLUTION ALTERNATIVES
Organization as an open system
Organization process input will directly impact the organization output by
processed through organization system. By considering this concept, it would
be no longer worry if salary information is disclosed since an organization could
really implement the concept that the output has strong linear correlation with
input and every employees possible to have difference performance that will
impact the differences of their salaries .
New payroll system

Company should starting using pay-for-performance. Company will assess

employee performance yearly and the salary and the salary will
determined after that. This will motivate employee to work as best as
possible to gain maximum salary.
Clear working objectives and rewards
Reward will be given directly to those who meet the objectives. Employee
will know why they earn, what they do and what they need to do to earn
more

RECOMMENDATION

The company shoukd change the system regarding salary calculation and
make performance as the most important indication to determine
employee salaries.